This month, Washington has gone all-in on rare earths. President Trump unveiled a $12 billion plan to stockpile critical minerals, while the State Department gathered diplomats from more than 50 nations to fortify supply chains beyond China. The message is clear: America is finally confronting the risks of relying on Beijing for the building blocks of modern technology.
That concern is justified. Rare earths are found in everything from electric vehicles and wind turbines to missile guidance systems and fighter jets. China dominates their mining, refining and magnet production. When Beijing tightened export controls last year, it underscored how dependent the United States has become on its geopolitical rival for materials it no longer reliably produces itself.
But there’s a risk in how Washington responds. Countering China’s state-directed strategy may require some new approaches, but the United States should be careful not to mimic it too closely. Doing so would erode the market dynamism and ingenuity that have long been America’s strategic advantages.
Rare earths are not especially rare. They are widely distributed across the globe, including the United States. What makes them strategically sensitive is the difficulty of extracting, separating and refining them at scale. China has mastered those steps with aggressive state-led industrial policy, backed by cheap capital, generous subsidies and lax environmental enforcement. Meanwhile, the United States’ mining and processing capacity has declined amid rising costs, regulatory uncertainty and permitting timelines that stretch for years.
In response, Washington has begun experimenting with tools that once would have seemed extraordinary. In the past year, the U.S. government has taken ownership stakes in several mining firms and set price-floor guarantees on domestic rare-earth production to buffer markets from volatility. These moves form the basis of an emerging U.S. industrial policy aimed at insulating America from supply shocks.
To counter China’s dominance, some degree of government involvement may be unavoidable. Modern defense equipment depends on rare-earth materials that have few substitutes. Strategic stockpiles can buy time during crises and reduce the risk of sudden supply shortages for security purposes.
But broader interventions come with real costs. Government-guaranteed price floors shift risk onto taxpayers and distort market signals. Equity stakes blur the line between public policy and private enterprise. And open-ended subsidies are difficult to unwind once in place. Most importantly, heavy-handed state intervention crowds out the very market forces that drive adaptation.
That adaptive capacity has long been America’s core strength. When inputs become constrained, prices send signals. Firms respond by improving efficiency, developing substitutes and expanding supply in places that once seemed uneconomical. This process has repeatedly reshaped markets for energy, materials and technology.
Such adjustments are already underway. New rare-earth projects are advancing across North America, including in Utah. Researchers are developing alternatives that reduce or eliminate reliance on rare earths. Some automakers are deploying motors that require no rare earths at all. The more China threatens supply, the faster these alternatives emerge.
This is markets doing what markets do: responding to scarcity with substitution, efficiency and new supply. Policy can help — but only if it enables adaptation rather than replacing it.
The most constructive role for government is to remove obstacles to adaptation. America has the world’s second-longest mine development timeline, averaging nearly 29 years from discovery to production. Streamlining permitting would do more to boost domestic production than any subsidy.
Strategic partnerships abroad also make sense. The administration’s agreements with Australia, Japan, and other countries to co-invest in mining and processing projects can help diversify supply.
Securing rare earths doesn’t mean we need to mine and refine every ounce we consume. Rather, we should diversify enough so that China can’t cut off critical supplies. Analysts suggest reducing reliance on China from 90% to 60 or 70% would be sufficient to meet essential needs, such as national security. That’s achievable without permanent subsidies or sprawling state intervention.
China’s grip on rare earths endures only as long as it keeps them cheap and available. The risk lies in Washington creating an industrial policy that steadily — and indefinitely — expands the government’s role in private markets.
Competing with China does not require copying its state-capitalism playbook. It requires reforming permitting, forging partnerships and using stockpiles judiciously — while letting competition and innovation do the rest.