This summer, President Trump imposed tariffs on imports from China, leading to significant pushback from Beijing, which restricted the flow of rare earth minerals critical to U.S. defense companies.
China currently controls a staggering 85% of rare earth processing, and about 78% of the Department of Defense’s weapon systems depend on these minerals. In an urgent bid, defense contractors are scrambling to secure supplies, as stockpiles dwindle. Everything from infrared sensors on missiles to components in drones is at stake.
Reviving domestic rare earth mining and refining has become essential for national security, warranting decisive federal action to ensure the defense industry doesn’t suffer further compromises.
Reflecting on the past, it’s crucial to see how America lost its prominent role in the rare earth market. Back in the latter half of the 20th century, the U.S. was the leading supplier globally.
The decline began with the Mountain Pass Mine in California, which was a major player until its shutdown in 2002 due to stringent environmental regulations. This opened the door for China to seize a larger share of the market.
Ironically, in an effort to protect the environment, the U.S. sacrificed its domestic production capabilities while China remains the world’s largest polluter.
Attempts were made to revive Mountain Pass through Molycorp, but the company ultimately went bankrupt by 2015 after failing to sustain proper management.
As a result, U.S. security now hinges on the goodwill of the Chinese Communist Party.
To remove this reliance, policymakers must swiftly develop a comprehensive domestic rare earth ecosystem, from raw material extraction to finished product distribution.
A few months ago, the Trump administration initiated substantial deals worth billions with MP Materials, the current operator of Mountain Pass.
This time, however, the Department of Defense is ensuring a price floor, securing a decade-long purchase agreement to safeguard against price manipulation by China.
Given that China does not adhere to conventional market practices, American producers risk facing an uphill battle in a skewed global market.
Moreover, reports suggest that the Trump administration is planning to extend price floors to other U.S. rare earth enterprises.
While these steps mark an encouraging beginning, they are insufficient without the rejuvenation of America’s refining capabilities. The domestic rare earth refining industry has similarly declined under pressure from low-cost Chinese competitors.
Increasing domestic refining is part of the White House’s broader Rare Earth Strategy, which aims to ramp up production – including at military bases.
For initiatives like MP Materials to succeed, long-term government support is imperative to keep operations running, especially against adversarial actions from China.
Strengthening U.S. mining and refining will also align with bipartisan policies aimed at eliminating reliance on Chinese rare earths from the U.S. defense supply chain by 2027.
While the Pentagon is a primary consumer, a robust non-Chinese supply chain will play an essential role in ensuring the availability of rare earth minerals.
A critical piece of this puzzle is to enhance U.S. production of essential minerals, especially for clean energy technologies that are rapidly expanding, including solar, electric vehicles, and batteries.
If American miners and refiners are forced to enrich Chinese manufacturers while supporting our defense sector, it could prove detrimental.
Currently, China commands over 80% of global solar power generation and about 70% of electric vehicle sales.
With such vertical integration, from raw materials to consumer products, China’s approach raises ethical questions, especially considering its use of forced labor, particularly against the Uyghurs.
It’s ironic that China positions itself as an environmental leader while simultaneously increasing coal power production more than any other region.
Key nations in clean energy must genuinely honor environmental concerns. Therefore, it’s imperative for the U.S. to foster domestic clean technology producers to source important minerals from local refiners.
Ultimately, U.S. national security hinges on reducing reliance on China. While Mountain Pass’s recovery is a promising start, it falls short of what’s needed. Washington must establish a holistic domestic market that empowers miners, refiners, and manufacturers to challenge China’s monopoly, thus safeguarding America’s interests.
