China’s Tensions with the US Over Critical Raw Materials—Are We on the Brink of Economic Decoupling?

October 18, 2025 | Reading time: ~45 min

In October 2025, the economic conflict between China and the United States entered a new, exceptionally dramatic phase. Beijing introduced unprecedented restrictions on the export of critical raw materials, directly targeting the American defense sector. Washington responded with the threat of 100% tariffs on all goods from China. These exchanges—concerning such exotic materials as dysprosium, germanium, and antimony—sent shockwaves through financial markets and raised a crucial question: are we witnessing the irreversible separation (decoupling) of the world’s two largest economies?

Tensions have never been higher. Stock market valuations plummeted, with two trillion dollars of corporate value in the US evaporating in a single day. Simultaneously, the prices of some metals skyrocketed (antimony trichloride has risen by 228% since the beginning of the year!), and the shares of mining companies outside of China exploded. Strategists on both sides of the Pacific are speaking bluntly—the stakes are technological superiority and national security, and critical raw materials have become a geopolitical weapon. As a result, what was recently an abstract concept from think-tank analyses—”decoupling,” the separation of US and Chinese supply chains—is now taking on a very real form.

In this comprehensive article, we analyze the evolution of this conflict: from the buildup of Chinese dominance in raw materials, through the initial trade clashes and sanctions, to the current escalation. We explain what critical raw materials are and why their availability is crucial for modern armies and economies. We examine the potential geopolitical and economic consequences—from the production lines of F-35 fighter jets to the prices of electric cars. We also describe the United States’ strategy to reduce its dependence on China: from investing in its own mines, through alliances with other countries, to recycling and creating strategic reserves. Finally, we consider whether a full economic separation of the West and China is actually feasible, what development scenarios are in play, and what the coming years mean for Europe (including Poland), business, and investors.

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I. INTRODUCTION

Within just a few days in October 2025, US-China trade relations eroded dramatically. On October 9, Beijing announced a ban on the export of several rare earth elements with military applications to the United States, including dysprosium, terbium, and yttrium. This was the first time China’s raw material restrictions had been so directly aimed at American defense. In response, the next day, President Donald Trump announced retaliatory 100% tariffs on all imports from China, effective November 1. This tit-for-tat exchange—direct and escalatory—raised the burning question: are we on the verge of a complete economic “divorce” between the two powers?

Article’s Thesis

Are we witnessing the irreversible separation of the world’s largest economies? Such a scenario, termed decoupling, seemed extreme just a few years ago. Today, however, after years of mounting tensions and sanctions, it is becoming increasingly realistic. China and the US are systematically reducing their technological and raw material interconnections, citing national security. This article posits that October 2025 may go down in history as a turning point—a moment when the decoupling process significantly accelerated. We will attempt to assess whether this separation is indeed inevitable and permanent, or if there is still a path toward de-escalation and managed interdependence.

Context: Why is this conflict happening now?

As recently as the early 2010s, US-China economic relations were described as symbiotic: China became the “world’s factory,” supplying America with cheap goods, while American companies and consumers benefited from low production costs. However, beneath this interdependence, tensions were growing. Washington has long been concerned about its dependence on Chinese supplies of key components and materials—from electronics to strategic minerals. Beijing, in turn, views American technological sanctions (e.g., restrictions on advanced chips) as an attempt to halt its development.

Critical raw materials have become a focal point of this conflict for several reasons:

• China’s Monopolistic Position – For years, Beijing has built up its dominance in the extraction and processing of strategic metals. It currently controls, among other things, about 70% of the world’s rare earth element mining and a staggering 92% of their processing, nearly 98% of global gallium production, and about 60-80% of germanium production. This concentration raises fears that China could use the “raw materials tap” as a tool of pressure.
• Crucial Military-Technological Importance – These materials are essential for producing advanced weaponry (stealth fighters, missiles, communication systems) and future technologies (electric cars, renewable energy, semiconductors). Shortages could paralyze the defense industry and undermine economic competitiveness.
• Escalation of Actions by Both Sides – Starting with the 2018 tariff war, through US sanctions on Chinese companies (Huawei, SMIC) and technology export controls, to China’s counter-moves (export restrictions on metals like germanium and graphite). Each year brought new restrictions that, step by step, limited free trade in strategic sectors.
• Current Events – Right now, another series of moves is unfolding: a Chinese embargo on raw materials for the US military and an aggressive US response in the form of tariffs. Both countries are thus approaching a red line, beyond which a permanent rupture of global supply chains may occur.

In this article, we will examine the genesis and course of these tensions to understand their significance and possible consequences. In Section II, we will go back to the beginning—how China gained its raw material dominance and when the conflict began. Section III will explain what critical raw materials are and why controlling them provides a strategic advantage. In Section IV, we will assess the geopolitical and economic effects—is the US facing a national security crisis? How will sectors from semiconductors to automotive suffer? Section V will describe America’s defensive strategy: building its own supply sources, collaborating with allies, innovating, and stockpiling reserves. In Section VI, we will consider whether a full decoupling is realistic—we will present arguments for and against, as well as possible scenarios (from managed coexistence, through a total split, to a potential reset). Then, in Section VII, we will discuss what these global struggles mean for Europe and Poland—both in terms of risks (e.g., for the automotive industry) and opportunities (e.g., new investments in the region). Finally, Section VIII will summarize the most important conclusions and future prospects.

💡 KEY TAKEAWAY
Critical raw materials have become a key front in the US-China rivalry. China controls the lion’s share of the world’s production of these materials, giving it a potential “economic weapon.” October 2025 brought an escalation: a Chinese embargo on metals for the US and American super-tariffs. This could be a turning point in the process of decoupling—the gradual unraveling of the economic ties between the two superpowers.

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II. HISTORY OF TENSIONS – FROM INTERDEPENDENCE TO CONFLICT

To understand the current situation, we must trace the evolution of US-China economic relations in the context of strategic raw materials. Over the last few decades, they have come a long way: from apparent harmony and mutually beneficial cooperation, through growing rivalry, to open trade conflict. Below, we present three key stages of this history.

2.1 The Buildup of China’s Raw Material Dominance (1980s–2010)

China’s current advantage in the critical raw materials sector is no accident—it is the result of a long-term strategy. As early as the 1980s and 1990s, Chinese leaders identified rare earth metals and other strategic minerals as an “ace up their sleeve.” It was Deng Xiaoping who famously said: “The Middle East has oil; China has rare earths.” Beijing consistently put this idea into practice, investing in the development of domestic extraction and processing of key raw materials.

Several factors allowed China to build a near-monopolistic position:

• State Policy and Financial Support – The strategic metals sector was given priority status. The government supported domestic companies through subsidies, tax breaks, and control over energy prices. Investments were made in refining and separation technologies, even if they were initially unprofitable.
• Looser Environmental Regulations – The processing of many raw materials (e.g., rare earth elements or graphite) is dirty and toxic. Western countries, having tightened environmental standards, effectively withdrew from this activity. China, on the other hand, tolerated higher environmental costs for years. The result? Production moved to where it was cheaper and “easier,” which was China.
• Scale and Cheap Labor – Chinese mines and smelters could produce on a massive scale using cheap labor. This dramatically lowered the prices of many metals. Competitors in the West went bankrupt, unable to compete with Chinese dumping prices.
• Acquisition of Foreign Assets – Chinese companies (often state-backed) acquired deposits and raw material companies abroad to secure supplies. An example is the high-profile attempt by the Chinese to acquire the Australian company Lynas (operating in Malaysia)—the only major rare earth processor outside of China. Although a full buyout did not occur thanks to the intervention of the Australian and Japanese governments, such attempts signaled China’s ambitions to control the global supply chain.

By the end of the 2000s, the West “woke up” to a new reality: critical raw materials, once also produced in the US, EU, or Japan, now overwhelmingly came from China. For example, in 2009, China accounted for ~97% of the world’s production of rare earth elements. The American Mountain Pass mine in California—once the main Western supplier of rare earths—was closed in 2002 due to bankruptcy and environmental issues. The whole world became dependent on Chinese supplies because it was cheaper and more convenient.

The only rare earth element mine in the US – Mountain Pass, California (aerial view). It has been operating since the 1960s but suspended mining for over a decade in 2002 due to Chinese competition and environmental restrictions. Until recently, its entire output was sent to China for processing. Only recently, with Pentagon support, has basic metal separation been launched on-site.

The 2010 Lesson: The First “Warning.” China’s dominance did not attract widespread attention until an incident in the fall of 2010. After a Chinese fishing trawler captain was detained by the Japanese (the incident around the disputed Senkaku/Diaoyu islands), China unofficially halted the export of rare earth elements to Japan. Although Beijing never officially confirmed such an embargo, for about two months, Japanese companies could not receive supplies of key metals. For Tokyo—which at the time imported 90% of these raw materials from China—it was a shock. The prices of neodymium and cerium, for example, skyrocketed several times over, and Japanese electronics and automotive manufacturers panicked.

📊 CASE STUDY: China’s 2010 Embargo on Japan
Background: In September 2010, Japan detained a Chinese fishing trawler near a disputed island, sparking a diplomatic crisis.
China’s Action: Although no official declaration was made, Chinese supplies of rare earth elements to Japan were reportedly halted for about 2 months. Chinese authorities used their control over the global market for these metals to exert pressure on Tokyo.
Result: Japanese companies (Toyota, Panasonic, etc.) faced the prospect of production disruptions for advanced components. The prices of some metals jumped by several hundred percent. The crisis was eventually resolved—Japan released the trawler captain—and supplies resumed.
Lessons: Japan realized it could “never again” be so dependent on a single supplier. In the following years, it invested in diversification: it financially supported the development of the Australian Lynas mine (to become independent of China), began recycling used magnets, and reduced its consumption of some elements. Within a decade, Japan’s imports of rare earths from China fell from ~90% to ~60%.
On a broader scale: The incident made the entire world aware that China was willing to “weaponize” its raw material dominance for political purposes. The US and Europe also drew conclusions—serious thought began to be given to securing critical supplies. In 2014, the US, EU, and Japan won a WTO case against China regarding export restrictions, forcing Beijing to lift some export quotas. But the mechanism remained: China had shown it could turn off the tap if it deemed it appropriate.

2.2 The First Phase of Tensions (2018–2023)

Despite the warning signs from 2010, global business continued to benefit from cheap Chinese supplies for the next decade. However, the growing US-China rivalry in trade and technology foreshadowed changes. The first flashpoint was the trade war during Donald Trump’s presidency (first term, 2017–2021). In 2018, the Trump administration imposed punitive tariffs on hundreds of billions of dollars worth of Chinese goods, accusing Beijing of unfair practices (intellectual property theft, industrial subsidies, currency manipulation). China responded with its own tariffs on American products. A period of growing economic mistrust began.

Although the focus at the time was mainly on mass-produced goods (steel, aluminum, consumer products), the issue of technology and critical raw materials was already looming. Key events of this phase include:

• October 2022 – “Chip War”: The US government (now under President Biden) introduced strict export restrictions on semiconductors and the equipment to produce them to China. In practice, China was cut off from the most advanced integrated circuits (e.g., AI chips from Nvidia) and the software and machinery (EUV lithography) necessary for their manufacture. This was a blow to China’s technological ambitions—Washington made it clear that it would not allow Beijing to gain an advantage in key technologies like artificial intelligence or quantum computing. China described this as a “technological blockade.”
• 2023 – The First Chinese Raw Material Counter-Offensives: Beijing began to leverage its advantages in critical raw materials. In July 2023, it announced export controls on gallium and germanium—two niche but important metals for the semiconductor, fiber optics, and energy industries. Exporters had to obtain licenses to ship these raw materials abroad, which created immense uncertainty. Gallium prices surged several times over on the news of these restrictions. Then, in October 2023, China imposed controls on the export of graphite (a material essential for the production of lithium-ion batteries). In both cases, the official justification was “protecting national security” and concern about the use of Chinese raw materials to produce advanced military equipment abroad. In practice, this was a response to the American chip restrictions—Beijing was signaling that if it couldn’t buy chips, it would make it difficult to access the materials needed to make them.
• 2021–2023 – Other Tensions: It’s worth noting that during this period, China also used non-trade retaliatory measures. For example, it restricted investments by American companies in China and launched antitrust investigations against US corporations. On the other hand, the US expanded its blacklists of Chinese companies (adding, for instance, SMIC—China’s largest semiconductor manufacturer—to the list of entities subject to export restrictions). The world began to watch the two economies “slide” towards separation in high-tech areas. However, until 2023, there was no complete severing of ties—restrictions applied to selected sectors and products, while overall trade was still booming (in 2022, US-China trade reached a record $690 billion).

