Antitrust Meets Rare Earths: Can the Law Catch Up to Great Powers Era 2.0?

Highlights

• USC law professor Jonathan Barnett argues U.S. competition law was built for firm-vs-firm rivalry, not state-backed industrial systems like China's rare earth dominance.
• China's control over rare earth separation and magnet manufacturing emerged from decades of industrial policy, not geology alone—posing challenges antitrust courts cannot fully resolve.
• Antitrust law can punish collusion and predatory behavior, but it cannot build mines, train metallurgists, or construct the processing infrastructure the West urgently needs.
• Rare Earth Exchanges frames this moment as Great Powers Era 2.0, where states use subsidies, export controls, and resource strategy as instruments of national power.
• The decisive battles in critical minerals will be won through capital formation, permitting reform, and engineering expertise—not courtroom victories alone.

A new antitrust paper (opens in a new tab) argues that U.S. competition law may need to adapt to confront state-backed industrial strategies that can distort global markets. For rare earth investors, the paper matters because it raises a question that sits at the center of critical mineral geopolitics: Can free-market legal systems effectively compete against state-directed economic power?

The Ghost in the Courtroom

The rare earth war may eventually reach an unexpected battlefield: antitrust court. In a provocative new paper, Matsushita Revisited: Can U.S. Antitrust Address Foreign State Mercantilism Without Abandoning Free Markets?, USC law professor Jonathan Barnett argues that America's competition laws may be ill-equipped to address the realities of modern industrial rivalry.

His core argument is simple. Traditional antitrust doctrine was built for a world where firms competed against firms. Increasingly, Western companies are competing against state-backed industrial systems. For readers unfamiliar with the legal debate, Barnett's paper asks whether U.S. antitrust law should play a greater role when foreign governments use subsidies, export controls, coordinated industrial policy, and market interventions to influence global competition.

The Rare Earth Case Study Hiding in Plain Sight

Rare earths sit at the center of the debate. China today dominates rare earth separation, controls much of the world's permanent magnet manufacturing capacity, and maintains significant influence over heavy rare earth supply chains. These positions were not built solely through geology. They emerged through decades of industrial policy, capital allocation, workforce development, technology transfer, infrastructure investment, environmental tradeoffs, and strategic planning.

Barnett correctly notes that WTO proceedings, trade investigations, and policy analyses have documented Chinese use of subsidies, export controls, coordinated industrial policy, and market interventions across multiple strategic sectors, including critical minerals. Those findings are well-supported by publicly available evidence. Importantly, the paper does not claim that all Chinese success is the product of unfair practices. Economies of scale, manufacturing expertise, supply chain integration, and process innovation also play important roles.

That distinction matters.

The Fog Between Law and Markets

Where the paper becomes more speculative is in its proposed solution. Barnett argues that courts could narrow the application of doctrines such as sovereign compulsion and international comity, allowing antitrust law to reach certain forms of state-directed conduct that affect U.S. markets.

The challenge is practical. Antitrust law can punish collusion. It can address predatory behavior. It can impose damages.

What it cannot do is build mines.

What it cannot do is train metallurgists.

What it cannot do is construct separation plants, magnet factories, or chemical processing networks.

The rare earth supply chain crisis facing the West is fundamentally an industrial capacity problem as much as a legal one.

Enter Great Powers Era 2.0

The deeper significance of Barnett's paper lies beyond antitrust. It reflects the emergence of what Rare Earth Exchanges calls Great Powers Era 2.0: a period in which major nations increasingly use industrial policy, resource control, technology restrictions, subsidies, export licensing, tariffs, and strategic investment as instruments of national power.

Under Great Powers Era 2.0, markets still matter. But states matter more than they did during the globalization era that shaped modern antitrust doctrine. Many Western legal frameworks were designed around assumptions of relatively open markets and limited state intervention. Those assumptions increasingly collide with a world where governments actively compete for control of supply chains, advanced manufacturing, critical minerals, energy systems, and strategic technologies. Barnett's paper identifies that tension with unusual clarity.

The Real Verdict

The paper succeeds as a diagnosis more than a cure. Its central insight—that state-directed economic power creates challenges that traditional antitrust frameworks struggle to address—is compelling and increasingly relevant.

Yet investors should avoid overstating what antitrust can accomplish. Even a perfect legal victory cannot rebuild a mine-to-magnet supply chain. The decisive battles in rare earths will still be fought through capital formation, permitting reform, engineering talent, processing technology, industrial know-how, and long-term strategic investment.

For investors, that may be the most important lesson of all. The future of critical minerals will not be decided solely in boardrooms, ministries, or courtrooms. It will be decided where all three intersect.