On January 1, 2025, China’s Ministry of Commerce announced that 28 U.S. defense-sector companies were added to its Export Control List. This decision affects major companies like Raytheon, Lockheed Martin, and Boeing, preventing them from importing dual-use goods from China. While it might initially seem like another move against Taiwan, China’s true aim appears more strategic.
China is setting the stage to restrict the Pentagon’s access to crucial rare earth elements (REEs) and magnets needed for advanced military technology. These REEs are vital for the operation of F-35 jets, Navy submarines, and precision-guided weapons.
By taking this step, China is preparing for a non-kinetic confrontation with the U.S. military, and unfortunately, the U.S. has enabled this scenario.
MOFCOM’s announcement did not explicitly mention a ban on REEs and other critical minerals, but such a restriction seems inevitable. China has previously halted REE exports, as seen in 2010. By targeting U.S. defense contractors, China could significantly undermine U.S. national security without engaging in direct conflict.
This strategy allows China’s mineral industry to continue thriving in larger markets like electric vehicles and industrial automation. Defense technology only accounts for a small portion of global REE consumption. Furthermore, this approach aligns with internal Chinese goals, given President Xi Jinping’s family ties to the REE industry.
REEs are indispensable in producing precision weapons, fighter jets, missile systems, and stealth technology. High-value REEs such as neodymium and dysprosium are used in permanent magnets essential for military applications. The U.S. and its allies depend heavily on China, which dominates both REE production and processing.
Efforts are underway in the U.S. to establish a domestic supply chain for REEs, with MP Materials in California leading the charge. However, multiple projects are necessary to reduce reliance on China.
A bottleneck in the REE supply chain could hinder U.S. innovation and technological advancement.
Rare earths are crucial for developing future military technologies, including advanced drones and AI-driven systems. Supply disruptions could stall research and development, allowing global competitors to catch up. The solution is clear: America must ramp up its own mining efforts.
The best response for the U.S. and President-elect Trump is to invest in domestic REE mining and processing. While alternatives to REEs exist, they compromise performance, which is unacceptable for U.S. defense needs. The U.S., along with allies like Australia and Canada, must develop processing infrastructure to meet demand.
In the short term, the lack of infrastructure could lead to increased costs and budget strains for defense programs. A comprehensive effort akin to the Manhattan Project is required to establish new mines and processing facilities. This will ensure the Pentagon gets the resources it needs to protect the nation.
Washington must act swiftly, focusing on strategic areas to enhance domestic mineral production. Utilizing the Pentagon’s Office of Strategic Capital and other programs can facilitate rapid development of critical mineral resources. Building a substantial defense-critical minerals stockpile is also essential.
To expedite the process, federal permitting must be streamlined, and litigation timelines should be limited. By doing so, the U.S. can mitigate immediate risks and reinforce its strategic position. This situation serves as both a warning and an opportunity to build resilience in critical supply chains.
Mark A. Smith, CEO of NioCorp Developments, stresses the importance of domestic mineral production. His company is working on the Elk Creek Critical Minerals Project in Nebraska. Drew Horn, Founder of GreenMet, highlights the need to align U.S. policy goals with capital and projects.
Both experts emphasize the urgency of developing a robust domestic supply chain for REEs. The threat posed by China’s actions underscores the need for a sustainable solution. Strengthening domestic production capabilities is crucial for national security and technological leadership.
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