Evaluation of U.S. Policies to Increase Domestic Access to Critical Minerals

RAND Corporation | Tom LaTourrette, Omar Aboulezz, Scott Behmer, Tom Blaubach

China currently controls more than 70 percent of the global supply of several critical minerals, leveraging this dominance through export controls that threaten United States defense and energy manufacturing. In response, Washington has deployed industrial policy tools including tax credits, loans, stockpiles, and tariffs to secure domestic supply chains.

However, a RAND Corporation analysis reveals that these policy interventions involve severe economic trade-offs and varying operational timelines. Stockpiling represents the only rapid mechanism to build near-term resilience. Other tools require years to yield results. Furthermore, policies that artificially stimulate domestic production frequently lower market prices. This dynamic inadvertently undercuts private sector incentives to develop alternative materials or technological substitutes. Process failures also hinder progress. Regulatory uncertainty, opaque capital allocation, and protracted permitting timelines actively deter private investment across the value chain. Ultimately, downstream manufacturers face increased costs if import tariffs are applied before domestic refining capacity is established.

Comment

The reliance on the National Defence Stockpile to buffer cobalt and lithium supply disruptions exposes a fundamental vulnerability in Western industrial capacity. While the Defence Logistics Agency can rapidly acquire raw materials, physical stockpiles offer only a temporary shield against prolonged export restrictions. The structural deficit lies not in raw extraction, but in the domestic processing and refining infrastructure required to convert ores into military-grade precursors.

This operational bottleneck is particularly acute in the midstream segment, where thin profit margins deter private capital. For instance, processing heavy rare earth elements requires complex chemical separation facilities that cannot survive on market-driven economics alone. Consequently, federal capital injection through Defence Production Act Title III grants remains insufficient without long-term price guarantees to offset Chinese market manipulation.

Strategic Question for Discussion

What happens to private sector investment in domestic chemical separation facilities if the Defence Logistics Agency continues to rely on the National Defence Stockpile as the primary mechanism for mitigating supply chain vulnerabilities?

The pattern suggests that heavy reliance on stockpiling provides immediate security but fails to address the underlying market failures of the midstream sector. My assessment is that private capital will remain on the sidelines of domestic chemical separation projects as long as government stockpiles absorb short-term supply shocks without stabilizing long-term market prices. Consequently, the strategic vulnerability in processing capacity is likely to persist despite increased federal procurement activity.

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