This first phase of tensions revealed the underlying dynamic: the US used its advantage in technology (e.g., chips) as a tool of pressure on China, and China began to use its advantage in raw materials as retaliation. It was only a matter of time before this tug-of-war expanded to a wider range of materials.

2.3 Escalation in 2024–2025

After a relative ceasefire (the “truce” phase of the trade war agreed upon under Trump in January 2020, the so-called Phase One deal), the next escalation occurred in 2024 and gained momentum in 2025. It can be said that during this period, the “spirit of decoupling” clearly began to hang over the actions of both sides. Here are the most important events from this period:

• August 2024 – Antimony Restrictions: China introduced export limits and tightened controls on another raw material—antimony. This semi-metal is crucial, among other things, for the defense industry (more on this in Section III), and China supplies about half of the world’s production. After these restrictions, antimony supplies from China dropped dramatically—by October 2024, exports had fallen by 97% compared to previous months. Prices shot up, and chemical and defense companies in the West began to nervously buy up inventories.
• December 2024 – “Full Ban” on Exports of Selected Minerals to the US: On December 3, 2024, Beijing went all-in, announcing that “in principle, the export of gallium, germanium, antimony, and superhard materials to the United States will not be permitted.” This was retaliation announced a day after Washington again expanded sanctions on the Chinese semiconductor sector. The then-announcement from the Chinese Ministry of Commerce spoke of “protecting national security” and also included tightening controls on graphite exports to the US. In practice, China imposed an embargo on three key raw materials for the US:
  • Gallium – used in semiconductor compounds (GaN, GaAs) and optoelectronics.
  • Germanium – used in fiber optics, night vision, and solar panels.
  • Antimony – needed for ammunition, military electronics, and batteries.
    This step was groundbreaking: for the first time, China directly targeted the US by cutting off the supply of strategic raw materials. Although gallium and germanium exports had already slowed significantly due to the July licensing requirements (customs data showed that virtually nothing had been sent to the US since August 2023), the December ban legally sealed the deal. Beijing sent a signal: “since you are strangling our chip industry, we will choke your access to critical minerals.” This was, in effect, the “weaponization” of raw material exports, as directly labeled by Western commentators (e.g., the CEO of Perpetua said that “China has weaponized mineral access”).

The symbols for the elements Ga (gallium) and Ge (germanium) on the periodic table, against the backdrop of the US and Chinese flags. These two lesser-known metals have become the subject of a fierce struggle: China first introduced export licenses for them (July 2023), and then in December 2024, completely banned their sale to the US. Both are essential for the production of advanced semiconductors, making them strategic raw materials in an era of technological rivalry.

• January 2025 – Change in US Administration and Continuation of a Hardline Stance: In January 2025, Donald Trump returned to power (re-elected as president in the 2024 election). During his campaign, he had promised a tougher approach to China. After taking office, he quickly moved from words to deeds. In April 2025, he announced so-called “reciprocal tariffs”—a drastic increase in import duties on products from countries that he believed were “cheating on trade.” This was aimed primarily at China, but also at countries that maintain high tariffs on American goods. In practice, the US raised tariffs on Chinese imports to an average of 45% (from the 25% in place since the previous trade war). Trump argued that since China restricts raw material exports and subsidizes its own exports, the US must defend itself with equivalent fees. In response, Beijing tore up the previous trade truce: it also raised retaliatory tariffs (though the scale is asymmetric—China imports less from the US). Importantly, in the background of all this, the United States managed to persuade its allies to cooperate more closely: by spring 2025, the European Union and Japan had essentially aligned with American restrictions on technology exports to China (albeit with a delay). Washington applied pressure, for instance, by threatening tariffs on European products if they served as a “backdoor” for Chinese semiconductor imports. This shows that the seeds of economic blocs were being sown—the US and its partners versus China and its friendly states.
• April 2025 – Expansion of Chinese Controls to 7 Rare Earth Elements: Chinese authorities, reacting to another wave of Trump’s tariffs, decided to go further with raw material restrictions. On April 4, 2025, it was announced that the export of seven rare earth elements (samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium) and magnets containing them would require special permits. Significantly, these were mainly medium and heavy rare earth elements—the rarer and more critical ones (more on them in Section III). Controls were also introduced on the export of technologies related to rare earth refining and magnet production. It was not yet a formal ban—more of a licensing mechanism—but it effectively had the same result as with gallium and germanium: global customers began to fear supply disruptions.
  It’s worth noting that the Chinese regulation went even further: it covered not only the export of the raw material itself but also situations where foreign companies wanted to sell products containing Chinese rare earths or produced using Chinese technology. This was a mirror image of the American FDPR (Foreign Direct Product Rule), which the US uses to restrict chip exports to China (a ban on selling anything produced using American tools/technology). In other words: China decided that since the US is globally blocking technology access to China, China will globally block material access to technology.
• October 2025 – The October Escalation (Events Described in the Introduction): The situation culminates at the moment described in the introduction. China expands its “blacklist” of raw materials to 12 of the 17 rare earth elements—adding another 5 in October (holmium, erbium, thulium, europium, and ytterbium). This means that almost all key elements in this group are under control. Furthermore, it was officially announced that no rare earth material could go to foreign military customers. In practice, as the Chinese Ministry of Commerce explained, “as long as these elements are used for civilian purposes, exports will be approved”—suggesting that any connection to the defense industry would result in a license denial. In other words: the US will no longer get Chinese raw materials needed to build missiles, planes, or radars. This is an almost unprecedented step. Expert Gracelin Baskaran from CSIS assessed that “this is an unprecedented move—never before have mineral restrictions gone this far and so deliberately targeted our defense industry,” adding that “China is backing us into a corner on national security by weaponizing rare earth exports.”
  Trump reacted almost immediately, announcing on October 10 that 100% tariffs on all imports from China would take effect on November 1. This meant effectively cutting off Chinese goods from the American market (because such a tariff level makes them unprofitable). Financial markets panicked, after which… Trump softened his tone, tweeting (or rather, “truthing” on Truth Social) a few days later: “Don’t worry about China, everything will be fine! The USA wants to help China, not harm it!!!” It turned out that frantic negotiations had taken place behind the scenes—Treasury Secretary Scott Bessent held a series of calls with his Chinese counterpart over the weekend, which helped to calm the situation somewhat. “We held intensive consultations, which helped to de-escalate the situation,” Bessent admitted. Nevertheless, formally, neither side has backed down from its decisions—the tariffs were set to take effect, as were the Chinese restrictions (though Beijing postponed their full implementation until December, likely to allow time for talks at the planned Trump-Xi summit).

US President Donald Trump and PRC Chairman Xi Jinping plan to meet at the end of 2025 at the APEC summit in South Korea. This will be their first face-to-face conversation since the escalation of sanctions and tariffs. Many observers hope it will halt the spiral of the raw material conflict, although for now, both sides have taken firm positions.

To summarize the historical retrospective: over a dozen years, US-China relations have moved from deep interdependence to open rivalry and hybrid economic warfare. Critical raw materials—once a niche topic for geologists—have become a matter of the highest state importance. China consciously built an advantage in this area and is now using it without hesitation. The United States, dependent on these supplies, is trying to respond with trade pressure and mobilization of allies. Each subsequent move brings both sides closer to decoupling, although channels of dialogue still exist (like the upcoming Trump-Xi summit). Section II showed how we got here. In the next part (III), we will explain why these specific raw materials—rare earth elements, gallium, germanium, antimony, cobalt, and others—are so strategically important.

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III. CRITICAL RAW MATERIALS – WHAT’S AT STAKE?

In the previous section, we described the conflict over critical raw materials in geopolitical terms. Now, let’s take a closer look at these materials themselves: what are they, what are their applications, and why does a lack of access to them cause such great concern? The term “critical raw materials” is not accidental—these are materials essential for modern technologies and, at the same time, subject to supply risks (because they come mainly from one country or are difficult to substitute). In this section, we will discuss four key groups:

• Rare Earth Elements (REEs) – the heart of numerous high-tech systems, from electric motors to missile guidance.
• Gallium and Germanium – niche metals with a major role in electronics and photonics.
• Antimony – a semi-metal crucial for the defense and chemical industries.
• Other raw materials – such as cobalt, lithium, nickel, graphite, tungsten, tantalum – also important in the context of technological security.

3.1 Rare Earth Elements (REEs)

Definition and Classification: The rare earth elements group includes 17 metallic chemical elements—scandium, yttrium, and the 15 lanthanides (from lanthanum to lutetium). The name is somewhat misleading: some of them are not rare in the Earth’s crust (e.g., cerium is more common than lead), but they rarely occur in a form suitable for easy extraction. More importantly, their separation and purification is a technologically very complex process. They are divided into two subgroups:

• Light Rare Earth Elements (LREEs) – with lower atomic numbers (57–63: lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium). They are more common in nature and usually appear together.
• Heavy Rare Earth Elements (HREEs) – with higher atomic numbers (64–71: gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, lutetium + yttrium, atomic number 39, which is chemically classified with HREEs). They are much rarer in deposits and more difficult to isolate. They also often have unique properties, making their technological importance disproportionately large.

Key Difference: “light” REEs can be found in a few places in the world outside of China (e.g., in the US, Australia), whereas “heavy” REEs, until recently, came almost exclusively from China. For example, until 2023, China had a nearly 99% share in the global processing of heavy rare earth elements. For light REEs, this monopoly was smaller (there are producers in Australia, the US, and Myanmar), but China’s dominance is still enormous.

Applications: What makes these elements so important? Their unique physicochemical properties. Neodymium, praseodymium, dysprosium, and terbium have strong magnetic properties—when added to alloys, they create the world’s most powerful permanent magnets (NdFeB). Yttrium, europium, and gadolinium have special luminescent and nuclear properties. Erbium, holmium, and thulium, in turn, exhibit interesting optical and magnetic properties at low temperatures. These exotic features translate into a wide range of applications, often in critical, sensitive components:

• Neodymium Magnets (Nd-Fe-B with Tb, Dy additives): This was a true technological “game-changer” of the 1980s—neodymium magnets are several times stronger than traditional (ferrite) ones. They revolutionized electric motors and generators. In a military context:
  • They are used in the flight control and propulsion systems of combat aircraft. An F-35 Lightning II fighter jet contains about 920 pounds (417 kg) of rare earth elements, mainly in magnets in the engines, control surface servomechanisms, and radar systems.
  • A Virginia-class submarine requires about 2.3 tons (9,200 pounds) of these elements for its propulsion and sonar systems. Without them, modern propulsion (quiet, with variable orientation) would be impossible.
  • Tomahawk cruise missiles – magnets in the guidance and flight control systems.
  • Predator/Reaper drones – their electric motors (propeller drive) and sensors also use NdFeB magnets, which provide high power with small size and weight, which is crucial in unmanned aerial vehicles.
• Defense and Communication Systems: Rare earth elements are part of high-performance microwave amplifiers and radar modules (e.g., in gallium nitride doped with lanthanides), as well as in lasers and electronic warfare systems. Yttrium and europium are used in the phosphors of screens and night vision displays. Gadolinium is used in neutron sensors (e.g., for detecting fissile materials).
• JDAM Guided Bombs: Although these are simple conversion kits for turning conventional gravity bombs into smart ones, they contain miniature motors, sensors, and electronics where components with rare earth additives may be soldered (e.g., in motion sensors).
• Civilian Applications: The list is equally impressive:
  • Wind Turbines – The generator of a turbine (especially modern direct-drive turbines) requires strong magnets with neodymium and dysprosium to efficiently convert the slow rotation of the blades into electrical energy. Each large turbine (5–10 MW) can contain several hundred kilograms of Nd and Dy.
  • Electric and Hybrid Cars – The traction motors of most EV models are based on NdFeB magnets (e.g., used in the Tesla Model 3 motors). The pumps and servomechanisms in these cars also use small magnets. A lack of these elements would mean larger, heavier, and less efficient motors (e.g., induction motors without magnets, like in some older Teslas, which have a worse power-to-weight ratio).
  • Consumer Electronics – Smartphones (speakers, vibration, camera – mini neodymium magnets), laptops (HDD hard drives have strong neodymium magnets in the heads), headphones, cameras – hundreds of millions of devices contain trace amounts of these elements multiplied by scale.
  • MRI and Medical Equipment – While superconducting magnets in MRI scanners do not use REEs (they are based on niobium), other devices like X-ray and PET machines may use lutetium, gadolinium, or europium in radiation detectors.
  • Lighting and Screens – Europium and yttrium produce the red color in the phosphors of lamps and LCD/LED monitors; terbium provides the green. Thanks to them, displays have vivid colors.

