Highlights
- China has strategically dominated rare earth element production by controlling the entire supply chain from mining to manufacturing.
- The Big Beautiful Bill seeks to boost U.S. critical mineral production through funding, permitting reforms, and strategic investments.
- The legislation reveals a complex tension between supporting mining extraction and maintaining demand in clean energy industries.
Rare earth elements (like neodymium, dysprosium, and others) are critical ingredients in everything from electric vehicle motors and wind turbines to many electronic components and advanced weapons systems. However, mining these elements is only the first step – they must also be refined into high-purity materials and converted into components (such as powerful magnets) before they are incorporated into finished products. China learned this early and has spent decades building an end-to-end supply chain for rare earths, from mining to magnet production. Starting in the 1990s, Chinese firms – backed by state investment and lax environmental standards – flooded the market with low-cost rare earths, undercutting competitors. This strategy drove nearly all non-Chinese producers out of business.
A telling example is the Mountain Pass mine in California: once the world’s leading rare earth mine, it halted operations in 2002 after a waste spill and intense Chinese price competition made it unprofitable to continue. In short, without strong support across the entire supply chain, new mines in the West have struggled to survive when China can dump product at lower prices.
This is why industrial policy is so important. Simply opening a rare earth mine doesn’t guarantee a secure supply if you lack domestic processing plants or steady demand from manufacturers. As past experience shows, a mine-alone approach can collapse if China slashes prices or restricts exports to exert leverage. (Notably, China’s government has at times used export quotas or bans as a geopolitical tool – for example, cutting off rare earth shipments to Japan in 2010 over a political dispute, which caused global prices to spike.)
And as President Trump’s recent “Liberation Day” trade initiative triggered a swift Chinese clampdown on rare earth exports, it’s clear that—at least in the short to medium term—America’s leverage remains limited based on how events have unfolded thus far. On the other hand, no one should count out U.S. power and influence; it goes deep, broad, and far, so the situation remains dynamic.
A comprehensive strategy needs to invest in every link, including mining, refining, manufacturing, and even stockpiling, as well as innovative breakthroughs in recycling and non-rare-earth magnet technology. It may also require safeguards, such as offtake agreements or tariffs, to prevent state-subsidized dumping. In essence, building a resilient rare earth supply chain is a collaborative effort between industry and government, often requiring significant public support and investment, much like China has done. The question is whether the United States is now willing to mount a similarly concerted effort, especially with midterms around the corner and a political culture in the USA that tends to kick the can down the road.
What the “Big Beautiful Bill” Does for Critical Minerals
House Republicans’ newly unveiled “One Big Beautiful Bill (opens in a new tab)” (H.R. 1) – a sweeping $4 trillion reconciliation package – includes several provisions aimed at jump-starting domestic production of critical minerals, including rare earth elements.
On paper, the bill clearly recognizes the strategic importance of these materials. Notably, it sets aside $2.5 billion specifically to boost U.S. critical mineral production through the National Defense Stockpile (opens in a new tab). The government could use this funding to purchase and stockpile domestically produced rare earths, effectively guaranteeing a buyer for U.S. mines (a buffer against price crashes). The bill also provides $500 million to expand a Department of Defense loan program that would support critical mineral projects with loans and loan guarantees.
According to the legislative text (opens in a new tab), this could leverage up to $100 billion in private financing for developing “reliable sources” of critical minerals and related industries.
In plain terms, Washington is offering to help finance new mines, processing facilities, or even manufacturing plants to ensure these strategic materials are mined and refined either in the U.S. or by allied countries.
Beyond funding, the Big Beautiful Bill aims to make it easier and less risky to bring new resource projects to fruition. It creates a new “De-Risking” program (opens in a new tab) that would compensate companies if a federal action (like a permit revocation or sudden regulatory change) shuts down a major energy or mineral project mid-stream.
Under this program, a U.S. company investing $ 30 million or more in a “covered” project, which explicitly includes critical mineral extraction and processing, could recover its sunk costs if the government were to withdraw support (for example, if a future administration canceled a mining permit after it was issued). This is essentially political risk insurance designed to reassure investors that the rules of the game won’t change unexpectedly.
