The U.S. government is actively expanding its stake in the domestic rare earth minerals sector, reflecting a strategic initiative to lessen the country’s dependence on imported materials largely sourced from China. This development involves a minority ownership interest in USA Rare Earth, a miner operating out of Oklahoma, which is focused on critical minerals essential for a wide array of high-technology applications including smartphones, robotics, and electric vehicles.
China controls the processing of more than 90% of worldwide critical minerals, a factor which has provided it significant leverage during ongoing trade tensions with the United States. Correspondingly, USA Rare Earth announced that the U.S. Department of Commerce is committing $1.6 billion to facilitate progress on a rare earth mining project in Texas, alongside the construction of a magnet manufacturing facility in Oklahoma.
Shares of USA Rare Earth surged over 13% in pre-market trading following this announcement. The financing arrangement under the Commerce Department’s CHIPS program comprises $277 million in federal funding along with a $1.3 billion senior secured loan. In exchange for this investment, the department will receive 16.1 million shares of common stock in USA Rare Earth, with additional rights to purchase 17.6 million shares.
Howard Lutnick, Secretary of Commerce, emphasized the critical nature of the heavy minerals project managed by USA Rare Earth, characterizing it as vital to securing U.S. independence in critical minerals. He indicated that this investment is aimed at creating resilient supply chains that are free from dependency on foreign sources.
Efforts under the Trump administration have concentrated on strengthening the domestic critical mineral industry to reduce China’s global influence over supply. USA Rare Earth, headquartered in Stillwater, Oklahoma, is the third domestic miner to receive federal investment in recent months. Parallel initiatives include the Pentagon’s $400 million investment and a $150 million loan extended to MP Materials, a producer of rare earths. Additionally, November witnessed a collaboration between the Trump administration and private sector investors forming a $1.4 billion partnership with rare earth startups Vulcan Elements and ReElement Technologies. This venture is designed to amplify U.S. access to essential raw materials and advance technological capabilities critical for both commercial and military applications.
The tax and spending legislation enacted by the Trump administration allocates $2 billion to the Department of Defense to fortify U.S. stocks of critical minerals, complemented by a further $5 billion designated for investments in these supply chains through 2029. From 2020 to 2024, the Pentagon reports awarding over $439 million to establish domestic rare earth supply chains. Recently, bipartisan lawmakers put forward a proposal to create a federal agency with a $2.5 billion budget to stimulate production of rare earths and other vital minerals.
Industry experts, analysts, and political figures have repeatedly raised concerns regarding America’s heavy dependence on China for a spectrum of 50 critical minerals, including 17 key rare-earth elements. This reliance constitutes a notable vulnerability in terms of national security and economic stability.
Among related geopolitical efforts is the previous administration’s interest in acquiring Greenland, a notable move within its broader strategy to secure critical mineral resources. The current approach focuses on nurturing and expanding domestic capabilities to ensure supply chain security and sovereignty over these strategic materials.