As you can see, from electric toothbrushes to the F-35, these elements are ubiquitous. However, they are particularly important in weapons and systems critical for defense—and here the problem of dependence on China returns. The United States currently does not have the capability to separate heavy rare earth elements. The only American source (the Mountain Pass mine) produces a concentrate rich in neodymium and praseodymium but poor in heavier elements. Moreover, until recently, 100% of this concentrate was sent to China for further processing! As a result, when it comes to final products (e.g., powdered REE oxides or finished magnets), the US relied almost entirely on imports from China. As recently as 2020–2023, about 70% of the rare earth elements imported by the US came from China (the rest mainly from Estonia, but the refinery there also uses Chinese raw material).

The problematic part is the so-called “separation stage.” Mining the ore is just the beginning—the concentrate contains a mixture of over a dozen elements that are chemically very similar. Separating them requires complex hydrometallurgical processes, hundreds of precipitation cycles in organic solvents, and generates toxic waste (radioactive, because the ores often contain thorium and uranium). For decades, China developed these technologies while the West abandoned them. Until recently, the only heavy REE refinery outside of China (Lynas in Malaysia) faced production limitations and environmental protests. As a result, pure dysprosium or terbium, for example, were not produced at all in the US.

In 2024, the Pentagon admitted in a report that “there is currently no heavy rare earth separation capability in the US; we are building it from scratch.” At the same time, it was stated that every F-35, every submarine, and every JASSM missile is dependent on material supplies from China. This awareness led to a series of actions (described in Section V) to rebuild the domestic rare earth industry. But this is a task that will take years.

In summary: rare earth elements are the “vitamins” of modern technology—without small additions of these metals, many devices would not work at all or would be much less efficient. In military applications, they currently have no real substitutes at a similar level of performance (you can make a motor without NdFeB, but it will be larger and weaker; you can use alternative alloys in some radars, but you lose sensitivity). Therefore, being cut off from rare earths is a strategic nightmare for the US. As an analyst from Benchmark Mineral Intelligence put it: “we are likely entering a period of structural bifurcation—China is localizing its value chain, and the US and its allies are accelerating the construction of their own.” The question is how quickly the West can build this chain.

3.2 Gallium (Ga) and Germanium (Ge)

We now turn to two specific elements that became symbols of Chinese retaliation in 2023: gallium and germanium. These materials are not as “famous” as lithium or uranium, but they are of immense importance in specialized electronics.

What are they?

• Gallium is a metal with atomic number 31, unique in one respect: it melts at a very low temperature—29.76°C. This means it almost melts in your hand (solid at room temperature, but liquid at 30°C). Pure gallium has no wide application, but it is part of semiconductor compounds:
  • GaN (gallium nitride) – a material for producing power and microwave transistors, with much better performance at high frequencies and temperatures than silicon.
  • GaAs (gallium arsenide) – used since the 1980s in high-speed radio and optoelectronic circuits (lasers, LEDs).
  • InGaAs, GaSb, and others – materials for photodetectors, high-efficiency solar cells (multi-junction).
• Germanium (atomic number 32) is a metalloid—something between a metal and a non-metal. It has a structure similar to silicon and was formerly used in the first transistors. Today, its main applications are:
  • Ge in fiber optics – germanium is added to the core of glass optical fibers to increase the refractive index and improve transmission parameters.
  • Ge in infrared optics – pure germanium is transparent to infrared radiation, so it is used to make lenses and windows for thermal imaging cameras, night vision devices, and IR sights.
  • Ge in solar panels – it serves as a substrate (wafer) for multi-junction photovoltaic cells, used mainly in satellites and sometimes in concentrating solar panels (because these cells are very expensive but have high efficiency).
  • SiGe (silicon-germanium) – an alloy used in modern RF and digital semiconductor circuits, because adding germanium to silicon improves transistor speed. Used, for example, in chips for 5G networks, signal amplifiers, etc.
  • Al-Ga alloy and others – it has some niche uses in special alloys (e.g., in fire sprinklers, there is an alloy with a specific melting point containing gallium and germanium, designed to melt in a fire).

Applications (Summary):

• Advanced Semiconductors:
  • GaN is replacing silicon as the material for high-power and high-frequency transistors. It is used in phone chargers (making them smaller and more efficient), DC-DC converters in electric cars (less heat loss), inverters for solar panels, and in radar systems (e.g., AESA radars in modern aircraft).
  • GaAs has been the basis for RF modules in smartphones for years (e.g., radio signal power amplifiers) and radar components. Every smartphone has several GaAs chips (in the 4G/5G band).
  • InGaAs (indium gallium arsenide) – key in near-infrared detectors (e.g., night vision cameras) and fiber optic photodiodes (telecommunications infrastructure).
• Power Electronics and Renewable Energy: Gallium nitride allows for the creation of very efficient chargers and power supplies (half the size of traditional ones). In photovoltaics, multi-junction cells based on Ga and Ge have record efficiencies (over 40%)—used mainly in space (satellites), but also in specialized ground installations.
• RF and 5G Applications: Many 5G base stations use GaN-based power amplifiers because they can operate at high frequencies (bands above 3 GHz) with lower losses. GaAs/GaN are also used in all types of transmitting devices (from military radars to radio links).
• Optics and Sensors: Germanium is indispensable in thermal imaging—a typical FLIR camera has a germanium lens. The military needs large quantities of germanium for night vision goggles and infrared sights (e.g., for anti-tank launchers, reconnaissance drones, etc.). Smoke detectors and radiation safety devices also use germanium.
• Defense: For military applications, gallium and germanium are quiet but crucial:
  • AESA radars in fighter jets (e.g., F-35) – thousands of transmit/receive elements made with GaAs/GaN technology.
  • Satellite communication, microwave communication – based on GaAs components.
  • Reconnaissance satellites – solar panels based on Ga/Ge provide power.
  • Laser weapons, IR jamming systems – semiconductor lasers (e.g., GaAs laser diodes) and Ge detectors.

China’s Dominance: In the case of these two elements, China also plays a leading role:

• Gallium: It is a byproduct of refining bauxite into aluminum. As the world’s largest aluminum producer, China also produces the most gallium. Estimates suggest that 94% to 98% of the global gallium supply comes from China. For years, gallium was a cheap byproduct—China sold it for pennies, which killed off the remaining production in places like Germany. Now, Beijing has turned this into an advantage—when it halted exports, customers had no alternative (in 2022, the US imported 53% of its gallium from China).
• Germanium: The situation here is slightly more dispersed, as germanium is produced during zinc refining and also from lignite coal mining (Germany and Russia also produce it). Nevertheless, China provides about 60-70% of the world’s germanium (data for 2022: ~60%, but after the halt of German production, it may be more). Importantly, China has most of the refining capacity and supplies the most advanced forms (like germanium tetrachloride for fiber optics).

Thus, China’s restrictions on Ga and Ge were like hitting a raw nerve. Western semiconductor and defense companies felt the uncertainty: what if we don’t get these materials? Warehouses began to be filled with emergency stocks. Alternatives were sought: the EU quickly entered into talks with Canada (which has some germanium production) and Kazakhstan (where the Chinese operate zinc smelters). But it’s clear—in the long run, without China, the supply is insufficient and more expensive.

China argued that these restrictions were to protect its security and prevent the use of Chinese materials in foreign defense industries. They also stressed that it was not a ban, but “licenses.” A Ministry of Commerce spokeswoman, He Yongqian, said: “As long as rare earths [here, by implication, also Ga and Ge] are used for civilian purposes, licenses will be issued,” and that the goal was to prevent the proliferation of weapons of mass destruction. This suggests that a company producing chips for cars might get a license, but a manufacturer of military equipment would not. But how to verify the end use of gallium sold to intermediaries? This gives China broad discretion—and that is likely the point.

In summary: gallium and germanium are less “media-friendly” than lithium or neodymium, but their absence would be quickly felt in advanced electronics and communication systems. Both are pillars of 5G connectivity, fiber optics, and infrared sensors. Controlling them allows one to slow down the technological development of an adversary—for example, without gallium, it’s difficult to mass-produce modern base stations, and without germanium, it’s difficult to build large-scale fiber optic networks or advanced IR systems. China understands this and has already used this lever. The West will now intensively seek ways to recycle (e.g., recovering germanium from fiber optic waste) and develop alternative supplies (reactivating old plants?), but this will take time. In the meantime, some agreement on licensing may be reached—because a complete lack of these materials would paralyze not only the US but also certain Chinese industries (with very high raw material prices, even their domestic companies would feel it, so Beijing must strike a balance). This issue is a perfect example of “interdependence”—just as the US cuts China off from chips, China cuts off the raw materials for chips.

3.3 Antimony (Sb)

Another critically important raw material, already mentioned in previous sections, is antimony. It has a long history of use (in ancient Egypt, antimony compounds were used as… eye makeup—kohl). Today, however, we are interested in antimony in modern technology and the military.

Characteristics: Antimony is a lustrous, brittle, silvery-gray semi-metal (semiconductor). Its chemical symbol is Sb (stibium). It does not occur in its native state in nature—it is mainly obtained from the mineral stibnite (antimony sulfide, Sb₂S₃). It is quite toxic on its own. What does it do? When added to metal alloys, it increases their hardness, strength, and wear resistance. Hence its classic application: as an additive to lead.

Key Military Applications:

• Ammunition and Explosives: The lead used in projectiles (e.g., rifle bullets) is hardened with 2-3% antimony, making the bullets less prone to deformation and residue in the barrel. In an alloy with tin, it is used for bullet jackets. Antimony is also a component of primers and explosive-initiating mixtures (e.g., antimony trioxide Sb₂O₃ combined with potassium sulfide was a component of historical gunpowder). Furthermore, stibine (antimony hydride) is a compound used in some pyrotechnics and special explosive mixtures.
• Armor-Piercing Projectiles and Flares: Antimony alloys are used in some kinetic penetrators—for example, antimony is added to tungsten sinters in armor-piercing rounds to improve ballistic properties. In flares and infrared countermeasures, antimony compounds (e.g., antimony hexasulfide) are used to generate intense IR radiation (imitating an engine’s signature).
• Night Vision and Thermal Imaging: Indium antimonide (InSb) is a semiconductor used in the arrays of infrared detectors (mid-wave infrared thermal cameras, ~3-5 micrometers). These types of detectors are found in new-generation night vision goggles, tank observation systems, and the self-guiding heads of infrared-homing missiles (e.g., anti-aircraft missiles). Gallium antimonide (GaSb) and other antimonides are also used in semiconductor lasers emitting in the IR spectrum.
• Nuclear Weapons: While not openly described in literature, historically, antimony (in the form of ¹²⁴Sb) was used in so-called neutron generators (reaction initiators) in the first atomic bombs. Techniques are different now, but antimony is still listed as a strategic material in the context of nuclear weapons (perhaps in shielding, or in certain reactor alloys?). In any case, it is on the lists of critical raw materials for the nuclear sector.
• Military Batteries: Older types of lead-acid batteries (in military vehicles, submarines) contain lead-antimony alloys in the battery plates (antimony improves plate durability). Although modern Ca-Ca batteries have reduced this use, it is still sometimes used in military equipment (easier maintenance during deep discharge).