Likewise, the bill includes permitting reforms to expedite project approvals. It allows project sponsors to pay a fee to expedite environmental reviews, imposing hard deadlines (e.g., one year for a full environmental impact statement) and even barring legal challenges to the resulting ecological studies. For a rare earth mine or processing facility that might otherwise face years of regulatory delay and courtroom battles, this fast-track option could be a game-changer.
The idea is to shorten the timeline from investment to production, so that strategic projects can come online before investors lose patience or capital.
In short, H.R.1’s mining-related provisions would pour significant money into the critical minerals sector and attempt to break logjams in the mine approval process. These steps certainly acknowledge that a robust supply of rare earths is a national priority.
The big question, however, is whether this approach, which focuses heavily on the upstream (extraction) side, is sufficient to secure the supply chain truly. Rare earth development doesn’t happen in a vacuum; it relies on healthy downstream industries to purchase the materials and transform them into products. This is where the bill’s broader thrust raises some concerns.
As Rare Earth Exchanges (REEx) has continuously suggested:
Industrial policy is crucial for building a resilient rare earth supply chain, as market forces alone cannot overcome the deep structural advantages China has established across upstream mining, midstream processing, and downstream manufacturing. Decades of Chinese state subsidies, export control strategies, and infrastructure integration have made it nearly impossible for private Western firms to compete without coordinated public support. Rare earth mines in the U.S. and allied nations risk collapse without guaranteed processing, offtake agreements, or price stabilization, especially when faced with Chinese rare earth dumping. At the same time, gaps in domestic refining, recycling, and magnet-making leave new mines disconnected from end markets. A whole work force needs to be educated. To succeed, America must invest across the entire value chain—from geologic surveys and permitting reform to separation facilities, magnet innovation, and substitutes like non-rare earth permanent magnets, to educational and vocational programs across the value chain—ensuring strategic redundancy, economic viability, and technological independence.
Of course, this is far from a perfect world, and given current dynamics—including the contents of the Big Beautiful Bill—such a comprehensive industrial policy in the U.S. remains unlikely. More realistically, progress will depend on a blend of public-private partnerships shaped by both market forces and targeted subsidies. That’s where REEx comes in: our online tools aim to guide smarter capital deployment toward the most promising companies and projects (with the supply chain in mind), helping maximize impact across the critical mineral supply chain.
Green Industry at Stake: Will Mining Support Be Enough?
Critics point out a potential contradiction in the Big Beautiful Bill: even as it boosts mining, it simultaneously pulls back on policies that sustain demand for critical minerals. A resilient rare earth supply chain needs both ends – supply and demand – working in tandem. Yet, H.R.1 aggressively rolls back many of the clean energy initiatives that were creating new markets for these minerals.
Most prominently, the bill guts or sunsets a slew of incentives for electric vehicles, renewable power, and advanced energy manufacturing that were enacted just a couple of years ago in the Inflation Reduction Act. It proposes to repeal or phase out nearly every major clean energy tax credit, including credits for buying EVs, installing EV chargers, wind and solar investments, and even the advanced manufacturing credit that covered domestically produced battery components and critical minerals, as reported by expert attorneys via Lexology (opens in a new tab).
For example, the IRA’s Section 45X advanced manufacturing credit, which would have rewarded U.S. production of materials such as battery components and rare earth magnets, would be phased out years early under this bill (opens in a new tab). This latter point is particularly dangerous given the Two Rare Earth Base China policy, with emphasis on near monopolization of rare earth magnets, components and assemblies, not to mention a torrent of patents in downstream innovation in the Middle Kingdom.
Likewise, new clean electricity projects would lose their tax credits in short order, and incentives for purchasing electric or fuel-cell vehicles (Sections 30D and 45W) would be reduced. In effect, the legislation shifts U.S. policy away from electric cars and renewables and back toward traditional energy (it even mandates more oil and gas lease sales and funds oil reserve purchases).
