WIREDGOV

Faced with Beijing’s export controls on rare earth elements, the Trump administration has stepped in, but the risk remains.

The Pentagon’s direct investment in rare earth miner MP Materials marks a decisive shift in US industrial and defence policy – one that shatters decades of Republican orthodoxy against ‘picking winners’. Faced with Beijing’s export controls on rare earth elements and magnets – critical to both defence systems and electric vehicles – the Trump administration has stepped in where the private sector and market forces failed.

China’s rare earth stranglehold is no abstract threat. In April, Beijing imposed export controls on certain rare earths and magnets in retaliation for US restrictions on chip exports. The result was immediate: overnight, US and European manufacturers, including automakers like Ford, were forced to idle factories.

The defence sector is even more vulnerable. US military hardware – from fighter jets to guided missiles – relies on specialized magnets, of which China supplies nearly 90%. Yet despite these clear risks, defence contractors and their suppliers have shown little urgency to diversify.

The reasons are simple: rare earths sit far down the supply chain, Chinese magnets remain far cheaper, and no company wants to shoulder the extra cost alone if competitors can still buy from China. There has been little impetus from government to fix the problem. In the UK, defence companies will not invest to de-risk supply chains unless the Ministry of Defence requires it.

The Pentagon has taken a lead, cutting through corporate inertia with decisive intervention. In June, it agreed to invest $400 million to acquire a stake in MP Materials and guaranteed the company above-market prices for its magnets for a decade. In effect, the Pentagon has revived a version of the World War II-era ‘cost-plus’ model that built the Arsenal of Democracy.

The Pentagon could end up paying heavily to support MP Materials

The deal will help MP Materials build a second US magnet facility, expanding its total capacity to 10,000 tonnes of rare earth magnets annually. The Pentagon has committed to buying all the magnets from the new facility – removing commercial risk for the company and ensuring a secure supply for defence and commercial needs alike.

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