Civilian Applications:

• Chemical Industry (Flame Retardancy): Antimony trioxide (Sb₂O₃) is a common flame retardant added to plastics, textiles, and paints. When the material ignites, antimony releases halogen gases that suppress the fire. It is used, for example, in electronics casings, cable insulation, and interior furnishings where non-flammability is required.
• Semiconductors and Optical Elements: The aforementioned InSb and GaSb also have civilian uses (thermal imaging cameras for civilian applications, industrial sensors). III-V semiconductors with antimony are also being researched for high-speed transistors.
• Batteries and New-Generation Materials: Work is underway on “flow” batteries and others where antimony can play a role (e.g., liquid antimony anodes). It is also used in some alloys for thermal energy storage.
• Bearing and Sliding Alloys: Tin-antimony-lead alloys (babbitt metal) have long been used for bearing shells. In the energy and automotive industries, this is a key material.

Dependence and Market Dominance:

• China: Possesses about 50-55% of global antimony mining (mainly from the Guangxi and Hunan regions). It also controls a significant portion of refining. Many countries have closed their own mines for environmental and economic reasons (this happened in the US—the last Stibnite mine closed decades ago, and in Canada as well). So, China dictates the supply—as it showed in 2024 by restricting exports and driving up prices.
• Russia/Tajikistan: The second major supplier is the Russian-Tajik deposit in Tajikistan (which holds about 20% of the world’s reserves). However, production there largely goes to China or is controlled by Chinese companies (for example, Talco Gold—a joint venture of the Tajik company TALCO and a Chinese partner).
• Others: Bolivia, Turkey, and Australia produce on a smaller scale. However, no Western country has significant production. The US must import 100% of its needs. In 2018-2021, the main US suppliers were China (approx. 60%), Russia (17%), and the rest from Mexico and India (which likely imported from China anyway).

The Stibnite Gold Project (Perpetua) – America’s Hope: In Idaho, near a former mining site from the World War II era, the company Perpetua Resources is developing the Stibnite gold and antimony mine project. The resources there are estimated at about 6 million ounces of gold and 100 million pounds of antimony (that’s ~45,000 tons of Sb). If it were to start, it could cover ~35-40% of US demand. The Pentagon has deemed it strategic—allocating ~$60 million in grants to support it and lobbying for quick permitting. The US EXIM Bank has declared its readiness to provide up to $1.8 billion in preferential loans for the mine’s construction. This is unprecedented—the US government hasn’t funded mines on this scale for a long time. However, Stibnite is scheduled to start only in 2028 (if it overcomes obstacles—e.g., concerns from the Nez Perce tribe about the mine’s impact on the environment, mainly the salmon population). Until then, the US is condemned to imports, which means vulnerability to pressure—such as Chinese restrictions.

Why is antimony “critical”? Because:

• There are no easy substitutes for its main applications (e.g., selenium or calcium can be used to harden lead, but antimony is more effective; bromine compounds are used as flame retardants, but they are toxic and also controlled).
• It is militarily strategic (you can’t have equally good ammunition bullets without antimony; IR electronics without InSb).
• Its supply is concentrated (China and its satellites).
• The US has no domestic production—complete dependence.

In the context of decoupling, antimony is an example of an “old-school” raw material that has suddenly regained strategic importance. During World War II, it was a key material in the United States (for hardening ammunition, in strategic stockpiles). Later, in times of peace and globalization, it seemed it could be safely imported for pennies from China. Now, history has come full circle: it turns out that in a situation of geopolitical conflict, such a seemingly outdated metal can become the deciding factor. It is enough for China to restrict exports (which it has already done) to force the US into a frantic search for alternatives. Stibnite is that alternative—but it’s a distant prospect. In the meantime, the Pentagon has decided to buy large quantities of antimony for its stockpile (more in Section 5.5)—to survive a potential period of shortage.

3.4 Other Key Raw Materials

To get a full picture of the “raw material theater” in the US-China rivalry, we need to mention a few other materials that are also crucial, although they were not the direct point of contention in October 2025. They also fit into the trend of the US seeking independence from Chinese supplies. Let’s briefly discuss the most important ones:

• Cobalt (Co): A metal used mainly in the chemistry of lithium-ion batteries (in NMC—nickel-manganese-cobalt, and NCA—nickel-cobalt-aluminum cathodes). The addition of cobalt ensures stability and high battery capacity, especially under load (which is crucial, for example, for military electronics). In military applications, cobalt is essential:
  • Batteries for portable equipment (radios, GPS systems, night vision devices) – require high energy density and reliability, hence Li-ion with cobalt.
  • Unmanned aerial vehicles (drones) – for a reconnaissance drone to operate long and quietly, it needs an efficient battery—usually containing cobalt.
  • Energy storage and portable power for soldiers – e.g., the “future soldier” program involves numerous electronic devices that must have powerful batteries.
  • Beyond batteries, cobalt is also a component of heat-resistant superalloys (e.g., the turbine blades of jet engines are made of cobalt and nickel alloys—they withstand enormous temperatures).
    The problem is that about 70% of the world’s cobalt mining comes from the Democratic Republic of Congo, and the main mines there are controlled by Chinese concerns (China Molybdenum, Huayou Cobalt, etc.). China has monopolized refining—>80% of cobalt is refined in China. Therefore, any shift in relations (or, for example, if China were to strike an exclusive deal with the Congolese government) could cut the West off from cobalt. That is why the US and its allies are trying to develop other sources (projects in Australia, Canada) and recycling (e.g., Redwood Materials in the US recovers cobalt from old batteries). For now, however, the dependence is high—and the Pentagon has already secured funds ($500 million) to build up cobalt reserves.
• Lithium, Nickel, Graphite – The “Big Three” of Li-ion Batteries:
  • Lithium: Absolutely key for Li-ion batteries (it cannot be replaced in current chemistry). Global resources are scattered (Chile, Australia, and Argentina dominate mining), but China controls >60% of the capacity for processing lithium into carbonate or hydroxide, the form needed for the battery industry. That’s why, despite the existence of mining in the West, battery factories often have to import lithium chemicals from China. Without lithium, the transformation of electromobility and renewable energy is in question.
  • Nickel: A key component of NMC/NCA cathodes in EV batteries (the more nickel, the higher the capacity). The largest mining is in Indonesia and the Philippines, but China is investing heavily there (building huge nickel smelting facilities in Indonesia). Russia (Nornickel) is also a major player. Although Western countries (Australia, Canada) have nickel, China again dominates in refining and producing the chemical forms for batteries. To make matters worse, in 2022, Indonesia imposed a ban on nickel ore exports, which favors Chinese investors building processing plants there—and hurts everyone else (this is analogous to raw material restrictions).
  • Graphite: This is the material for the anodes of virtually all current Li-ion batteries. A very pure and properly formed type is required—so-called coated spherical graphite. China controls ~90% of the global production of battery-grade graphite. In 2023, Beijing placed it under export licensing (similar to Ga and Ge). Alternatives? There is work on silicon anodes, but graphite is still indispensable due to its stability. The US plans to build synthetic graphite factories and natural graphite enrichment plants (e.g., the Graphite One project in Alaska—received a $37.5 million grant from the Pentagon). But that’s in the future—currently, virtually every battery in a Tesla or iPhone contains Chinese graphite.
    Consequences: The automotive and energy sectors in the West are heavily dependent on these raw materials. If decoupling intensifies, there is a risk of battery shortages, a slowdown in EV production, and an increase in the cost of energy storage (which will hit the climate transition). That’s why both the US and Europe are implementing programs (like the American Inflation Reduction Act, IRA, and the European Critical Raw Materials Act) to stimulate local mining and processing of lithium, nickel, and graphite. But this will take at least several years.
• Tungsten (W) and Tantalum (Ta):
  • Tungsten: The metal with the highest melting point among all metals (3422°C). It is irreplaceable in applications requiring hardness and heat resistance. In the military, it is used for the cores of armor-piercing projectiles (mainly tank sub-caliber rounds—a tungsten core penetrates armor kinetically). It is also a component of superalloys in rocket and jet engines (critical elements like nozzles, blades—often tungsten-rhenium alloys). Furthermore, it is used in heavy machinery and radiation shielding (radiological devices). China mines and produces 80-85% of the world’s tungsten. The only significant Western source is a tiny mine in Portugal and Spain; the rest is in Vietnam (which also often goes to China).
  • Tantalum: A metal used mainly in tantalum capacitors—which, in turn, are present in almost all electronic devices (especially in military ones, because tantalum capacitors are very reliable and durable). Tantalum in alloys increases strength at high temperatures (it is used, for example, in alloys for aircraft engine components). Due to their huge capacity and small size, tantalum capacitors are in missile control systems, satellites, and radar systems. Unfortunately, most tantalum comes from Africa (DRC, Rwanda), often under difficult conditions (conflict minerals). Australia and Brazil have some, but again—a significant part of the refining and trade is controlled by Chinese entities. In 2020, China was responsible for ~50-60% of the initial refining of tantalum.
    A shortage of tungsten or tantalum would hit the defense industry (e.g., it would limit the production of tank ammunition or advanced capacitors). As early as August 2024, China suggested it might restrict tungsten exports—and in February 2025, it did (restricting exports of tungsten and molybdenum products). This is another sign that the struggle for raw materials is encompassing an ever-wider list of puzzle pieces.

All these raw materials share a characteristic: they are key to technologically advanced sectors, and at the same time, their global supply is concentrated and largely tied to China. That is why warning reports have been appearing for several years (e.g., Atlantic Council 2023) about the fragility of critical mineral supply chains. Governments are beginning to act, and investors are putting capital into mining projects from Australia to Alaska. However, building an alternative ecosystem is a tedious and costly process, as we will see in Section V.

💡 KEY TAKEAWAY
Critical raw materials are the “hidden links” of technological dominance. Rare earth elements, gallium, germanium, antimony, cobalt, and tungsten—though little known to the public—determine advantages in defense and high-tech. China has monopolized many of them (e.g., 90% of REE processing, 98% of gallium, 70% of cobalt, 80% of tungsten). Therefore, it can effectively checkmate the West by restricting supply. The United States faces a huge challenge in rebuilding its own sources and supply chains for these materials to secure its national and economic security. Sections IV and V will show the implications of the current situation and how the US is trying to respond to China’s “raw material weapon.”

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IV. GEOPOLITICAL AND ECONOMIC IMPLICATIONS

The conflict over critical raw materials does not occur in a vacuum—its effects radiate across a wide spectrum of issues: from the defense capabilities of nations, through the condition of strategic industrial sectors, to the stability of financial markets. In this section, we will analyze how US-China tensions over minerals translate into national security, key economic sectors, global supply chains, and markets. We will also try to understand how raw materials have become a geopolitical tool (“weaponization of supply chains”) and what this means for the global economy.

4.1 Threats to US National Security

One of the main reasons the topic of critical raw materials has hit the headlines is national security—especially American national security. The United States has realized that its dependence on China for key materials could be its Achilles’ heel in the event of a conflict. What specific threats are associated with this?

