How to break China’s chokehold on rare earths

**Soumaya Keynes** (0:01)
The Chinese have honed a fearsome economic weapon. At the stroke of a pen, they can shut down manufacturing around the world, which is exactly what happened last year.

**Jim Farley** (0:12)
These high-power magnets, they're all processed in China, and they go in your speakers, in your auto system, they go in your motors for your wipers and your seats.

**Soumaya Keynes** (0:22)
That's Ford CEO Jim Farley sounding the alarm in June of 2025 after China imposed export controls on seven rare earth metals and the magnets that contain them.

**Jim Farley** (0:33)
We're educating the administration, we're educating the Chinese leadership about how important these jobs are. We have had to shut down factories. It's hand to mouth right now.

**Soumaya Keynes** (0:44)
Farley wasn't the only one panicking. The Chinese were squeezing manufacturers around the world, withholding the materials they needed in response to trade aggression from the Trump administration. Ultimately, the weapon proved so potent that the Americans climbed down and enough trade resumed that the car makers' production lines restarted. But that wasn't the end of it. Today China's trading partners are racing to make sure that a crisis like that doesn't happen again.
This is The Economics Show with Soumaya Keynes. In this special episode, I am looking at rare earth metals. China spent more than 30 years becoming their dominant supplier. Now, the US, Europe and their allies are in a race to reduce their dependence on Chinese supplies. Over a year after the starting gun was fired, how much progress have they made?
There are three main ways to reduce China's chokehold over rare earth supply chains. Number one, build stockpiles. Number two, build alternative supply chains. And number three, innovate your way out of needing Chinese supplies. I'll get to each of those, but let's start with the quickest, buying up existing supplies and hoarding them, for when the Chinese use their trade weapon and cut you off.
Now, given the complaints you just heard from Jim Farley, you might think it would make sense for the private sector to be building stockpiles of their own. Then they wouldn't have to educate policy makers on what they need to make their supply chains work.

**Abigail Hunter** (2:25)
We're dealing with a capitalist society where ultimately the quarterly earnings calls for these companies need to show kind of the best possible outlook. So keeping a ton of raw materials, magnets, more so than you actually need for your manufacturing system does not make economic sense for you.

**Soumaya Keynes** (2:42)
That's Abigail Hunter. She's executive director of a non-profit advocacy group, the SAFE Center for Critical Minerals Strategy, based in Washington, DC.
As she explains, the private sector isn't going to stockpile enough on its own. Companies tend to run lean operations that don't build in a lot of redundancy. If not, they risk being undercut by their competitors and pressured by their shareholders. And there's another factor.

**Abigail Hunter** (3:09)
You know, these are highly complex supply chains. Not everybody has total visibility in what they need and where they're sourcing from.

**Soumaya Keynes** (3:16)
The private sector isn't going to fix this, which is why the government has had to step in. Here's President Donald Trump announcing just that in February 2026

**Donald Trump** (3:26)
For years, American businesses have risked running out of critical minerals during market disruptions. Today we're launching what will be known as Project Vault to ensure that American businesses and workers are never harmed by any shortage. We don't want to ever go through what we went through a year ago.

**Soumaya Keynes** (3:45)
Project Vault is a strategic critical minerals reserve, including all but one of the rare earth elements. It sounds like a good idea, but a complicated one. Building a rare earth stockpile isn't quite as straightforward as hoarding bags of powdered food for when the apocalypse comes.
Manufacturers need very specific materials in very specific forms at very specific purity levels. Building a stockpile means matching exactly what industry needs.

**Abigail Hunter** (4:15)
And so the way that it's supposed to function is it is supposed to be designed for the private sector with the private sector and governed by the private sector. So manufacturers say, I need this thing in this amount at this quality, at this cost, and then work with the trading agencies to go out and get it, and then house it until they need it. And so you're leveraging the in-house expertise and the logistics infrastructure knowledge connections that trading agencies have, trading houses, and then you're making sure that you're actually getting things that our manufacturers truly need, right?

**Soumaya Keynes** (4:47)
Several big companies have already signed up to Project Vault, including General Motors, Lockheed Martin and Alphabet. It all sounds very promising, though we shouldn't get too excited.