Trump's Critical Minerals Policy Is A $6.5 Trillion Trap

President Donald Trump’s campaign to purge Chinese-linked critical minerals from federal supply chains is facing the U.S. industrial reality check.

Federal contractors must stop purchasing specified rare earths, magnets, tungsten, molybdenum and tantalum from China, Russia, Iran and North Korea by January 1, 2027.

Trump has sought to end the waiver system that long softened those restrictions, declaring in a May 11 Truth Social post: "ALL FEDERAL AGENCIES MUST BUY AMERICAN — NO EXCUSES!" U.S. demand for common rare-earth magnets totaled roughly 48,000 metric tons in 2025.

However, the data compiled by Arthur D.

Little and cited points to just 300 tons of domestic supply.

An increase to 5,000 tons by year’s end is meaningful in relative terms, yet a fraction of absolute demand.

The strategic exposure is global.

China controls more than 80% of critical-mineral refining, while the International Energy Agency estimates that full implementation of Chinese rare-earth restrictions could put $6.5 trillion of annual downstream manufacturing outside China at risk.

Those sectors include automotive, defense, high-tech and energy.

Read Also: Jamie Dimon Sounds The Alarm On Critical Mineral Vulnerability Midstream Bottlenecks and Allied Friction Washington is trying to build the processing and magnet-making capacity that mining alone cannot provide.

Energy Fuels Inc. (NYSE: UUUU ) received a $725 million Pentagon loan to expand domestic rare-earth processing and integrate magnet manufacturing.

Its planned $1.9 billion acquisition of Germany’s Vacuumschmelze GmbH (VAC) would be an even larger strategic step.

VAC is the only Western producer making permanent rare-earth magnets at scale, supplying defense and automotive manufacturers.

Yet, a transaction of such strategic importance is unlikely to go without friction under the current market conditions.

Germany’s Economy Ministry is reportedly reviewing the acquisition and could impose conditions to safeguard the Hanau-area manufacturer’s technology, production base and access for European customers.

German officials and defense companies worry U.S. defense buyers could receive priority access to magnets essential for drones, submarines and other military systems. "This will not be an easy process, but Germany knows how important we are and hopefully they will make the right decision," VAC CEO Erik Eschen told Bloomberg.

Thus, allies seeking to reduce Chinese dependence are also competing for the limited existing non-Chinese capacity.

Read Also: China’s Rare Earth Curbs Could Trigger $6.5 Trillion Supply Shock for Industries From EVs to Weapons Systems, IEA Warns Stockpiling and the November Test Trump’s administration has adopted a more pragmatic interim strategy through Project Vault, a $12 billion program to stockpile minerals for U.S. manufacturers.

Officials have acknowledged that initial purchases will have to come from global sources — including China.

That buying is running out of time, as China’s 12-month suspension of expanded rare-earth export controls expires on November 10 – one week after the U.S.

Midterm elections.

Existing April 2025 controls, known as Announcement No.

18, already require licenses for several heavy rare earths and magnet materials.

Licensing, Not a Shutdown Critical Minerals Institute co-chair Jack Lifton expects Beijing to avoid a blanket embargo.

Instead, he sees China using selective licensing: allowing civilian applications, subject to delays and detailed end-use checks, while denying or effectively blocking Western military end-users. "China may continue to sell the fish while prohibiting the export of the fishing boat, the net and the fisherman," Lifton wrote — meaning finished materials may remain available while processing equipment, technical expertise and personnel do not.

However, November remains a negotiating deadline, and a one-week buffer zone between the elections and a decision signals that Beijing is willing to wait for Washington’s political fog of war to lift.

Image via Shutterstock Read Also: Can SpaceX Help Save Earth From The Critical Mineral Crunch?