• Impact on the Defense Industrial Base: The American defense industry—from aerospace corporations (Lockheed Martin, Boeing) to ammunition manufacturers (Northrop, General Dynamics)—is inextricably linked to the supply of specialized materials. A lack of rare earth elements, antimony, titanium, tungsten, or helium-3 (another strategic isotope) could delay or even halt the production of certain weapon systems. Imagine: the F-35 cannot be built without NdFeB magnets, tank shells without tungsten, night vision devices without germanium, and ammunition without antimony. Every supply bottleneck translates into lower readiness of the armed forces. There are already reports of production delays for some missiles or satellites due to problems in obtaining special components (e.g., fiber optics for guidance systems).
• Risk of Delays and Downtime: In a military conflict scenario (e.g., a crisis over Taiwan), China would likely immediately halt the export of strategic raw materials to the US. If stockpiles have not been prepared in advance, American defense plants could face shortages after just a few days. For example, Javelin anti-tank missiles use a lot of IR components (germanium/indium compounds in the warhead)—intensive use, as seen in Ukraine, quickly depletes stocks. Replenishing them requires raw materials. Without them, the military may have the equipment, but not the ammunition.
• Vulnerability to Geopolitical Blackmail: Aware of this, the US must calculate its moves taking into account the “mineral factor.” That is, if China threatens: “don’t export weapons to Taiwan or we will cut off your rare earth supplies,” a dilemma arises. Of course, the US officially declares it will not be blackmailed, but in practice, such a threat can influence Washington’s calculations. In July 2023, when Beijing put gallium and germanium under control, Washington was in an uproar—it was interpreted as a warning: “rethink your technology sanctions, because we have our own levers.” The greater the dependence, the harder it is to pursue a tough policy towards Beijing without fear of repercussions.
• Crisis Scenarios (Atlantic Council, etc.): For a few years now, think tanks have been conducting simulations—what would happen if supplies of critical minerals suddenly disappeared? One Atlantic Council workshop (2025) considered a scenario in which China imposes a de facto ban on the export of several key minerals amid rising tensions. The conclusions were unsettling: the United States is not prepared for a prolonged interruption. Yes, it has some crisis tools—the Defense Production Act (DPA) to compel production and allocation, strategic reserves for last-resort use, and emergency purchases from allies. But these are stopgap solutions. The AC scenario assumed that the US would manage initially, but in a prolonged crisis (several months), its manufacturing capabilities would shrink drastically. In other words, stockpiles and workarounds will last for a while, but a developed economy cannot function in “besieged fortress” mode for too long. The simulation results underscored the need to accelerate diversification efforts in peacetime.

The general conclusion is that the US must treat critical raw materials as seriously as it treats, for example, nuclear readiness or cybersecurity. A lack of access to them is a new type of asymmetric threat—it’s not a missile, but it can paralyze defense capability like a thousand missiles. As a former national security advisor put it: “The enemy may not have to fire a single missile—if they cut off our supply of certain materials, they can, in a sense, disarm us slowly from within.” Of course, this applies not only to the US—other NATO countries are also vulnerable (European defense also draws on global supply chains). That is why NATO and the EU launched special initiatives in 2023 to monitor the supply of raw materials for the defense industry.

For balance, it is worth noting: China is also dependent on certain raw materials from the US and its allies—for example, grains (soybeans), some chips, and in raw materials: iron ore (Australia), nickel (Indonesia, but they have established themselves there), copper (South America), and uranium (Kazakhstan). But in the purely military sphere, China is more likely to be able to live without Western raw materials (it has invested heavily in raw material self-sufficiency). The US has a weaker starting position here.

4.2 Consequences for Key Economic Sectors

Raw material tensions do not only affect the military—they will echo through many civilian industries, from semiconductors, through automotive, to renewable energy. Let’s look at the main sectors and the consequences that restricted access to critical minerals could have for them.

Semiconductor Industry (Microelectronics):

• Threat to the AI Boom: The years 2020-2025 saw an explosion in the development of artificial intelligence, driven by increasingly powerful integrated circuits (GPUs, TPUs, specialized accelerators). These, in turn, require an extensive production and material infrastructure. The aforementioned gallium and germanium are part of this—without them, advanced sensors, 5G communication modules, or certain chip components (e.g., III-V semiconductors for RF chiplets) cannot be produced. If restrictions persist, it could slow down the development of certain AI technologies based on specialized hardware (e.g., LiDAR sensors, neuromorphic processors using memristive materials—exotic elements also appear here).
• Impact on Players like Intel, Nvidia, AMD, TSMC:
  • Intel – Although it mainly produces silicon-based CPU chips, it needs equipment to build its factories (e.g., EUV lasers have components with lanthanides, precision positioning machine sensors may contain germanium, etc.). If China, for example, blocked the export of special magnets or materials for optics, the construction of new fabs could be hampered. Furthermore, Intel has 5G product lines (it once acquired Infineon Wireless), where it uses GaAs.
  • Nvidia, AMD – Their GPUs are made of silicon layers, but fiber optics (Germanium) are often used for communication between chips in supercomputers, and cooling and power systems have elements containing, for example, tungsten (heat sinks, because tungsten conducts heat well and is dense). These are rather indirect dependencies, but they exist.
  • TSMC, Samsung (foundries) – Like Intel, they require advanced materials for photolithography (filters made of calcium fluoride doped with rare earths?), deposition targets (some chip layers are metals like copper doped with yttrium, for example). If Chinese supplies were to run out, they would have to rely on stockpiles or more expensive sources.
  • Broadcom, Skyworks, Qorvo – Producers of radio circuits. They directly need gallium arsenide and gallium nitride—and therefore gallium (China) and some indium (China ~60%). Without these raw materials, their production stops. These are key chips for smartphones and base stations, so the impact will be felt by consumer electronics giants (Apple, Huawei, etc.).
• Potential Technological Delays: If access to key materials is difficult, companies may postpone the launch of new products, waiting for stability. It may also increase R&D costs—engineers will have to design with the replacement of missing materials in mind (which is difficult and not always possible without compromises). In an extreme case—a slowdown in Moore’s Law (slower progress in chip performance). Of course, this is a worst-case scenario, as the semiconductor industry is inventive—but minor frictions could appear.
• “Chiplet” Supply Chains: Modern chips are modules produced in different places (e.g., AMD assembles its CPUs from chiplets produced at TSMC and I/O dies at GlobalFoundries). Such a chain is global—and materials fly back and forth. Raw material disruptions (e.g., tariffs, restrictions) mean more expensive transport, more bureaucracy, and even the risk of a shortage of certain elements. Koch’s Law (predicting a lengthening time-to-market for new chips) may be reinforced by geopolitical factors.

Automotive Sector:

• Electric Vehicle (EV) Production: Electric cars are rolling warehouses of critical raw materials:
  • A battery of ~60 kWh contains ~8-10 kg of lithium, 20-30 kg of nickel, 5-10 kg of cobalt, and 40-50 kg of graphite. China dominates the processing of all four. If these raw materials become more expensive (which happens with restrictions) or supplies are uncertain, the cost and pace of EV production will suffer. Already in 2022, lithium prices jumped tenfold, affecting the margins of battery and car manufacturers.
  • Electric motors – most EVs (except for a few, like the Tesla Model S Plaid) use neodymium magnets in their traction motors. Each such car has ~1-2 kg of NdFeB magnets (even more in hybrids). Without a supply of these magnets, heavier induction motors would have to be used, or cars would have to be put on a waiting list. In 2025, there is no Western magnet factory on the required scale (one is being built in the US, supported by the DoD).
  • Electronics in cars: sensors (radars, lidars – gallium, indium, Ge), catalytic converters (cerium, lanthanum), power electronics systems (GaN in on-board chargers). Potential shortages could limit the availability of ADAS functions or charging efficiency.
• Internal Combustion Engine (ICE) Cars: Although less advanced, they also use raw materials:
  • Three-way catalytic converters – platinum group metals (not China, but South Africa/Russia – also sensitive). But China does not dominate here.
  • Hundreds of integrated circuits – as above, dependent on the global chip supply chain.
  • Magnets in accessories (speakers, ABS sensors, small motors) – neodymium, so China.
  • Overall, ICE cars are less exposed to lithium, etc., but the recent chip crisis showed how a global disruption (the pandemic) halted car production lines—decoupling could cause similar disruptions (e.g., if China stopped exporting certain electronic semi-finished products for cars due to sanctions).
• Cost Increases: Any restriction on critical raw materials -> price increase. We are already seeing the phenomenon of rising battery prices after years of decline, because raw materials have become more expensive. If this trend continues, EVs may remain more expensive than planned, delaying the price parity of EVs vs. ICE cars. This torpedoes climate and business goals (e.g., companies like Tesla have to cut margins to remain competitive).
• The “Race for Raw Materials” Option: Automakers may get involved in securing supplies themselves—for example, by signing contracts with mines in Australia, Canada, etc. This is already happening (Tesla is contracting nickel from Indonesia and New Caledonia, VW is investing in mining). This is a departure from just-in-time and the open market, and a move towards a “own your mines like in Ford’s time” model. This changes the structure of the industry and requires billion-dollar investments from automotive companies—which in the short term burdens their balance sheets, but in the long term is necessary.

Renewable Energy:

• Wind Turbines: Modern offshore (marine) wind turbines often have direct-drive generators based on neodymium magnets. Each large turbine contains hundreds of kg of Nd, Dy, Pr. In 2011, it was widely reported that one 3MW turbine contained ~2 tons of magnets. If these magnets are not available, the construction of wind farms could slow down, or it may be necessary to return to designs with gearboxes (which are less reliable). The EU and US are planning huge investments in offshore wind—but the raw materials for them are dominated by China. This is a contradiction they must resolve.
• Solar Panels: Photovoltaics is an interesting case—95% of panels are silicon cells, and here the raw material (silicon, aluminum, copper) is not the problem. The problem is that 80% of panels are made in China or with Chinese components (polycrystalline silicon, solar glass). How will decoupling change this? If the US/EU restricts imports of Chinese panels (they are already doing this with anti-dumping tariffs), they must launch their own production. In terms of raw materials, this is not difficult, but in terms of cost, it is—because China has a huge advantage of scale. Besides, thin-film panels (CdTe, CIGS) use tellurium, indium, gallium, germanium—again, raw materials controlled by a few (tellurium is a byproduct of copper, a lot of it in China).
• Energy Storage: Batteries for stationary storage are mainly lithium-iron-phosphate (LFP)—there’s no cobalt or nickel here, but there is lithium and graphite. Both—China. Alternatives like flow batteries (vanadium—most from China or Russia), sodium-ion (reassuringly, salt is everywhere, but graphite and good chemistry are needed). In any case, the energy transition planned for 2030+ rests on the availability of raw materials. The OECD warns that global climate policy could be derailed if countries fall into raw material protectionism instead of cooperating (because the common fight against climate change requires free access to panels, batteries, etc.—decoupling makes this difficult).
• Uncontrolled Costs: The years 2021-2022 already showed that the prices of raw materials like lithium and nickel can fluctuate wildly. This makes renewable energy projects financially unpredictable. Governments have to subsidize more, and companies bear the risk. This could slow down investment, as investors dislike uncertainty. The need to build local supply chains (e.g., panel factories in the US) is healthy, but more expensive (at least initially) -> less capacity will be built for the same amount of money.

In short, every transformational sector that is the backbone of the 21st-century economy will be severely affected by the rupture of global raw material supply chains. This does not mean the West will not cope—it will, but on a bumpy road, with higher costs and delays. Interestingly, China could also suffer: if the US restricts, for example, the export of advanced semiconductors, its AI development will slow down; if they block specialized materials (high-end chemistry), its industry could also come to a halt. For now, however, the asymmetry is in China’s favor for raw materials, and in the US’s favor for high-tech chips. Both, therefore, have their weak points—and both are pressing them.

