This is part of a series examining the central importance of critical minerals and the race to ensure Western supply.
Over decades, many democratic governments stopped planning strategically or placed losing bets on what future threats might be. They allowed the free market to outsource manufacturing and critical supply chains, including for the vital mineral inputs at the heart of every aspect of modern technology, from cell phones to power grids and F-35 fighter jets.
In contrast, Chinese leaders did not let markets get in the way. For six decades, Beijing has backed mineral mining and processing with state planning, cheap capital, and a tolerance for environmental costs that Western producers could not match.
It then consolidated the industry into state-controlled champions. Washington and Brussels now face the question Beijing answered long ago: when the market cannot price security, will government pay for it?
In 1992, Chinese leader Deng Xiaoping declared “the Middle East has oil, China has rare earths,” reflecting a national vision for domination of the resources that are today at the heart of modern life. Using every tool available, from foreign direct investment in the developing world to domestic industrial policy and environmental regulation, China built control over critical minerals and their global market.
The strategic importance of these minerals was not unknown to Western political leaders. In 1980, Congress declared that the availability of minerals and processed materials was essential to national security, economic prosperity, and industrial production.
But as Washington talked episodically about the importance of sustaining local production, China built a formidable advantage in processing and refining capacity. Now China dominates global rare earth supply chains, accounting for approximately 60% of mining, 90% of processing and separation, and 94% of permanent magnet manufacturing.
Beijing’s control is even more concentrated in heavy rare earths such as terbium, which, along with samarium and other rare earth elements, is essential for high-performance magnets used in advanced defense technologies. China also controls about 94% of battery-grade graphite processing and roughly three-quarters of cobalt refining, key elements in most batteries.
Last year, China demonstrated to the world just how serious its leverage is. Beijing imposed export controls on several rare earth metals and heavy rare earth elements, forcing some automakers to cut production or halt lines. Beijing then expanded export restrictions to include Chinese technology, graphite anode material, and battery cathode inputs.
In their October 2025 Busan meeting, US President Donald Trump and Chinese President Xi Jinping agreed to the suspension of some of these curbs until November 2026 (recently extended to January 2027). If fully enforced, the restrictions could put at risk $6.5 trillion in annual downstream output, according to the International Energy Agency.
The US and Europe are scrambling to build resilience. Political timelines are tight, especially in the US, which is fast approaching the deadlines for both Chinese export restrictions and new statutory and White House requirements to cleanse US defense supply chains of certain foreign inputs by January.
To meet these ambitious goals, Western allies are focused on creative industrial policies combining market stimulation, government investment, price floors, stockpiles, and partner engagement. Key to the success of these efforts will be agreements with like-minded nations, accelerating innovation, and rapidly expanding mining and processing capacity outside China.
The US administration launched two major initiatives in February under Hollywood-style monikers: Project Vault and FORGE.
Project Vault, or the US Strategic Critical Minerals Reserve, is a public-private stockpile backed by $12bn in government and private commitments. Designed as an insurance policy for companies to protect against external supply manipulation, it aims to boost investor confidence to facilitate risky new minerals processing ventures.
At the same time, the European Union’s 2025 RESourceEU plan aims to mobilize €3bn ($3.3bn) for priority critical mineral projects. It also pilots joint purchasing and a joint stockpile, and limits exports of scrap. Other nations, such as Australia, the UK, Japan, and Canada, are also building strategic stockpiles and action plans.
FORGE, or the Forum On Resource Geostrategic Engagement, is a plurilateral organization focused on policy coordination and setting price floors to help new processing ventures get off the ground. It currently has 17 members, including the biggest economies in Europe as well as the EU itself.
Vice President JD Vance described the goal of FORGE as building a “preferential trade zone” for critical minerals, with a US-led architecture to support bilateral agreements and rebalance a market now dominated by China.
The greatest challenges for US and European cooperation lie in long timelines to establish new mineral processing plants, and the difficulty of negotiating sustainable price floors. Geopolitical fluctuations caused by wars in the Middle East and Ukraine, as well as changes in US politics, could derail these urgent efforts.
China spent more than half a century establishing a new paradigm in the mining industry, and the only way for the US and Europe to counterbalance Beijing’s dominance is through trust, collaboration, and innovation.
FORGE, for example, will succeed if its members can build reliable operating and enforcement mechanisms, but after nearly two years of shifting US tariff announcements, members are likely to be wary of Washington’s commitments on price floors.
Collaboration among allies is critical. A price floor set alone, or bilaterally, can keep new mining and processing projects alive, but at a high and rising cost. It invites leakage, i.e., cheaper supply flows to markets without a price floor, and China can undercut the price or play allies against each other. Only a price floor backed by a group covering most of allied demand can support a viable market outside China. With America’s two deadlines in January, the US and Europe should agree on shared rules now or risk bidding against each other for the same scarce supply.
It is time for America and its key allies to supercharge government research and development support for mining and processing. Not only does China dominate critical mineral processing, but it also controls the unique expertise and technology needed to run modern processing factories and is continually improving its efficiency and cleanliness. More than 11 Chinese universities and 40 laboratories train hundreds of specialized rare earths engineers each year, while the United States trains none.
The US and Europe should aim to capitalize on scientific breakthroughs and leapfrog into a more sophisticated use of byproduct and waste recovery, as well as using AI, new processing methods, and modular processing plants.
There is neither time nor capital to build a parallel market-based critical minerals supply chain without state support, especially as China deflates prices and skews the market when its competitors attempt to gain ground.
Instead, US and European leaders should hark back to the spirit of ambitious Allied programs during World War II, when necessity forced the rapid construction of alternative technologies and supply chains. Faced with the loss of Asian natural rubber supplies, Washington and London coordinated production, concentrated investment where industrial capacity was strongest, and developed alternative supply chains at extraordinary speed.
Today’s critical-minerals challenge requires the same ambition: shared rules, shared financing and shared innovation, or competition between allies could undermine the very supply chains they are trying to secure.
Sharon Hudson-Dean is a Senior Fellow at the Center for European Policy Analysis (CEPA) and an Associate Fellow at Chatham House in London. She is a senior foreign policy leader with more than 30 years of diplomatic experience managing complex global, defense, political, and strategic challenges. Most recently, she served as US Deputy Assistant Secretary of State for Northern Europe, NATO, and Arctic Security (2024-25).
Europe’s Edge is CEPA’s online journal covering critical topics on the foreign policy docket across Europe and North America. All opinions expressed on Europe’s Edge are those of the author alone and may not represent those of the institutions they represent or the Center for European Policy Analysis. CEPA maintains a strict intellectual independence policy across all its projects and publications.
