Vance says US seeks to create a critical minerals trading bloc with its allies to counter China

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WASHINGTON (AP) — The Trump administration wants to create a critical minerals trading bloc with its allies that will use tariffs to maintain price floors and defend against China’s tactic of flooding the market to undermine any potential competitors.

Vice President JD Vance said Wednesday that the trade war over the past year exposed how dependent most countries are on the critical minerals that China has a stranglehold on.

“We want members to form a trading bloc among allies and partners, one that guarantees American access to American industrial might while also expanding production across the entire zone,” Vance said at a meeting of foreign ministers at the State Department.

“What is before all of us is an opportunity at self-reliance that we never have to rely on anybody else except for each other, for the critical minerals necessary to sustain our industries and to sustain growth.”

Critical minerals are needed for everything from jet engines to smartphones. China dominates the market for those ingredients crucial to high-tech products.

“I think a lot of us have learned the hard way in some ways over the last year, how much our economies depend on these critical minerals,” Vance said at the opening of a meeting that Secretary of State Marco Rubio is hosting with officials from several dozen European, Asian and African nations.

Two days ago, President Donald Trump announced Project Vault, a plan for stockpile of rare elements to be funded with a $10 billion loan from the U.S. Export-Import Bank and nearly $1.67 billion in private capital.

Trump's Republican administration is making such bold moves after China, which controls 70% of the world’s rare earths mining and 90% of the processing, choked off the flow of the elements in response to Trump’s tariff war. The two global powers are in a one-year truce after Trump and Chinese President Xi Jinping met in October and agreed to pull back on high tariffs and stepped-up rare earth restrictions.

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

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

Vance said some countries have signed on the trading bloc, which is designed to ensure stable prices and will provide members access to financing and the critical minerals. He hoped others would agree after the meeting.

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

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

In addition to creating the stockpile, the government last week also made its fourth direct investment in an American critical minerals producer when it extended $1.6 billion to USA Rare Earth in exchange for stock and a repayment agreement.

Seeking government funding these days is like meeting with private equity investors because officials are scrutinizing companies to ensure anyone they invest in can deliver, said Pini Althaus, who founded Oklahoma rare earth miner USA Rare Earth in 2019. He said the government is demanding terms designed to generate a return for taxpayers as loans are repaid and stock prices increase.

Japan's minister of state for foreign affairs, Iwao Horii, said at the meeting that Tokyo was fully on board with the U.S. initiative and would work with as many countries as possible to ensure it is a success.

“Critical minerals and (their) stable supply is indispensable to the sustainable development of the global economy,” he said.

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

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

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

Manufacturers, which benefit the most from the reserve, are making a long-term financial commitment, Jovanovic said, while the government loan spurs private investments.

The stockpile strategy may help spark a “more organic” pricing model that excludes China, which has used its dominance to flood the market with lower-priced products to squeeze out competitors, said Wade Senti, president of the U.S. permanent magnet company AML.

The administration also has injected public money directly into the sector. The Pentagon has shelled out nearly $5 billion over the past year to help ensure its access to the materials after the trade war laid bare just how beholden the U.S. is to China.

A bipartisan group of lawmakers last month proposed creating an agency with $2.5 billion to spur production of rare earths and the other critical minerals. The lawmakers applauded the steps by the Trump administration.

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

Building up a stockpile will help American companies weather future rare earth supply disruptions, but that will likely be a long-term effort because the materials are still scarce right now with China's restrictions, said David Abraham, a rare earths expert who has followed the industry for decades and wrote the book “The Elements of Power.”

The administration has focused on reinvigorating critical minerals production, but Abraham said it's also important to encourage development of manufacturing that will use them. He noted that Trump’s decisions to cut incentives for electric vehicles and wind turbines have undercut demand for these elements in America.