This is why tech and automotive leaders have sounded alarms. Industry stakeholders – including Tesla’s CEO Elon Musk – warn that canceling clean energy incentives will undercut the very industries that make use of rare earth materials, from EV makers to wind turbine manufacturers. Musk and others point to the hundreds of new projects and over $120 billion in private manufacturing investment announced since the IRA’s passage as evidence that the prior policy was effective in building domestic capacity. They argue that yanking support now could derail this nascent momentum.
From a rare earth supply chain perspective, this matters because without a robust domestic clean tech sector, who will buy the output of new U.S. rare earth mines? Remember, other countries are already acting in their interests to develop industrial policies, such as India and Europe.
A big driver of rare earth demand is the push for electrification and renewable energy. For instance, an electric car can contain a kilogram or more of neodymium in its motor magnets, and each large wind turbine requires hundreds of kilograms of rare-earth magnets. If U.S. policy makes it less attractive to build or buy EVs and wind turbines (by removing credits and even rolling back fuel efficiency and emissions standards, then the growth in rare earth demand may occur overseas instead of in America. That could leave U.S. mines serving a mostly export market or competing globally against China’s still-dominant producers – a precarious scenario, given China’s ability to drive prices.
China’s Moves
Meanwhile, China is moving in the opposite direction. Beijing continues to heavily support its green industries and the raw materials behind them. As a result, China not only produces about 90% of the world’s rare earth elements but has also leveraged that position to become a manufacturing powerhouse in EVs, batteries, and renewable energy technology. In fact, China spent years investing in every stage of the supply chain (often through state-led programs), and today it enjoys what one analyst called a “near monopoly” in the mining and processing of rare earths and other minerals essential for the clean energy transition, as cited by Yale (opens in a new tab) and many others.
It’s important to also understand China’s aggressive and massive Belt and Road Initiative (opens in a new tab), and the hundreds of deals the nation already has with countries worldwide. These are advancing, maturing, and consequently make it hard for the U.S. to regain its resurgence in many parts of the world.
This dominance was not accidental – it came from long-term industrial policy. The payoff is that Chinese companies, such as BYD, now lead the world in EV production, and China accounts for more than 80% of global solar panel manufacturing capacity. It is also rapidly installing renewable energy at a record pace (China added as much solar capacity in 2022 as the rest of the world combined, then doubled that addition in 2023). China’s leadership clearly sees moving away from fossil fuels as an opportunity to capture economic and strategic advantage, and it is acting on that vision. Fossil fuels still play a big role in China’s energy mix (coal remains huge). Still, tellingly, as of 2023, fossil fuel plants account for less than half of China’s power generation capacity, down from about two-thirds a decade ago, according to a Yale report (opens in a new tab).
The trajectory is set toward cleaner technologies, which means sustained demand for critical minerals, such as rare earths, in China and allied markets.
This contrast raises a blunt point: If the U.S. retreats on support for clean tech industries, it could inadvertently cede further ground to China in the next-generation sectors that rely on rare earths. Even if America succeeds in digging more rare earths out of the ground, will we end up shipping those raw concentrates to Asia for processing and manufacturing (as happens with the Mountain Pass mine today)? Without domestic customers and processing plants, the U.S. risks remaining an upstream supplier at the mercy of global commodity prices, still far from achieving proper supply chain security.
A Contrarian Play
Trump’s contrarian play in the Big Beautiful Bill rests on a bold assumption: that while much of the world chases green energy transitions, the United States will seize global energy dominance by doubling down on fossil fuels and reviving nuclear power. The argument posits that oil, gas, and coal still account for over 80% of global energy consumption, and with demand from emerging markets like India and Africa expected to increase, a fossil-fuel-rich America can reap substantial geopolitical and economic benefits. By rejecting costly green subsidies and over-regulation, this strategy bets that the herd is wrong—that China, the EU, and ESG-driven investors are racing toward an energy cliff. At the same time, the U.S. remains rooted in energy realism. Add in a new generation of modular nuclear reactors, and the vision becomes one of unshackled industrial might and global leverage.
