By Lara Seligman
On the eve of a highly anticipated meeting between U.S. President Donald Trump and Chinese President Xi Jinping during this weekend’s G-20 summit in Osaka, Japan, Congress is growing increasingly concerned that the supply of critical rare-earth minerals found in every advanced weapon in the U.S. arsenal could be a casualty of the escalating trade war.
Chinese officials have in recent months raised the specter that Beijing could potentially cut off supplies of critical rare-earth materials—key components in products including cell phones and smart bombs—to the United States in response to Trump’s decision to impose harsh tariffs on Chinese goods and blacklist the Chinese telecommunications giant Huawei. Experts say such a move by China could devastate the United States’ ability to wage war, as Beijing controls more than 90 percent of the global production of these minerals.
Rep. Chrissy Houlahan, a Democrat from Pennsylvania and former chemistry teacher, wants the Defense Department to do more to tackle this threat. She introduced legislation in the annual defense policy bill that would, if passed into law, require the Pentagon to come up with a plan to help shore up the domestic rare-earth industry and establish a secure supply chain for the materials.
Houlahan chatted with Foreign Policy about her efforts.
Foreign Policy: What is the threat the United States is facing on the rare-earth front, and why is it so important to get a handle on it?
Rep. Chrissy Houlahan: Rare-earth elements are essential to making some of the products that we use as civilians, whether they are cell phones or the products that we use in our military. So making sure we have the proper supply and access to the proper supply is important not just for our defense industry but also for our civilian supply chains.
These rare earths are in many cases not necessarily in the ground in our area, but they are in the ground in Asia or in Africa. The concern that I have and I think that other people do as well is that at this point in time there has been a very deliberate effort on the part of the Chinese government to control the supply and access of many of these earth elements. It is doing that in a variety of different ways: by moving into Africa aggressively, for example, and by buying up product aggressively and stockpiling it. It is concerning because it is a national defense, a national security issue, as well as an economic issue.
FP: How did China come to have a monopoly on these critical materials?
CH: It’s been a very strategic and deliberate effort on China’s part that we in a lot of ways have been asleep at the wheel on. That’s partially why I’m worried about it—I think that the Chinese have recognized appropriately that this is something where they can control market pricing, that they can control availability for manufacturing, and we haven’t been as diligent enough as we should be.
It is not just the Chinese who are playing in this game—it’s North Korea, Iran, and Russia, too.
FP: How does your legislation hope to secure the U.S. supply of rare-earth minerals?
Advanced U.S. weapons are almost entirely reliant on rare-earth materials only made in China—and they could be a casualty of the trade war.
Beijing could slam every corner of the American economy, from oil refineries to wind turbines to jet engines, by banning exports of crucial minerals.
CH: There are three parts of the amendment that we put forward. One is requiring the Defense Department to report on what the supply issues are and making sure there is a plan to secure appropriate supplies.
Another is to give more authority to people who are stockpiling it in our country, to make sure that they can control the sale of those rare-earth elements when they are releasing stockpile inventory. Right now, if Asia, particularly China, comes in and offers a higher price than other people do, U.S. companies are in the position to take that higher price. This legislation says, no, our folks who are selling it are allowed to make decisions based on other issues, not just maximum price.
It’s not an outright ban. The idea is to make sure that we don’t by accident sell off stockpiles literally into Chinese hands, which has been happening because they control pricing in many cases. This amendment allows us to be more deliberate about who we sell to.
FP: One part of your legislation allows companies to actually sell off some of the stockpiles, which seems counterintuitive. Can you explain?
CH: The third is specifically giving permission for us to sell off some of the stockpile of rare-earth minerals that we don’t need, which does free up some money. It’s sort of a relief mechanism: We build up a stockpile of various earth elements, and then as they get big, we have the authority to sell them off at various periods of time. We intend to use some of those monies to fund other aspects of the defense budget, including the Family and Medical Leave Act to give Defense Department civilian employees family and medical leave.
FP: China has threatened to use its leverage to cut off the United States’ rare-earth supply. Do you believe it actually will do so? If it did, what would be the impact on U.S. national security?
CH: I do not believe that China behaves in the same way as we do in terms of its strategic plans of controlling markets, and I do worry that it has the ability and the intent to do that.
So I operate under a relatively paranoid lens, and I think it is important that we think strategically about it before it becomes a problem instead of when it becomes one.
If that does happen, I think it could be as dire as people predict in terms of supply chain and manufacturing capabilities. We talk about this not just with rare earths but with steel and aluminum as well—we need to have a supply chain that we control of pretty much everything we need to be secure and safe. I’m not as extreme as some people are, but I do think that we need to be concerned about it.
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