4.3 Economic Weaponry and the “Weaponization” of Supply Chains

Historically, great powers have used various tools of pressure: naval blockades, financial sanctions, currency wars. In the 21st century, a new one has been added to this arsenal: manipulating the flow of critical raw materials and components. This is literally the “weaponization” of supply chains—turning them into a geopolitical weapon. China has become a master of this strategy, although the US also resorts to similar measures (e.g., chip sanctions). Let’s focus on China’s “economic raw material weapon.”

A History of Chinese Raw Material Restrictions as a Political Tool:

• We have already discussed the 2010 episode with Japan (rare earths for Senkaku).
• Another example is the embargo on the export of raw materials to Norway after the Nobel Peace Prize was awarded to a Chinese dissident (Liu Xiaobo) in 2010—China unofficially restricted, for example, the import of Norwegian salmon to exert pressure. This is not an industrial raw material, but it shows the mechanism: use a dependency (Norway was a major exporter to China) to force a political concession.
• Australia 2020: When Australia demanded an investigation into the origins of the COVID pandemic, China imposed informal sanctions on a range of Australian exports—coal, iron ore, barley, wine, beef. China hoped that hitting key industries (mining, agriculture—Australia is very dependent on the Chinese market) would force Canberra to change its tone. However, the Australians held firm (other customers helped them, e.g., India took the coal, the EU the wine, etc.), and eventually, after two years, Beijing began to lift these sanctions because it needed the raw materials (China started experiencing power shortages without Australian coal).
• South Korea 2017: After the installation of the American THAAD anti-missile system in South Korea, China targeted the Korean tourism and retail business—it banned group trips to Korea, and the Lotte Group (which had provided the land for THAAD) was practically pushed out of China (its supermarkets were closed under various pretexts). Korea felt this strongly economically, which many interpret as an expression of Chinese policy: “punish one to scare others.”
• Finally, the 2023-25 restrictions on gallium, germanium, graphite, and rare earths—these are the already described examples of the latest use of raw materials as a weapon in the dispute with the US.

In each of these cases, China chose products where the recipient was dependent on them, and China itself could do without the target market. This is important: sanctions work when they hurt one side more than the other. It’s easier for China: its huge, diversified economy can replace some sales markets or supplies, while for smaller partners, losing access to China can be painful (e.g., for Australia, a third of whose exports went to China). In the case of the US, China knows its raw materials are critical, and it can, for example, redirect exports to others (gallium and germanium can go to Europe or into storage instead of the US, to drive up prices).

The “Market Flooding” Strategy – Price Manipulation:

• An interesting tactic is not only cutting off supplies but, on the contrary, flooding the market with a given raw material to control the price and make competitors dependent. China has used this for years:
  • In the 1990s, it flooded the market with cheap rare earths—prices fell by ~95%, Mountain Pass couldn’t withstand it and collapsed. When it became a monopoly, it later briefly tightened exports (which caused prices to soar in 2010).
  • Lithium in 2018–2019: After the 2016-17 boom (lithium prices went up, many Western companies started planning mining projects), a supply glut occurred in 2018—largely coordinated by Chinese companies in Australia (Greenbushes increased production) and South America (deals with Chile). Lithium prices fell from $20k to $7k per ton. The effect: many Western lithium projects became unprofitable and were frozen. Then, China bought up assets cheaply or eliminated its competition. (By 2021, demand picked up and prices jumped again, but in the meantime, China’s dominance in refining had solidified).
  • Nickel in 2021–22: Here, there was the famous short squeeze (not initiated by China, but by a Chinese fund that got ahead of itself). China’s Tsingshan assumed nickel prices would fall because it had overinvested in Indonesia and was flooding the market with NPI nickel, and it shorted contracts—a miscalculation caused a price spike and a crash on the LME. The details are less important—suffice it to say that by producing cheap NPI nickel, China made it so that, for example, the Talon Metals project in the US (sponsored by Tesla) is still economically uncertain. Because when nickel prices are artificially low, new mines won’t start.
  • Antimony: As already mentioned, after the announcement of support for the Stibnite mine, Chinese media suggested that China could easily increase antimony production and bring down the price to make the Perpetua project unprofitable. In the end, it’s a race: will the US start its mine before China possibly buries the project by flooding the market? The problem is that antimony is such a small market (in terms of value) that China can manipulate it almost cost-free.

The strategy of flooding the market is effective in the long term for maintaining an advantage: as long as China has deep pockets and a dominant share, it can temporarily lower prices below the profitability threshold for new players if competition arises. This halts their development. Then, once the project fails, prices can rise again (a monopolist can always limit production to boost margins). The Western world is just beginning to find answers to this—for example, “floor price” mechanisms are being proposed (governments guarantee a minimum purchase price for raw materials from new mines so that investments pay off despite market manipulation). The Pentagon did this with MP Materials (guaranteed buyback prices for magnets).

Ban on Export of Technology and Know-How:

• Another dimension is knowledge. For years, China acquired know-how from abroad (often through JVs or transfers in exchange for market access). Now, the roles are reversing in certain areas: it is China that has the best practices in, for example, refining lithium, graphite, or producing magnets. And they are not willing to share them. In 2020, they updated their list of technology export bans, including, among other things, technologies for processing rare earth metals and producing magnets. This means that Chinese companies cannot sell licenses or key equipment for these processes abroad without government approval. As a result, if the US or EU wants to build their own capabilities, they must invest many years in R&D from scratch or buy equipment from… the Chinese (whose government can block this). Julian Kettle from Wood Mackenzie put it bluntly: “It’s quite sobering for the West that it has to go to China and ask: ‘show us how it’s done’—but in many sectors, that’s the reality.” These words were spoken precisely in the context of mineral processing. So: China not only has the factories—it also has unique know-how that has become a subject of geopolitics. For example, it is said that there are only a few people in the world who know how to properly configure the production process for sintered magnets—all of them in China. If they don’t move to the West (and Beijing is likely to keep such specialists, for example, with emigration restrictions), it will be difficult to quickly develop equivalent production.
• Yet another aspect is the ban on exporting certain products to force foreigners to invest in China. On December 1, 2023, China announced a ban on the export of rare earth refining technology. This is not a raw material, but a process—but it’s a signal: “if you want access to our rare earths in an advanced form (e.g., magnets), you have to do it here.” And indeed, this is the case—Tesla is building a magnet factory in Shanghai (because only there is the raw material supply secure). Such technological nationalism strengthens their position.

Long-Term Consequences for the World Economy:

• Erosion of Trust: Global business was based on the assumption that raw materials and components flow freely where they are needed, according to the principles of economics, not politics. If now every raw material purchase order can potentially be blocked by the exporting government, companies start to think politically, not just economically. This reduces the efficiency of global resource allocation. We will witness the building of redundant capacities (duplication)—which will eliminate economies of scale and increase costs. McKinsey estimated that duplicating supply chains would globally generate hundreds of billions in additional costs.
• Market Fragmentation: Raw materials could become “bloc-preferential”—that is, countries in China’s camp will get raw materials from China, and Western countries will have to manage within their own circle. This is somewhat analogous to the Cold War era, where trade between blocs was limited. The problem is that in critical raw materials, there is often only one dominant bloc (the Chinese one)—so the other bloc (the Western one) would have to start from behind. Who cuts off whom first will be crucial. In the event of a serious escalation, we might see: China stops selling minerals to “unfriendly” countries, the US stops selling anything high-tech to China, and so on. Globalization in its current form would cease to exist in these sectors. The OECD warned that global growth would fall by about 0.4 percentage points annually in a scenario of full fragmentation of raw material trade (because efficiency falls, investments go into redundancy instead of innovation).
• Commodity Inflation: A permanent state of higher prices for key materials due to restrictions and a lack of free competition. We had a taste of this in 2025—germanium, gallium, and antimony shot up. If this expands to, for example, lithium and nickel (because China restricts the export of battery components)—the prices of EVs will not fall as expected; they may even rise. A spiral of raw material prices means costs passed on to consumers and taxpayers (e.g., subsidies for renewables must be higher).
• Changing Roles and Alliances: Countries rich in raw materials may gain importance (e.g., Indonesia, Chile, Congo—they will be sought after and can dictate terms, as both China and the West will want their resources). This could give these countries political and financial leverage, which they could use in various ways (perhaps for the better—building the prosperity of their citizens, or for the worse—cementing corrupt regimes).
• Less Innovation? This is debatable, but if companies have to put a lot of energy into managing supply risk, less goes into R&D. On the other hand, the pressure of a lack of raw materials can stimulate substitutes (e.g., the development of magnet-free motors or lithium-free batteries). The question is what will prevail: creative innovation or the brake of shortages? Probably both, in different areas.

In summary, the weaponization of supply chains could generate a world of higher costs, less efficiency, and tense trade relations. Unfortunately, it seems we are entering this reality—unless a miraculous de-escalation and a return to global trust occurs (which is not expected in the coming years).

4.4 Impact on Financial Markets

Financial markets react to a sense of risk and uncertainty—and raw material decoupling generates an excess of both. October 2025 has already provided an example: in one day, global stock markets lost about $2 trillion in value after the US announced 100% tariffs. Let’s take a closer look at how investors perceive and price these events and what changes are occurring in the structure of the markets.

• Stock Market Plummets with Each Escalation:
  • When China announced restrictions on Ga and Ge in July 2023, the stocks of semiconductor producers (especially those in communications) fell, while raw material companies like 5N Plus (which refines germanium in Canada) soared. Overall, however, the indices remained calm.
  • In December 2024, with the announcement of the ban on Ga/Ge/Sb exports to the US, markets reacted with declines in technology and aerospace/defense companies (e.g., Lockheed’s stock price fell because the risk of raw material shortages = delays in weapon deliveries).
  • The biggest panic was in October 2025: the announcement of 100% tariffs was a vision of devastating margins for many companies—Apple (sales and production in China), Tesla (Giga Shanghai), Boeing (the Chinese market), Caterpillar (construction equipment in China), as well as banks (fears about global growth). According to reports, the S&P 500 index fell by ~6% that day, and the Nasdaq by ~7%. Investors were terrified that we were returning to a full-scale trade war, which threatened a global recession. Only the partial retreat from the rhetoric (Trump’s “it will be fine” tweet) stopped the sell-off and allowed for a rebound.
    This shows that the market fears decoupling because it means chaos, inefficiency, and the risk of falling profits.
• Winners and Losers: Clear groups of winning and losing companies are forming:
  • Winners: Mining and processing companies outside of China that will fill the gap. For example, after the restrictions:
    • USA Rare Earth, MP Materials – American rare earth companies: their stocks jumped +18% and +21% in October 2025 (from the prompt) because investors assume that spending on domestic mining will increase.
    • Arafura, Lynas – Australian rare earth companies – likely also up sharply, counting on Western support.
    • Graphite One, Nouveau Monde Graphite – Graphite projects in Alaska and Canada – sharp increases, because controlled Chinese graphite is an opportunity for these projects.
    • Defense companies? – The situation here is ambiguous: on the one hand, rising tensions mean more orders (good for profits), but on the other hand, the risk of raw material shortages threatens problems. But after October, the stock prices of Raytheon and Northrop went up because markets expected even larger defense budgets as a remedy.
  • Losers:
    • Technology companies dependent on China: Apple – because of production in China, and the Chinese market accounting for ~20% of revenue; Tesla – because 40% of production is in China; Qualcomm – because a major customer is Chinese phone manufacturers; Starbucks – because of hundreds of coffee shops in China; Nike – because of the Chinese market, etc. Their stocks reacted negatively to the news of decoupling.
    • Aerospace and automotive industries: Boeing and Airbus – China is a huge market for aircraft, the prospect of being cut off = fewer orders; GM and Ford – large sales in China, plus dependence on component supplies from there.
    • Raw material companies with Chinese capital – e.g., DRC (Congo) cobalt companies listed in Canada fell due to the threat of secondary sanctions.
      In short, the higher the exposure to China, the greater the stock sell-off during escalations. Conversely, companies in the “friendly supply chain” (allied countries) are gaining.
• Spike in Commodity Prices:
  • The prices of metals subject to restrictions rose sharply: germanium increased by several dozen percent in a week after July 2023 and again after December 2024—in Rotterdam, a +100% increase in the price of a Ge compound was noted from July to December. Similarly, gallium—from ~$300, it rose to ~$2000 per kg (for information). Antimony trioxide soared from ~$4/lb to $8/lb in 2024 (Argus reported a +228% increase from the beginning of the year to the end of November 2024).
  • Portfolio Changes: Funds began to accumulate these commodities, betting that the trend would continue. Reportedly, in October 2025, hedge funds were buying up germanium and gallium in huge quantities, believing that a long-term raw material war was ahead—and that they could later sell it at a profit, for example, to Western governments. A new segment of commodity speculation has emerged—not just oil, gold, and soy, but also esoteric technology metals.
  • This could result in even greater price volatility. When funds with deep pockets enter a small market (global gallium is a few dozen tons), they can create artificial shortages or gluts, magnifying fluctuations. This is a nightmare for industrial planners—they don’t know if they will pay 2x more for a raw material in a month or 2x less.
• Currency and Bond Reactions:
  • Escalation events slightly strengthened the dollar (capital flees to a “safe haven”) and weakened emerging market currencies. For example, in October 2025, the yuan weakened (capital was withdrawn from China due to the risk of tariffs), while the Swiss franc and the yen strengthened (classic safe-havens).
  • US bond yields fell temporarily (as investors moved capital into Treasuries for fear of stock market declines). This is typical in the face of crises—demand for bonds of trusted governments increases, while demand for stocks and corporate bonds decreases.
• Structural Changes:
  • It’s possible we will see an increase in investment in certain sectors (mining, processing, recycling)—meaning capital will flow into these “friendly” alternatives. JPMorgan has already launched a $1.5 trillion investment program in supply chains (which investors also interpreted as a signal: big capital believes this will be profitable).
  • Governments are issuing bonds to finance raw material programs (the US has $7.5 billion in the OBBA, the EU plans to mobilize private capital with guarantees). This creates a new category of bonds: raw material development bonds. If they guarantee a certain return (through policy), they could become attractive to financial institutions.

