Summary

The United States faces a severe strategic vulnerability in its critical minerals supply chain, with complete import dependence for 15 critical minerals and over 80 percent import reliance for an additional 11 minerals. China dominates the global supply chain, producing 95 percent of US rare earth elements supply. This dependence threatens America's technological capabilities and national security. President Trump's recent executive order on critical minerals is a strong start, but following through on execution will be the harder part. This paper proposes a two-pronged approach: federal funding for domestic mining and refining ventures, and the establishment of a strategic mineral reserve, supported by environmental permitting reform.

Problem

The United States finds itself in a precarious position, dependent on China — its primary strategic competitor — for the essential minerals that power modern civilization. The US produces the majority of only 13 of the 63 critical minerals domestically. For "rare earth elements," a term used to describe elements that are in fact common but difficult to extract, China produces 95 percent of the US supply. Without these critical minerals, semiconductors cannot function, batteries cannot operate, and both basic and advanced military systems cannot be produced. China has deliberately achieved market dominance in these minerals through decades of industrial policy, while US policy choices have led to the offshoring of domestic production capacity. This vulnerability has moved beyond theoretical concern to active threat: China has already begun using critical mineral export controls in retaliation for US technology restrictions, demonstrating both the willingness and ability to weaponize this dependency. Market forces alone cannot correct this imbalance, as Chinese firms have repeatedly demonstrated their ability to flood markets and destroy the economic viability of new Western mining ventures. With US-China tensions escalating and the defense industrial base exposed to potential supply disruptions, establishing secure critical mineral supply chains has become an urgent national security imperative.

Solution

Departments of Defense and Energy

America has a pre-existing statutory framework with which to solve this problem: the Defense Production Act (DPA). Title I of the DPA is more widely known and allows the government to rapidly procure national security-related supplies and equipment from existing industrial capacity. This is the authority that was used, for example, during the height of the COVID pandemic to secure emergency supplies of ventilators and personal protective equipment (PPE). Title III, on the other hand, is less commonly invoked and is aimed at addressing gaps in the American industrial base. In short, DPA Title I is meant to alleviate near-term supply constraints, while Title III focuses on adding new or expanded domestic manufacturing capabilities in the long term. Together — and with sufficient congressional appropriations — Title I and Title III allow ample statutory powers to address America's critical minerals vulnerability.

Title III requires that a specific industry (or in this context, class of critical mineral) be designated by the president or by agencies as eligible for funding. Funding can be deployed to provide grants to domestic mining and refining operations. Given Title III's explicit allowance for the scaling of emerging technologies, the Departments of Defense and Energy should seek to include projects with technologically differentiated approaches to minerals exploration, mining, and refining. For example, while finding new deposits of critical minerals has become more challenging, new technologies, such as hyperspectral satellite imagery combined with machine learning algorithms, have the potential to accelerate our rate of discovery.

When used in concert with the Departments' "Other Transaction Authority," which bypasses many of the burdensome rules in the traditional federal procurement process, Title III can quickly allocate funding to promising minerals ventures. Funding can take a variety of forms, such as purchase commitments, loans, loan guarantees, and direct grants. Direct purchase agreements under Title III, or purchases made under Title I, can be used to guarantee demand at a specific price for these minerals, which will be essential for these businesses to be viable. If these minerals are stockpiled, this can be a pilot version of the proposed Strategic Minerals Reserve, discussed below.

Congressional Actions

Congress should appropriate funds to authorize expanded grantmaking for critical minerals under DPA Title III. In addition to providing the funding, Congress should consider expanding the list of countries where Title III funding can be allocated. Currently, it is restricted to the US and a handful of close allies (Canada, the United Kingdom, and Australia, the latter of which was added only in 2023). Title III eligibility could be strategically expanded to include, for example, Greenland — ideally to provide support for American-backed mining ventures.

Another essential step is to relax, and ideally repeal, procedural environmental regulations that delay important industrial projects of all kinds. Chief among these is the National Environmental Policy Act (NEPA). NEPA introduces delays to essential construction while providing very few tangible environmental benefits. Short of repeal, Congress should provide clear pathways for expedited approval of critical minerals projects, particularly those with Title III support.

Finally, Congress should consider the creation of a formal Strategic Minerals Reserve, modeled on the Strategic Petroleum Reserve (SPR). Existing statutory authorities allow the executive branch to purchase minerals, but absent congressional action there will be few purpose-built physical locations in which to stockpile them. Furthermore, a Mineral Reserve would allow the federal government to act as both a buyer and seller of minerals, creating a potential long-term buffer against price volatility, as is the intended purpose of the SPR. (See "Secure Energy, Stable Prices: A Strategic Petroleum Reserve for Industrial Resilience" for more on this idea; see also "Demand-Side Financing for Critical Minerals" for more on stabilizing the critical mineral market.)

Justification

America must respond to China's strategic dominance of critical mineral mining and refining. Preserving and expanding domestic supply chains of strategic goods like critical minerals is a matter of national and economic security. Market-based solutions, on their own, are unlikely to work, because China regularly seeks to lower prices in specific markets when Western sources of supply appear likely to be developed. To counteract this, the federal government, on its own or in concert with allied countries, must develop an independent supply chain for the discovery, mining, and refining of critical minerals necessary for key technologies.