Next Steps for DoD to End U.S. Reliance on China for Rare Earth Elements

In becoming a majority shareholder of MP Materials, the Trump administration demonstrated the salutary thought that no radical free-market orthodoxy should prevent the United States from taking decisive action, including direct investment of taxpayer dollars, to secure domestic sources of industrial materials vital to our national defense.  It is encouraging that Apple, long known for its Chinese assembly operations, followed up with a $100 billion investment in U.S.-based supply chains, including a significant expansion of MP Materials to furnish magnets for Apple production. 

Consistent with being America’s first true “builder” commander-in-chief, President Trump can further reduce America’s rare earth vulnerability by using his executive authorities to grow a finished rare earth element stockpile and begin the construction of processing plants within the United States. 

Without rare earth magnets used in brakes, steering, and fuel injectors, U.S. automobile production would stall in a scenario far more damaging than the relatively brief COVID-era semiconductor shortages. Neither the civilian nor military sectors can function without access to the seventeen rare earth elements on the periodic chart – from Cerium (Number 58) to Ytrium (Number 70).

Despite their indispensability, refined rare earths will never be generated in adequate supplies by the private sector responding to the usual market forces and government incentives. Even in China, with vastly lower labor and regulatory costs, heavy state subsidies are required to sustain production. The Chinese Communist Party recognizes the strategic value of such critical mineral production—and dominance of finished global rare earth supply chains—and acts accordingly.

It has taken the United States much longer, too long, to reach that same conclusion. As with maintaining a modern military or building public infrastructure, there are certain things the government must pay for, like a military, because the national interest, indeed, survival, demands it.

Upon returning to the White House, President Trump recognized the strategic peril posed by allowing China to maintain a de facto chokehold over such materials that keep the lights on, water flowing, and the Internet running. In March, he issued the Executive Order “Immediate Measures to Increase American Mineral Production.” The Interior Department is prioritizing mineral extraction on all federally owned lands known to contain deposits, while other agencies, including DoD, are identifying sites suitable for mineral production.

The Pentagon is driving an effort to generate additional supplies of critical minerals needed for weapons production and to refill the stockpile managed by the Defense Logistics Agency (DLA).

Nonetheless, even if the United States were to tap ground deposits instantly, most of the rocks would still go to China for refinement and separation.

The United States, using the Defense Production Act, the Office of Strategic Capital, and the Development Finance Corporation, should finance the construction of a half-a-dozen to a dozen geographically dispersed manufacturers for separating heavy and light rare earths. The plants could be government-owned, private sector operated. A hefty, expensive undertaking, yes. However, having redundant processing plants would break China’s chokehold and avoid the trap of a single point of failure. Some of those facilities could feature remarkable new American separation technologies that use lasers, providing a clean alternative to Chinese environmental abuses.

Nonetheless, even with welcome actions, investments, and reforms pursued by the Trump Administration, it will, under the best of circumstances, take years to establish sufficient domestic processing capacity. Yet, by some informed estimates, conflict with China, which would effectively cut off the supply of commercial-grade rare earth magnets and metals, could come at any time.

Consequently, the Defense Department needs a crash program for DLA to buy, and stockpile finished rare earth mineral powders, oxides, and parts irrespective of their country of origin—including, if necessary, China. Congressional lawmakers in both parties have proven receptive to urgent appropriations requests when presented with solid facts.

The United States can move fast when there’s a will to do so. Take the first Trump Administration's launch of Operation Warp Speed, which defied expectations (and critics) to produce and distribute a coronavirus vaccine in under a year. Building the capacity to assure reliable supplies of processed rare earths will take longer. But that is all the reason to start now.

Jeffrey Jeb Nadaner is a senior vice president at Govini, the defense acquisition software company. He served as deputy assistant defense secretary for industrial policy in the first Trump administration.