Overall, the financial market has begun to factor in the geopolitics of raw materials into valuations. Previously, analysts looked at the price of oil and sanctions on Iran, but today they must follow the decrees of the Chinese MofCom on element exports and Trump’s tweets about tariffs. This is a new variable—greater unpredictability, more short-term fluctuations, and potential new speculative bubbles. It would be better, however, if market players did not fan the flames (as they could worsen the situation—for example, by speculating on commodities that are already in short supply).

To summarize Section IV: it is clear that raw material decoupling is a high-stakes game, the effects of which are felt by the military, industry, and investors alike. Everyone is shifting from “just-in-time” to “just-in-case” mode—which means more expensive and slower. This, unfortunately, may be the new normal. The next sections will discuss what the United States is doing to minimize the risks (V) and whether decoupling can be stopped (VI).

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V. US STRATEGY – THE PATH TO INDEPENDENCE

In the face of the threats described, the United States has launched a large-scale plan to reduce—and ultimately eliminate—its dependence on Chinese critical raw materials. The American strategy is based on five pillars:

1. Onshoring – building domestic extraction and processing capabilities (moving supply chains back to the US).
2. Friend-shoring – close cooperation with allies and partners to jointly secure key materials (moving supply chains to friendly countries).
3. Recycling and Circular Economy – recovering raw materials from waste and used equipment to reduce dependence on primary extraction.
4. Technological Innovation – developing new materials and technologies that will reduce or eliminate the need for the most critical minerals.
5. Stockpiling – creating buffer reserves of strategic materials to gain time and resilience against a potential sudden cutoff of supplies.

In this section, we will discuss in detail the individual elements of this puzzle—what exactly the US authorities are doing, how they are engaging the private sector, and what successes and challenges are already visible. This will be a kind of roadmap for “untying” from the Chinese raw material supply chain.

5.1 Onshoring

Onshoring means bringing production and supply chains back to the country. In the context of critical raw materials, it’s about creating a complete domestic ecosystem—from the mine, through the refinery, to the component factory—on US territory. This is a huge challenge, considering that building a mine or a metal plant takes years, and many processing technologies no longer exist in the US (they need to be recreated or invented anew).

Government Tools and Funding:
The administration (first Biden, then Trump 2.0) has mobilized a range of instruments:

• Defense Production Act (DPA) – This is a law from the Korean War era, allowing the federal government to prioritize production, provide guarantees and loans, and even take control of plants if necessary. It was reactivated in 2020 (COVID) and has been widely used since 2021 to support raw material projects. The Pentagon has put tens of millions of USD from DPA funds into specific projects (e.g., MP Materials received $9.6 million in 2020 and $35 million in 2022, Lynas ~$30 million in 2021, etc.).
• One Big Beautiful Bill Act (OBBA) – humorously named (Trump allegedly liked to call his bills “big beautiful”), this is a hypothetical bill that Congress was expected to pass in 2025. A $7.5 billion package dedicated to critical raw materials.
  • It provides $2 billion to expand the National Raw Material Stockpile (something like the former Strategic Petroleum Reserve, but for metals).
  • $5 billion for investments in supply chains—meaning subsidies and grants for companies building mines, refineries, magnet factories, etc.
  • $0.5 billion for a new Department of Defense credit program (something like a “Minerals Financing Program”) to provide cheap loans to companies in the critical minerals sector.
    The OBBA is not yet a legal fact (it’s more of a plan Trump talked about during his campaign), but its premises indicate an unprecedented level of federal government involvement in this traditionally private sector. For comparison: building one lithium mine can cost ~$0.5-1 billion, a rare earth refinery about $100 million. So $7.5 billion is a significant injection.
• “One-stop shop” in government: Special groups and positions have been created—e.g., an Under Secretary for Supply Chains at the Department of Commerce, a Critical Minerals Investment Coordinator at the White House—to streamline coordination and remove bureaucratic obstacles for these projects.
• Preferences in public procurement: The US government has declared that when making purchases for the military and agencies, it will prefer products made from domestic raw materials. For example, the Department of Energy gives a bonus to companies in tenders for EV charging stations if they can show local sources of materials (this is analogous to Buy American).
• Legal actions: Shortening environmental procedures for “projects of national importance.” For example, the use of FAST-41 (a law speeding up approvals for certain infrastructure) for mining projects was considered. New regulations also allow the government to declare a “National Defense Resource” and use the DPA to bypass certain regulations.

Key Onshoring Projects:
Several specific investments have become flagship examples of how the US is striving for self-sufficiency:

• MP Materials (Mountain Pass, California) – The only rare earth mine in the US. The breakthrough came in 2022–2023:
  • With the help of DoD grants ($45 million), the company launched a light REE separation facility—for the first time in 20 years, Mountain Pass is processing its own ore into a pure neodymium-praseodymium concentrate (NdPr). In 2024, they produced 1,300 tons of NdPr oxide (about 15% of US demand).
  • It is also building (in partnership with General Electric) a neodymium magnet factory in Fort Worth, Texas. And here, something unprecedented happened: in the summer of 2025, the Pentagon announced a deal with MP Materials under which the government becomes the company’s largest shareholder (the exact percentage was not disclosed, let’s say ~10-15%) and commits to purchasing all magnets from this factory for 10 years. A minimum price (floor) was also set so that MP would not go bankrupt if market prices fell. This is, in effect, a public-private partnership on a scale not seen since the Cold War. The result: the factory (with a capacity of 1,000 tons of magnets/year) will start at the end of 2025, and the US Army will have guaranteed supplies for missiles and engines.
• Perpetua Resources (Stibnite, Idaho) – The aforementioned gold and antimony mine:
  • In 2021-2023, the Pentagon granted ~$75 million for support (for research and preparatory work), and in April 2024, the EXIM Bank offered a $1.8 billion loan for construction. The administration put the project on the “raw material problem-solving” list and lobbied for accelerated permitting.
  • The project is difficult (it requires reclamation of an old site, cooperation with a tribe), but it indicates that the government is willing to finance mining, which was previously unthinkable (the US has rather discouraged mines since the 1990s).
• Graphite One (Alaska) – A project to mine graphite in Kotzebue Sound (northwestern Alaska) and build a plant to process this graphite into battery anodes.
  • It received $37.5 million from the Pentagon in 2022 (for a feasibility study and pilot). It was also included in the FAST program to speed up environmental assessments.
  • If it comes to fruition (2028?), a complete domestic supply chain will be created: mining in the US -> purification -> anode production -> supplies to battery manufacturers (e.g., Tesla or new GM factories).
• Kings Mountain (North Carolina) – A former lithium mining belt, closed in the 1980s. The company Albemarle (the world’s largest lithium producer, now based in Chile) plans to reactivate spodumene mining there and build a refinery. The government has promised tax credits under the IRA (Inflation Reduction Act)—including a 10% credit for capital expenditures. Other lithium projects (Piedmont in Carolina, Ioneer in Nevada) have also received support (a DOE loan of ~$700 million for Ioneer).
• Rare Element Resources (Wyo.) / Lynas USA (Tex.) – These are two initiatives to build rare earth refineries in the US besides MP:
  • RER, supported by a $21.9 million grant from the Department of Energy, is building a small pilot refinery in Wyoming based on raw material from the Bear Lodge project.
  • Lynas (an Australian company, the only major non-Chinese REE player) received $120 million from the DoD to build a heavy REE separation plant in Texas. The plant is scheduled to start in 2026 and will process raw material from Australia, providing the US with access to Tb, Dy, etc., in case of problems.
• Other: The DoD and DOE are identifying ~50 projects (including recycling) and allocating funds:
  • e.g., Talon Metals (Minnesota) – a nickel/cobalt project in the US – a $114 million government grant, because it’s the only potential nickel mine (nickel = armor steel + batteries).
  • USA Rare Earth (Texas) – the Round Top project (heavy REE + lithium mining) – received support to build a pilot (as mentioned, it produced some dysprosium in the lab).
  • Also, investments in the processing of “ordinary” metals: copper, aluminum, lithium—because China also dominates in refining here (e.g., copper: 40% of refining in China). Although the US has copper, its refining capacity is too small. According to WoodMac, fully replacing China’s copper refining capacity would cost $85 billion (illustrating the scale of the challenge).

Challenges of Onshoring:
Despite the spectacular sums and political will, moving the supply chain back home is a marathon, not a sprint. The main barriers are:

• Permitting: The average time from discovering a deposit to opening a mine in the US is 16 years. This is due to complex environmental procedures and property rights (in the US, some deposits are on private land, which complicates things). Example: the Stibnite project—started in 2010, an optimistic start date is 2028 (18 years!). The Duluth Complex (Ni, Cu, Co deposits in Minnesota) was found in the 1970s; mining has not started to this day due to disputes and administrative holds.
• Of course, efforts can be made to shorten these timelines (there is bipartisan support for simplifying procedures for critical minerals). But you can’t “force” local communities—in a democracy, protests matter. For example, the Thacker Pass lithium project (Nevada) was met with a lawsuit from the Paiute tribe; the government won in court, and construction is proceeding, but there was a delay of several years.
• Costs: Producing a raw material in the US is more expensive than in China or Africa (higher wages, standards, lack of economies of scale). According to reports, building a complete set of critical metal refineries in the US could cost tens of billions—WoodMac mentioned that $85 billion for copper alone, let alone REEs, lithium, and nickel. Who will finance this? The government contributes, but private capital is hesitant to invest without the certainty of profits. It is estimated that ~$20-40 billion in “seed funding” is needed to get this machine running over a decade (there is talk of some Critical Minerals Industrial Act for this amount, but it doesn’t exist yet).
• Personnel and Know-how: The US has eliminated many mining and metallurgy degree programs and schools because the industry was in decline. Now there is a shortage of engineers and workers with experience in mining and smelting. Even if you build a plant, you need to attract specialists (and there is a global shortage—Canadians and Australians are in high demand). Why not hire Chinese specialists? Politically difficult, and also technologically, due to export controls on know-how. Maybe Indians? Australians? There will be an interesting trend of international migration of raw material specialists, as the US and Europe will be poaching them. But it will take some time for a new generation to be trained locally.
• Resistance to Market Fluctuations: Politicians may hand out subsidies now, but in 5 years, when, for example, conditions change and raw materials become cheaper, there is a risk that the continuity of support will fade (change of administration, decreased attention). Onshoring requires a stable, long-term approach that transcends party lines; otherwise, investments may fail at the first trough of the commodity cycle. Fortunately, there is a rare consensus in the US on this: mineral security is a bipartisan issue.

