If the United States fails to develop alternative mineral supplies and supply chains on a wide enough scale, it faces two major risks. Falling behind in the race to dominate the various technologies mentioned above and going from being energy independent in most fossil fuels to rely on inputs from China as it transitions to green energy. Angelo Katsoras from the National Bank of Canada lays out some of China’s advantages and the measures that the US will likely take to counter them. 

Key quotes

“China currently dominates the minerals and supply chains essential to the production of advanced information technologies, alternative energy systems and electric vehicles. If the US fails to make significant progress to roll back this control, it will in effect be trading oil and gas independence to relying on inputs from China as it transitions to tomorrow’s cutting-edge technologies. This means Washington will have no choice but to implement measures to rebuild domestic mineral production and processing capacity in the relevant areas.”

“The US will have to take a page from China’s playbook and use government policy to shape the market. This will mean increasing government subsidies to companies, including supporting them through down cycles that in the past have led to mass bankruptcies.”

“The US will also need to make efforts to shorten the time needed to obtain a permit to operate a mine and build processing facilities. While less is known about how long it will take to build a rare earth processing facility due to the fact none exist in the United States, it is estimated that it would take at least several years to build.”

“Finally, to prevent companies from choosing lower-priced minerals/goods over those produced by higher-priced US companies, America’s industrial policy could include some form of a carbon border tax on minerals imported from countries with lower environmental standards. All this points toward a progressive increase in the cost of inputs needed to fuel the next industrial revolution.”