As U.S. President Donald Trump moves to block purchases of Chinese critical minerals used in manufacturing starting next year, some say the plan could hit snags because the United States lacks adequate mineral production capacity.
Under federal rules, U.S. defense contractors and manufacturers will be barred from purchasing rare earths and magnets, tungsten, molybdenum, and tantalum from China, Russia, Iran, and North Korea starting Jan. 1, 2027. These minerals are used to make fighter jets, missiles, cars, and computers. In particular, rare earths are the raw materials needed to make powerful magnets, which are essential for advanced weapons and the electric vehicle industry.
◇ Five months left until the regulations take effect… U.S. production falls short of total mineral demand
Since taking office, President Trump has made mining and processing critical minerals in the United States a key national security priority. He has provided tens of billions of dollars to about 150 mineral corporations to overhaul supply chains that depend on China.
However, Reuters reported that with about five months left until the rules take effect, U.S. production capacity still does not meet domestic demand.
According to consulting firm Arthur D. Little, demand for the most widely used rare earth magnets in the United States last year was about 48,000 tons (t). By contrast, U.S.-made supply was 300 t. The production capacity U.S. corporations are expected to secure by the end of this year is just 5,000 t, about 10% of total demand.
The United States has halted tungsten since 2015, and tantalum production has been suspended since 1959. Guardian Metalic Resources is pursuing a project to open a tungsten mine in the United States by 2028, which is a year later than the implementation of the rules. A tantalum mine underway in South Dakota has not even set an operation date.
Minerals industry analyst Chris Berry told Reuters, "The likelihood that the United States will produce enough minerals by January next year to end exemptions for Chinese products is small," and "it will take many more years to build the facilities needed to compete."
China, by contrast, accounts for more than 80% of the global mineral refining market. The International Energy Agency (IEA) warned that if China restricts rare earth exports, it could disrupt $6.5 trillion (9,517.95 trillion won) in manufacturing worldwide.
◇ Defense industry exemptions draw backlash from mineral companies… "Fewer reasons to buy expensive U.S.-made products"
While restricting purchases of Chinese critical minerals, the U.S. government has allowed exemptions for defense contractors when U.S. supply is insufficient. Starting in January 2027, the U.S. government plans to bar defense contractors from sourcing rare earths and certain critical minerals from China and other countries.
However, for companies that struggle to find alternative suppliers, the U.S. Ministry of National Defense can grant temporary exemptions after case-by-case review. On the 20th, President Trump strengthened the criteria for approving exemptions through an executive order. Going forward, defense contractors must provide evidence that they made every possible effort to avoid Chinese raw materials and present a specific timeline to cut off Chinese supply.
To prepare for shortages, the Trump administration in February also launched Project Vault, a $12 billion (17.5716 trillion won) critical mineral stockpiling program. The U.S. government acknowledged that in the early stages of the project it would have to purchase minerals from countries around the world, including China.
The problem is that U.S.-made mineral supply falls far short of demand. The industry expects the Ministry of National Defense will have little choice but to continue granting exemptions to some companies that use Chinese minerals until domestic production facilities are completed. U.S. mineral companies object that if exemptions and stockpiling of Chinese minerals continue, defense contractors will have fewer reasons to purchase more expensive U.S.-made products.
Meanwhile, some say allies such as South Korea and Japan could serve as alternative suppliers to China until U.S. supply stabilizes. Samantha Carl-Yoder of law and lobbying firm Brownstein Hyatt Farber Schreck said, "Until U.S. corporations sufficiently expand capacity, cooperation with allies such as Korea and Japan could be the link that supplies the minerals manufacturers need."