Watch: Vance says the US wants to create an important minerals trading bloc to counter China

WASHINGTON (AP) — The Trump administration wants to create an important metals trading bloc with its allies that will use tariffs to maintain minimum prices and defend against China’s tactic of flooding the market to undercut any potential rivals.

Watch in our video player above.

Vice President J.D. Vance said Wednesday that the trade war over the past year has exposed how dependent most countries are on critical minerals controlled by China.

He watches: Trump announces a plan to create a strategic reserve of rare earth elements

“We want members to form a trading bloc among allies and partners, one that ensures U.S. access to American industrial power while expanding production throughout the entire region,” Vance said at a meeting of foreign ministers at the State Department.

“What we all have before us is an opportunity for self-reliance so that we never have to depend on anyone else but each other, for the vital minerals needed to sustain our industries and sustain growth.”

Important minerals are needed for everything from jet engines to smartphones. China dominates the market for these vital components of high-tech products.

“I think many of us have learned the hard way in some ways over the past year how dependent our economies are on these important minerals,” Vance said at the opening of a meeting hosted by Secretary of State Marco Rubio with officials from dozens of European, Asian and African countries.

Two days ago, President Donald Trump announced Project Vault, a plan to store rare items that will be financed with a $10 billion loan from the U.S. Export-Import Bank and nearly $1.67 billion in private capital.

The Republican Trump administration is making such bold moves after China, which controls 70% of the world’s rare earth mining and 90% of processing, throttled the flow of items in response to Trump’s tariff war. The two world powers entered into a year-long truce after Trump and Chinese President Xi Jinping met in October and agreed to roll back high tariffs and tighten restrictions on rare earths.

But China’s borders remain tighter than they were before Trump took office.

Xi spoke with Trump on Wednesday, according to Liu Bingyu, spokesman for the Chinese embassy in Washington. Details were not immediately available.

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Vance said some countries have signed on to the trading bloc, which aims to ensure price stability and will provide members with access to financing and important minerals. He hoped that others would agree after the meeting.

Administration officials said this plan would help the West move beyond complaining about the problem of access to important minerals to actually solving it.

“Everyone here has a role to play, and that’s why we’re so grateful for you to come and be part of this gathering that I hope will lead not only to more gatherings, but to action,” Rubio said.

Countering China’s dominance of vital minerals

In addition to creating the stockpile, the government last week also made its fourth direct investment in a significant U.S. mineral producer when it provided $1.6 billion to USA Rare Earth in exchange for a stockpile and payment agreement.

Read more: How critical minerals give China an advantage in trade negotiations with the United States

Benny Althouse, who founded rare earth mining company USA Rare Earth in Oklahoma in 2019, said seeking government funding these days is like meeting with private equity investors, because officials vet companies to make sure anyone they invest in can succeed. He added that the government is demanding terms designed to generate returns for taxpayers while repaying loans and increasing stock prices.

Japanese Minister of State for Foreign Affairs Iwao Hori said during the meeting that Tokyo fully supports the American initiative and will work with as many countries as possible to ensure its success.

“Critical minerals and their stable supplies are indispensable for the sustainable development of the global economy,” he added.

Inventory strategy

The Export-Import Bank’s board of directors this week approved a $10 billion loan — the largest in its history — to help finance the creation of the US Strategic Minerals Reserve. It is tasked with ensuring access to critical minerals and related products for manufacturers, including battery maker Clarios, energy equipment maker GE Vernova, digital storage company Western Digital and aerospace giant Boeing, according to the policy bank.

The project creates a public-private partnership formula that is “uniquely suited and puts America’s best foot forward,” the bank’s president and CEO, John Yovanovitch, told CNBC.

“What it does is it creates a scenario where there are no free riders,” he said. “Everyone is stepping in to solve this huge problem.”

Manufacturers, who benefit most from the reserve, make a long-term financial commitment, while the government loan stimulates private investment, Jovanovic said.

Wade Sinti, president of US permanent magnet company AML, said the inventory strategy could help launch a “more organic” pricing model that excludes China, which has used its dominance to flood the market with lower-priced products to squeeze rivals.

The administration also pumped public funds directly into this sector. The Pentagon has spent nearly $5 billion over the past year to help ensure it gets the materials after the trade war revealed how favored the United States is with China.

The effort has some bipartisan support

A bipartisan group of lawmakers last month proposed creating a $2.5 billion agency to stimulate production of rare earths and other important minerals. Lawmakers praised the steps taken by the Trump administration.

“It is a clear sign that there is bipartisan support for securing a strong domestic supply of critical minerals that reduces our dependence on China and stabilizes the market,” Sens. Jeanne Shaheen, D-Ind., and Todd Young, R-Ind., said in a joint statement.

Building a stockpile will help U.S. companies weather rare earth supply disruptions in the future, but it will likely be a long-term effort because the materials are still scarce right now under China’s restrictions, said David Abraham, a rare earths expert who has followed the industry for decades and author of “Elements of Strength.”

The administration has focused on revitalizing production of critical minerals, but Abraham said it is also important to encourage the development of manufacturing that will use them. He pointed out that Trump’s decisions to reduce incentives for electric cars and wind turbines have undermined demand for these items in America.