Introduction
The increasing reliance of the world economy on advanced technologies—ranging from semiconductors and renewable power to defense systems—has cast a shadow over U.S. supply chains. At the center of this concern is the United States’ dependence on China for critical minerals, particularly rare earth elements. The Chinese government’s ability to control the supply of essential minerals such as gallium, germanium, and antimony has been a significant geopolitical and economic threat. The U.S. must respond to these continuous threats through new policies which enhance domestic resilience and reduce dependence on Chinese supply chains.
China’s Strategic Leverage Over Critical Minerals
China has long been the leading power in rare earth processing, controlling over 85% of the world’s supply chain. In December 2024, China extended its economic influence by imposing a licensing regime on the exportation of strategic minerals like gallium, germanium, and antimony. The minerals are key to the U.S. economy and are used in everything from military technologies to clean energy systems. Gallium, for instance, is essential in semiconductor manufacturing, while germanium is essential in fiber and military optics.
Although there is no direct export ban, China’s export licensing regime acts as a tool of exerting economic pressure. This has not yet caused severe disruptions in U.S. supply chains but sent a powerful message: The U.S. needs to reduce its dependence on China for critical materials. Inaction would result in long-term weaknesses in terms of disruptions to defense preparedness, technological advancements, and clean energy transitions. This is not a matter of trade, but one of national security. As competition around the world increases, China’s strategic manipulation of its control of essential minerals has the potential to threaten U.S. interests if not addressed.
The U.S. government has already recognized this weakness, and policymakers are warning of the potential economic costs of long-term dependence. Based on an estimate by a United States Geological Survey (USGS) study, a long-term ban on gallium and germanium alone would cost the country a $3.4 billion GDP. Moreover, strategic minerals such as rare earth elements are not only crucial in cutting-edge manufacturing but also in defense technology. This growing recognition serves to underscore the need for revisiting U.S. supply chain resilience to mitigate the geopolitical and economic dangers of China’s control over such pivotal resources.
Policy Recommendations
In order to offset these threats, America must place highest priority on establishing a secure supply chain of essential minerals. My proposed policies have two twin pillars: the revival of domestic mining and refining capacities and closer international partnerships for diversification of critical mineral sources. These policies do not only target the reduction of reliance on China but also the strengthening of the U.S. economy and national security.
Revitalizing Domestic Supply Chains Through Federal Tax Incentives
The first key proposal is establishing federal tax credits intended to incentivize private sector investment in mining and refining rare earth. Following the success of previous acts, such as the CHIPS and Science Act of 2022, which incentivized the manufacturing of semiconductors, the government of the United States could offer a 30% tax credit for investment to those involved in refining rare earth and mining. This would be complemented with a 20% tax credit for production on refinery activities. These kinds of incentives would lower the landing cost of establishing critical mineral processing infrastructure, thus becoming an enticing endeavor to private firms.
Advantages of such incentives are obvious. The CHIPS Act has already demonstrated how focused tax credits stimulate the growth of the high-technology industry. Similarly, rare earths are important not only to defense but to the green energy sector as well. With their importance to electric vehicles (EVs), wind turbines, and solar technology, the 30% investment tax credit aligns with the Biden administration’s broader green energy agenda. Thus, the economic and environmental benefits of strengthening the nation’s domestic supply chain for critical minerals go hand in hand.
However, the viability of this program hinges on the condition that companies adhere to rigorous environmental standards. To alleviate potential concerns about the environmental impact of mining activities, the policy would require that a portion of the tax incentives be used in setting up low-emission technologies and community research. The U.S. Department of Energy (DOE) can also streamline permitting for refining and mining projects and reduce approval timelines from 29 years to five years to speed up development even more. It can involve setting up a new Centralized Permitting Authority (CPA) in the DOE that oversees and expedites approval of refining and mining projects in federal, state, and local governments.