However, this bet may underestimate a rapidly shifting global reality. China is not abandoning green energy—it’s dominating it, investing more in renewables and EVs than the rest of the world combined, while building up its rare earth and battery supply chains (China controls much of the battery value chain now).
Europe is accelerating decarbonization not just for climate, but to escape geopolitical energy dependence. Even major oil companies are hedging toward net-zero. As clean tech costs fall and climate-driven trade barriers rise (such as carbon tariffs), clinging to fossil fuels could isolate the U.S. both economically and diplomatically.
Instead of bucking the herd, America may find itself behind it—outpaced in the race for future industries and increasingly reliant on yesterday’s energy for tomorrow’s challenges.
REEx cannot predict the future; we only delineate the possibilities here.
Balancing Extraction and Demand: An Objective Look
From an objective standpoint, Big Beautiful Bill’s critical mineral provisions demonstrate a serious effort to fortify the supply side of the rare earth equation. The funding for mines, stockpiles, and loan guarantees, as well as permitting relief, would lower barriers for companies looking to extract or process rare earth elements in the U.S. These measures could help kick-start projects that have long been considered too risky or expensive. They also indicate policymakers understand that China’s stranglehold on rare earths is a strategic vulnerability worth addressing with public resources. In that sense, the bill’s proponents are right: a degree of “industrial policy” is needed if the U.S. hopes to catch up in this arena.
However, securing a resilient rare earth supply chain is about more than just digging mines. It requires nurturing the entire ecosystem – from mines, to refiners, to manufacturers – and aligning it all with actual market demand.
On this front, observers note that H.R.1’s broader provisions seem to be at cross purposes with supply chain resilience. By slashing support for clean energy and high-tech manufacturing, the bill could weaken the very domestic customers who would buy rare earth materials. The risk is that mining projects get greenlit. However, the downstream industry isn’t there to fully utilize them, leaving the U.S. still reliant on selling into foreign supply chains (or relying on government stockpile purchases as the main customer). In economic terms, a healthy demand pull is as important as the supply push.
It’s also worth mentioning that while the House passed the One Big Beautiful Bill in May 2025, its prospects in the Senate (and with the current administration) are uncertain. Many provisions – especially the reversals of clean energy programs – face staunch opposition from Democrats and even some Republicans who are otherwise friendly to cleantech. However, as of today, it appears that the Senate is headed toward advancing the bill into law.
Of course, once the bill is signed into law, the 2022 Inflation Reduction Act’s incentives will no longer be in effect: these have been policies actively driving investment in battery plants, EV assembly lines, and rare earth magnet factories on U.S. soil. That momentum is something any future compromise will have to grapple with. Policymakers on both sides of the aisle agree on the goal of reducing dependency on China for critical minerals; the debate centers on how to achieve it.
REEx Reflections
In conclusion, the Big Beautiful Bill highlights a pivotal tension in America’s approach to rare earth security. On the one hand, support for mining and stockpiling suggests a recognition that the government must help jump-start the supply side. But a truly compelling industrial strategy would likely also bolster the demand side, ensuring that the clean-energy industries of the future take root in the U.S. rather than overseas. This would include far more provision for production downstream of necessary magnets, components, and assemblies for defense purposes, for example.
One reality is the clash of politics and business. Something Trump is learning in this second term, and a dynamic Elon Musk still does not fully understand.
Is the bill enough? On its own, probably not: a resilient rare earth supply chain will require a more holistic approach, one that couples raw material production with thriving domestic manufacturing, significant contribution to educational and vocational readiness, and according to REEx’s understanding of the global nature of the problem, coordinated efforts with allies such as Australia, Canada and even nations such as Malaysia and others.
In the long run, the United States may need to find a balance between encouraging extraction at home and staying in the race for the high-tech, low-carbon industries that will define the future – the very industries (including the future of defense, robotics (humanoids), drones and more) that make rare earth independence strategically worthwhile. As the saying goes, mines don’t exist in isolation: they succeed when part of a competitive, end-to-end supply chain. The Big Beautiful Bill makes a big bet on one end of that chain; whether it delivers security will depend on what happens with the rest.
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