Trans-Pacific View | Economy | East Asia

The United States’ Rare Earth Strategy Faces a Durability Test

Rare earth projects require a solid commitment across political cycles, a challenge that the United States has not yet been able to overcome.

U.S. Secretary of State Marco Rubio delivers opening remarks at the Critical Minerals Ministerial at the Department of State in Washington, D.C., Feb. 4, 2025.

In May 2026, the U.S. Department of Energy selected USA Rare Earth for a $50.5 million separation project in Oklahoma. This single movement is modest, but its significance lies in how it fits into a broader pattern of U.S. support for the rare-earth industry. The United States is trying to build a system that can make non-Chinese suppliers commercially viable. That shift is necessary, but it also raises an important question for the U.S. rare earth strategy: can Washington sustain durable support for the industry?

China’s dominance in the rare earth supply chain makes its export controls unusually powerful. In 2024, China accounted for 60 percent of global mined production of magnet rare earths, 91 percent of refined output, and 94 percent of permanent magnet production. Under these conditions, China’s export licensing system does not need to become a full embargo to create pressure. It can keep trade formally open while making access conditional, slower, and subject to tighter end-use scrutiny when tensions rise. For U.S. manufacturers, key inputs may remain available in principle but become unreliable in practice.

This problem is not new. After the 2010 China-Japan rare earth shock, Washington and private investors already had strong incentives to balance an alternative supply. But rare earth projects require a solid commitment across political cycles, and this durability (or lack thereof) is the problem the United States has not been able to solve. 

The revival and later collapse of Molycorp is a direct example: during a crisis, alternative suppliers can mobilize government and private attention, but these companies tend to unravel once prices weaken and buyers return to cheaper sources. Rare earth resilience cannot survive on strategic urgency alone.

This explains why the new U.S. approach can be understood as market shaping. Washington is trying to change the market conditions that made earlier alternatives fragile, which are volatile prices, uncertain buyers, weak private financing, and limited processing capacity. The clearest example is the Pentagon’s partnership with MP Materials since July 2025. By combining equity investment, price floors, and long-term purchase commitments, the government is acting more like an investor, insurer, and anchor buyer rather than a grant-maker. The aim is to make U.S. base production bankable and more resilient before the next shock arrives.

What makes this approach special is also what makes it risky. Earlier U.S. efforts recognized the dependence problem, but treated it mainly as a capacity problem: encourage alternative projects, and supply would eventually adjust. The new approach treats it as a credibility problem. The issue is that firms, investors, and buyers may not commit at scale unless they believe non-Chinese supply will remain commercially viable after the immediate shock passes. That requires Washington to shape expectations that support will not disappear when prices fall, political attention shifts, or China changes tactics. 

When private investment depends on public credibility, the policy itself becomes part of the market. This is where the durability test begins.

Credibility is first tested politically. Firm-specific financing is different from broad tax incentives, because it requires the government to justify why some companies receive direct support while others do not. The issue is whether public equity, price guarantees, and targeted financing can be governed transparently enough to survive oversight and partisan scrutiny. In February 2026, lawmakers demanded........

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