Strengthen International Partnerships to Reduce Reliance on China
The second leg of the strategy proposed in this article covers the development of strengthening international relationships to reduce American reliance on China for critical minerals. While important domestic efforts can be made at building processing units, America should also work at building secure and stable alliances with other mineral-dense nations such as Australia, Canada, and Brazil. All these countries represent stable, politically aligned sources of critical minerals that would reduce geopolitical risks associated with Chinese dominance.
One of the key initiatives is trade deal strengthening, particularly with the United States-Mexico-Canada Agreement (USMCA). A new chapter can be added to the trade deal to ease the flow of important minerals across the border and eliminate tariffs. By streamlining legal and regulatory procedures, the U.S. would be able to accelerate the flow of minerals from nearby countries and have a more diversified supply chain. Emphasis on facilitating simpler trade relations with Canada and Mexico not only reinforces North American security but also promotes regional economic stability.
Moreover, the U.S. must deepen its engagement with Australia, which is one of the largest raw rare earth element suppliers. As a member of the AUKUS alliance, the U.S. could engage more intensively with Australia so that it invests in rare earth refining and processing technologies. This partnership would include collaborative business in mining activities and the sharing of advanced processing technologies, further constraining the geopolitical influence China has over global rare earth resources. Expanding the AUKUS partnership to critical minerals by name would increase strategic partnership between the U.S., Australia, and the United Kingdom, promoting a shared interest in global supply chain security.
One of the most important things about strengthening global alliances is strategic foreign investment. One of the most important roles that the U.S. Export-Import Bank (EXIM) can serve would be to finance projects to extract and process key minerals in allied countries. A proposal of $8 billion in investments in mining and refining ventures would fortify the nation’s supply chain globally by investing in countries like Australia and Brazil. By providing direct financing, loan guarantees, and insurance for significant mineral projects, the U.S. would incentivize the production of alternative sources of key minerals, further reducing reliance on China.
Additionally, the U.S. will have to join hands with international financial organizations such as the World Bank and the International Finance Corporation in a joint investment venture for mine operation. Such union would allow the U.S. to obtain a steady supply of vital minerals on one hand, while facilitating mineral-producing nations to grow their economy simultaneously. This strategic use of foreign investment will also assist the U.S. in balancing out China’s dominance in the world’s economic market of mining activity.
A third necessary component is the creation of the International Critical Minerals Security Network, a multilateral initiative led by the U.S. Department of State, Department of Commerce, and DOE. The network would establish global standards for the extraction, processing, and trade of critical minerals to ensure that U.S. allies adopt environmentally and socially responsible practices. This initiative would involve tracking and making the origins and destinations of critical minerals publicly available, promoting transparency in an otherwise secretive business.
The network would also facilitate collective responses to supply disruptions, establishing a mechanism for rapid response in the event that a member country experiences shortages. By establishing common standards and cooperative practices, the U.S. and her allies can be assured that countries like China will be kept from manipulating mineral markets for geopolitical agendas. The development of such a network would not only increase security within supply chains, but also greater international cooperation amongst mineral-producing states.
Looking Ahead
The United States is faced with a compelling challenge in obtaining a strong and diversified supply chain of rare earth elements and other critical minerals. The policies outlined—with emphasis on the revitalization of domestic mining and processing capacity, pushing forward international partnerships, and leveraging foreign investment focused in critical sectors—constitute a realistic course of action to mitigate this vulnerability. By acting resolutely at this time, the U.S. can protect its economic and national security interests and ensure its leadership in emerging technology and green energy.
As geopolitical tensions escalate, particularly with China, the necessity of a diversified supply chain of strategic minerals cannot be overstated. The aforementioned policies constitute a clear path toward greater U.S. economic resilience, enhanced energy security, and reduced risks of future supply chain shock. Early implementation of these steps is highly recommended to safeguard U.S. interests and maintain competitiveness on the international stage. It is only through a proactive and strategic response that the United States can guarantee its long-term economic stability in the face of emerging global challenges.
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