China's Choke Point

The United States does not lack critical mineral resources. It lacks the processing infrastructure to convert those resources into usable industrial inputs. China's dominance is not primarily geological — it is industrial and political, built through two decades of state-directed investment, below-market pricing, and strategic acquisition of foreign mining assets.

Rare earth elements illustrate the structure. The United States mines rare earths at Mountain Pass, California — the only active rare earth mine in the country. But the ore is shipped to China for separation and processing, then returned as refined material or finished components. The United States has no commercial rare earth separation facility operating at scale. China processes roughly 85% of the world's rare earths.

The same pattern holds across battery materials. Lithium is mined in Australia, Chile, and Argentina, but the majority of battery-grade lithium hydroxide and carbonate is processed in China. Cobalt is mined primarily in the Democratic Republic of Congo — where Chinese companies control the majority of producing mines — and processed overwhelmingly in China. Chinese companies account for approximately 70% of global cobalt refining capacity.

Rare earth permanent magnets — neodymium-iron-boron (NdFeB) — are essential to the electric motors in F-35 fighter jets, Virginia-class submarines, Tomahawk cruise missiles, and virtually every precision-guided munition in the U.S. arsenal. China produces approximately 92% of NdFeB magnets globally.

The Department of Defense has funded domestic magnet production through the Defense Production Act, and MP Materials opened a magnet manufacturing facility in Fort Worth, Texas in 2023. But domestic capacity remains a fraction of defense requirements, and the facility depends on rare earth feedstock that still passes through Chinese processing at intermediate stages.

In 2023, China announced export licensing requirements for gallium and germanium — two materials used in compound semiconductors, radar systems, night-vision equipment, and satellite communications. The restrictions were widely interpreted as a direct response to U.S. export controls on advanced semiconductors and chip-making equipment. The United States has no domestic gallium or germanium production at commercial scale.

The Inflation Reduction Act created substantial incentives for domestic electric vehicle and battery manufacturing. But the IRA's Foreign Entity of Concern (FEOC) provisions — which restrict tax credits for vehicles using battery components or critical minerals from Chinese-linked companies — have exposed the depth of the supply chain problem rather than resolved it.

Chinese companies have responded to FEOC restrictions by establishing joint ventures and licensing arrangements with non-Chinese entities in third countries, particularly in Europe, Canada, and Morocco. CATL's licensing agreement with Ford for the Michigan LFP battery plant, subsequently restructured under political pressure, illustrated the difficulty of separating Chinese technology from nominally non-Chinese manufacturing.

Graphite presents a near-term constraint that has received less attention than lithium or cobalt. China produces approximately 65% of natural graphite and 100% of the battery-grade synthetic graphite used in EV anodes. In October 2023, China imposed export controls on graphite, requiring export licenses for battery-grade material. No alternative supply chain for battery-grade graphite exists at commercial scale outside China.

Solar-grade polysilicon is the foundational input for photovoltaic panels. China produces approximately 80% of global polysilicon, with a significant share concentrated in Xinjiang, where the Uyghur Forced Labor Prevention Act (UFLPA) creates a rebuttable presumption that goods are produced with forced labor. U.S. Customs and Border Protection has detained thousands of solar panel shipments under UFLPA enforcement.

Chinese manufacturers have responded by routing polysilicon through Southeast Asian facilities — primarily in Malaysia, Vietnam, Cambodia, and Thailand — in an attempt to obscure Xinjiang origin. The Commerce Department's antidumping and countervailing duty investigations, and subsequent tariff actions, have targeted this circumvention pattern. But supply chain tracing at the polysilicon level remains technically difficult and resource-intensive.

The United States has no domestic polysilicon production capacity oriented toward solar applications. Hemlock Semiconductor and REC Silicon produce electronic-grade polysilicon for semiconductors, but solar-grade production — which requires different specifications and operates at much higher volumes — does not exist domestically at scale. The IRA's manufacturing tax credits have incentivized downstream panel assembly but have not yet produced upstream polysilicon investment.

Federal policy has addressed the critical minerals problem through multiple instruments: the IRA's FEOC provisions and manufacturing credits, the CHIPS Act's semiconductor supply chain provisions, Defense Production Act Title III investments, the Minerals Security Partnership with allied governments, and bilateral critical minerals agreements with Australia, Canada, Japan, and the United Kingdom.

These instruments have produced real results in downstream manufacturing. Battery gigafactories are under construction or operating in Georgia, Tennessee, Michigan, Kentucky, and Nevada. Semiconductor fabs are under construction in Arizona, Ohio, and New York. Rare earth magnet manufacturing has begun in Texas.

The upstream processing gap has not been closed. Mining and processing projects operate on 7–15 year development timelines from discovery to production. Environmental permitting for domestic mining and processing projects remains a structural constraint. And Chinese producers, benefiting from sunk capital costs and state subsidies, can price below the level at which new Western projects are economically viable — a dynamic that has already contributed to the suspension of several announced projects.

The critical minerals dependency is not a problem that can be resolved in a single policy cycle. The processing infrastructure China has built over two decades cannot be replicated in five years, regardless of the level of federal investment. The realistic near-term objective is not supply chain independence but supply chain resilience — diversifying sources, building strategic reserves, and reducing the share of any single chokepoint that is controlled by a single jurisdiction.

The more immediate risk is not a sudden Chinese embargo — which would impose costs on China as well as the United States — but the use of export licensing, regulatory delay, and pricing pressure as instruments of political leverage in specific disputes. The gallium and germanium restrictions of 2023 were a demonstration of capability, not a full exercise of it.

The United States has the geological resources, the capital markets, and the allied relationships to build a more resilient critical minerals position. Whether it has the policy continuity and permitting infrastructure to translate those assets into operating supply chains is the central question. The answer will be determined not in Washington but in the mine permitting offices, the processing plant construction timelines, and the investment decisions of the next decade.