Trump's Mineral Paradox

The Atlantic

02-05-2025

Resources have always determined power. The British empire's command over coal helped expand the realm to the ends of the earth. The United States entered World War II as a dominant oil power and for decades consolidated control over global supply. This century, power could be built on batteries, solar panels, and artificial intelligence. And China has a grip on the minerals—rare-earth elements, lithium, graphite—needed to make them.
Both parties in Washington seem to agree that breaking Beijing's near monopoly over such materials would benefit the United States. 'Our national and economic security are now acutely threatened by our reliance upon hostile foreign powers' mineral production,' President Donald Trump wrote in an executive order in March designed to speed up permitting for mineral production. The administration has already green-lighted a new rare-earths mine in California next to the only active one in the United States, and today added 10 more mines to a list of projects whose permits the federal government is fast-tracking. It has also proposed flashy and controversial ideas to secure America's supply of minerals, including seizing dubiously accessible deposits in Ukraine and Greenland, clearing the way for creating the first mines on the deep-ocean floor, and investing federal money directly in U.S. mining companies.
At the same time, Trump is breaking what experts say are the federal government's best tools for returning mining to the United States. Creating demand for minerals 'is best done by ensuring clean-tech manufacturing markets are here,' says Milo McBride, a fellow researching the geopolitics of mineral supply chains at the Carnegie Endowment for International Peace. 'Yet we're cutting demand for the manufacturing of these technologies.' At some point, he told me, the administration will have to face the paradox of mineral security it's creating: The country is now smoothing the path for production while closing off its main destinations.
Syrah Resources, a graphite supplier, is trapped in that paradox. The company's Vidalia project, in central Louisiana, is designed to refine graphite into battery-grade material, providing the first U.S. source of the soft, conductive mineral. (China controls 93 percent of the world's graphite-processing capacity.) Syrah is an Australian company, but it saw in the United States both a potential market for graphite and policies meant to encourage production. When the plant started producing graphite in February 2024, Syrah could bet on a few things to make its investment pan out.
Under the Biden administration, the Department of Energy's Loan Programs Office put up a $102 million loan to back the facility. The State Department, intent on competing with China to court mineral-rich African countries, had laid out a 10-year strategy for strengthening U.S. ties with Mozambique, from which Syrah obtains ore to refine. (The plan included improving transportation infrastructure, for instance, which would help get those rocks to port.) And the nation's landmark climate-infrastructure law, the Inflation Reduction Act, was set up to redirect mineral supply chains away from China: Its electric-vehicle tax credit gave a major bonus for cars with batteries composed of American-made minerals.
A year later, those federal policies are changing dramatically. The Trump administration is gutting the Loan Programs Office and could cut as much as 60 percent of its workforce. Goods from Mozambique now face 16 percent levies at American ports; tariffs are also raising the cost of equipment needed for mining and processing minerals, much of which are purchased from China, Kwasi Ampofo, the lead mining and minerals analyst at the energy consultancy BloombergNEF, pointed out. And Republicans in Congress are all but certain to repeal the IRA's electric-vehicle tax credits.
Already this year, companies have scrapped plans for nearly $8 billion worth of clean-energy projects, most of which were factories for batteries and electric vehicles, according to a Canary Media analysis of data from the research group E2. In his attempt to fulfill his campaign pledge to ' terminate ' what he called the 'Green New Scam,' Trump appears to be jeopardizing the domestic supply of minerals for the military and industries he supports.
'The administration is clearly worried about rare earths from a defense and aerospace perspective, and I've seen battery-industry players that are, in their rhetoric and advocacy in Washington, distancing themselves from EVs and selling themselves as strategic technology for grid resiliency and defense,' Seaver Wang, a researcher at the Breakthrough Institute, a think tank focused on policy around climate technology, told me. 'But we know EVs are like 80 percent of the demand.' (According to the International Energy Agency, electric-vehicles will account for 80 percent of global battery capacity in the future.)
And the U.S. cannot gain an advantage in mining and minerals control if it has no one pushing to buy those resources at home. 'Without a clear, consistent demand signal, no mining company would put a single drill in the ground to make an investment,' Ampofo told me. He described it as a chicken-and-egg problem in which 'if you kill the chicken, you have no egg.'
Even some of the administration's efforts to make permitting new mines and processing plants easier may already be backfiring. Ostensibly to help such companies, the White House ordered federal agencies to rescind regulations for implementing the National Environmental Policy Act; because the statute remains on the books and Congress has not moved to axe it, legal experts warned that the administration's proposal would mostly stir uncertainty, which will spur lawsuits and clash with decades of case law. Projects to mine and process minerals have long lead times and high up-front costs, including labor, permitting, and associated litigation. Those dynamics mean that for investors, 'you're going to have very low tolerance for risk and uncertainty,' Arnab Datta, an expert in critical mineral policy at the think tank Employ America, told me. 'This administration has added uncertainty and chaos into every part of the equation.'
The White House did not return my request for comment. But its strategy seems based on the simple arithmetic that if you make mines easier to open and minerals harder to import, you get a domestic boom. And that's not entirely illogical: On an industry podcast right after the 2024 presidential election, Syrah's chief executive, Shaun Verner, said tariffs could help counteract losing the electric-vehicle tax credits, by raising the cost of imported materials and therefore giving the company's Louisiana plant a price advantage. But the administration's math misses some key variables. If a country wants an abundance of minerals to supply batteries to one kind of buyer, such as a military-drone manufacturer, it helps to guarantee demand from a more plentiful purchaser, such as automakers and the roughly 238 million Americans who drive cars. To rapidly divert mineral supply chains away from the rival nation that spent decades building up its industrial base, it helps to enlist allies who have not just resources you can potentially tap but developed reserves you can share. Trump's formula ignores the fact that blanket tariffs might make domestic minerals more competitive, but also hike the cost of the equipment needed to produce those metals.
Meanwhile, China is following its own logic, in which it controls more variables. In March, the Financial Times reported that 'at least half of China's 34 provincial-level governments, including those of top resource-producing regions such as Xinjiang, have announced increased subsidies or expanded access for mineral exploration' over the past year. Even outside China, Beijing sets the prices for global contracts. When financiers determine the price for a ton of lithium, they turn to where those prices are set, which—thanks to China's dominance—is typically in Asia. That means the price of a deal between a Tesla factory in Texas and a lithium mine in Quebec is ultimately determined by how much of the metal China is selling in a place like Vietnam.
The U.S. could find a way around that, Datta told me, by building an alliance with other producers and establishing an integrated market for contracts, with countries such as Australia, Brazil, and Canada, that could set prices for selling materials to battery makers in Europe, South Korea, and Japan. That's what the Biden administration aimed to do; the electric-vehicle tax credits treated allies that had free-trade agreements with the United States as domestic sources. For those countries, U.S. minerals were supposed to offer a less risky alternative to China. But now, Datta said, 'we've pissed everyone off, and all these countries are looking to hedge away from the U.S.'