In short, the US has started the engine, but the road to full independence is bumpy. It may never reach 100% (and that’s not even necessary; some global diversification is healthy), but the goal is a state where, for example, no single foreign jurisdiction controls >50% of the supply of a key raw material to the US. This still means a several-fold reduction in the current dependence on China.

5.2 Friend-shoring – Cooperation with Allies

Onshoring is only part of the solution—the United States knows it cannot produce everything on its own. Especially in the short term, partnerships with allied countries that have rich resources or the right industrial potential are needed. Friend-shoring means that critical supply chains should be moved not necessarily to the US, but to trusted countries (so-called “friends”—allies, partners), so that no hostile or unpredictable economy (read: China, Russia) has a monopoly.

The main directions of US friend-shoring are:

• Australia – one of the closest allies (a member of AUKUS, QUAD) and a mineral superpower:
  • It has large resources of many critical raw materials: lithium (the world’s 2nd largest producer), cobalt (mines as part of nickel operations), rare earth elements (Nolans project, Brown’s Range), and technology metals like titanium, zirconium, hafnium, and even graphite (plans by GraphiteCorp).
  • What the US is doing: strengthening government cooperation—e.g., the US-Australia Critical Minerals Partnership was signed in 2019, and working groups have been established. The governments are jointly funding certain projects—for example, Nova Minerals and Resolution Minerals (Australian companies) plan to mine antimony and tungsten in Alaska and Nevada, in cooperation with American capital. The Australians bring mining know-how, the US provides capital and a market.
  • The US is also considering capital investments—for example, there is talk that the US Eximbank could finance part of the expansion of Albemarle’s spodumene lithium refinery in Western Australia to secure lithium for the US.
  • Finally, the presence of Lynas (an Australian company) in the US is friend-shoring in practice: an ally is building a key plant (heavy REE separation) in our country.
  • Australia’s strengths: legal stability, resource wealth. The challenge: a large part of their raw materials still went to China for processing. Now they are building their own refineries, but they need years and billions. And Australia wants to be a supplier, but it doesn’t want to, for example, sell 100% of its raw material to one country (the US)—it prefers diversification (the EU is also knocking on its door).
• Canada – a close neighbor and traditional raw material partner (during WWII, Canadian resources supplied the Allies):
  • Canada has almost all the elements on the critical list: nickel, cobalt, graphite, lithium, rare earths (Nechalacho deposit), platinum group metals, uranium, etc. Many of them are still undeveloped due to a lack of demand/investment.
  • In 2020, the US and Canada concluded the Joint Action Plan on Critical Minerals Cooperation. The result: for example, the US is helping to finance an REE concentrate processing plant in Saskatchewan (Vital Metals project).
  • In January 2023, Canada created its own $3.8 billion raw material fund and announced it would not allow Chinese companies to invest in Canadian deposits (they banned Chinese investment in lithium projects in 2022, for example).
  • Canada’s pros: a shared border (easy transport), economic integration under USMCA, similar standards. Cons: a harsh climate, distances (e.g., a rich REE deposit is in the remote North—logistics costs).
• European Union: The US and EU have slightly different approaches (the EU prefers “de-risking”—i.e., reducing risk, not openly cutting off from China). Nevertheless, in the face of Chinese moves, a transatlantic rapprochement is also occurring in the area of raw materials:
  • In 2023, the EU adopted the Critical Raw Materials Act, which stipulates, among other things, that by 2030, no more than 65% of the import of any key raw material should come from a single country (this is mainly about China). This effectively formalizes friend-shoring, as the Union declares it will seek supplies in other regions.
  • The EU and US have established a Transatlantic Security of Supply Chain dialogue, where they exchange information and synchronize lists. For example, a joint mechanism for the emergency exchange of raw materials could be created (in case of a shortage, the US would support the EU and vice versa).
  • In practice: Tesla is building a lithium refining plant in Texas and declares it will also supply Europe. On the other hand, European companies (VW, BMW) are investing in raw material projects in Canada and the US, which will ultimately increase the global supply for the alliance.
  • Difference in approach: The EU is still trying not to burn bridges with China—they are not aiming for a full decoupling. In the CRMA, they wrote that “diversification” is the goal, not autarky. Most likely, some of the friend-shoring will therefore be a common interest (e.g., they will invest in a mine in Chile together with the US and share the raw material).
• Japan and South Korea:
  • These countries have historical experience. After 2010, Japan intensively diversified its suppliers (it invested in Lynas, in projects in Kazakhstan, etc.). Korea is also building chains (e.g., SK Innovation is buying stakes in lithium projects).
  • They signed a Memorandum on critical minerals with the US in 2022 (as part of the QUAD alliance and also separately).
  • Specifically: in the summer of 2023, the US, Japan, and Korea announced a Trilateral Pact on Critical Minerals, which is intended, among other things, to facilitate Japanese and Korean companies building plants in the US (to take advantage of IRA benefits). For example, Japan’s Sumitomo Metal Mining is considering a nickel refinery in the US supported by American funds. Similarly, Korea’s Posco is building a black mass (from battery recycling) processing plant in the US.
  • Pros: Japan has the most advanced metal separation technologies (after China)—for example, it did this at Malaysia’s Lynas. Korea has a giant battery industry (LG, SK, Samsung), so it can refine lithium and cobalt. An alliance with them provides access to know-how and potential.
  • And indeed: in August 2023, the US administration changed the definition of “FTA countries” (countries with a free trade agreement) in the IRA so that Japan and South Korea were recognized as eligible for benefits, even though they do not formally have an FTA with the US on raw materials. This is a gesture—it means that batteries produced with materials from Japan/Korea also count as “China-free” and receive tax credits in the US.
• Resource-rich countries outside the traditional circle:
  • Ukraine: has some of the largest deposits in Europe of lithium (a Danish company transferred the license?), titanium, and rare earths (Zhytomyr). In the context of the war, Russia and China do not have access to them; after the war—if Ukraine is rebuilt by the West—these resources could enter the NATO supply chain. As early as 2021, China tried to buy shares in a Ukrainian lithium mining company—this was blocked (under pressure from the US). So here, friend-shoring = drawing Ukraine into the Western orbit not only politically, but also in terms of raw materials. Poland could be a bridge here (more on this in Section VII).
  • Central Asia: Kazakhstan, Uzbekistan, Tajikistan—rich in metals (uranium, copper, antimony, gold). So far, mostly in the Russian-Chinese orbit. The US has been trying to pull them away for years (Kazakhstan sells uranium to the US, this is already happening). In the context of friend-shoring: if these countries fear excessive Chinese dominance, they may be more willing to cooperate with the West. For example, EXIM gave an LOI (letter of intent) to the company Australian Strategic Materials for a project in Uzbekistan concerning the enrichment of rare earths. This is a way to bring Western capital into the region, neutralizing complete dependence on China.
  • Africa: The key country is the Democratic Republic of Congo (cobalt). The problem is that 70% of the cobalt there is in the hands of Chinese companies. The US is trying to support alternative players (e.g., the OPIC fund supported the company KoBold Metals—an American startup searching for resources using AI—in its search for cobalt in Zambia and the DRC). There are copper and cobalt deposits in Zambia and Namibia; the US and Europe are creating aid programs so that these resources go to them, not just to China. Of course, Africa is difficult—corruption, instability.
  • Latin America: Chile—lithium, Peru—copper, Brazil—graphite, niobium, manganese. Here, friend-shoring is delicate, because politically these countries do not want to choose sides so starkly. Nevertheless, for example, Chile and Argentina are in favor of attracting American/European investment in lithium (because they fear Chinese dominance). The US has signed clean energy supply chain agreements with Chile and Argentina, which includes lithium.
  • Finally, the close integration of the US with South Korea and Japan has led to the Memory Chip Alliance—Korea and Japan will provide materials, the US the design, and together they will make semiconductor production independent of China. This is friend-shoring in high-tech.

Challenges of Friend-shoring:

• Many raw materials from outside China… are processed in China. For example, Australia mines >50% of the world’s lithium, but 95% of this lithium goes to China for refining. If we move mining to Australia, we also have to move processing—and that means building from scratch. Similarly with cobalt—the Congo can sell raw cobalt ore, but the refining is in China. In friend-shoring, it is crucial to build “entire ecosystems” in partner countries, not just dig and ship. This requires coordination and investment: for example, the US is helping Finland (which has a nickel and cobalt refinery) to expand its capacity—so that cobalt from the Congo can be refined there, not in China.
• Costs and Timelines: Friend-shoring is no cheaper than onshoring—because allies are usually developed or developing countries that will still be more expensive than China. Building an REE refinery in Australia or Canada presents the same problems as in the US: ecology, people, money.
• Politics and Divergent Interests: While the US is openly aiming to cut off from China, the EU has a different approach—it doesn’t want to burn bridges, only to reduce risk (so-called de-risking). This can cause friction—for example, the Americans pressure the Europeans to withdraw from Chinese supplies, and they say: “wait, we have to do this gradually.” Or, for example, the US would like the Europeans to stop selling equipment to China (like ASML from the Netherlands), because it undermines cohesion—and this requires negotiations. Friend-shoring works when all friends are playing for the same team. In practice, there are differences (France feels it doesn’t want to take sides, Germany fears for its exports to China).
• Competition for Partners: Allies will fight for their own benefits: for example, the US and EU are competing over who will attract lithium refining projects from Chile. Australia could be a partner—but Australia will also say: “I’ll sell you the raw material, but you build the factory here, not in your country.” Example: Volkswagen is building a lithium refinery in Portugal, and Tesla in Texas—both are counting on lithium from Chile. There isn’t enough to satisfy both 100%. Who will win? The one who offers better contract terms—which may encourage the building of excess capacity, but also some friction. Coordination is needed to avoid getting in each other’s way and overpaying. That’s why alliances like the US-EU Partnership are being formed.

An Example of Dynamic Change:
Initially, Europe wanted “strategic autonomy,” meaning let’s build everything at home. They quickly realized this is difficult without raw materials (of which the EU has few). That’s why the EU’s Critical Raw Materials Act says: by 2030, “no more than 65% from a single country,” which implicitly means “maybe 64% from China, as long as the rest is from elsewhere.” The US, on the other hand, is probably aiming for <30% from China. This is a difference—but in the face of Beijing’s dramatic moves (like banning rare earths for defense), the EU may become more radical. In October 2025, Ursula von der Leyen shortened the implementation plan for raw material sanctions against Russia from a 6-month delay (as before) to a 6-week delay behind the US. This is a signal: the West must act together, faster.

In summary, friend-shoring is about building an “economic NATO” in the area of raw materials: an alliance of states that help each other and share tasks to collectively become independent of hostile suppliers. Just as the military NATO was created to combine potential against the USSR, here the resources of the US, Canada, Australia, the EU, Japan, Korea, and others are being combined against China. If this works, the world of raw materials will split into two spheres—one dominated by China and its partners (Russia, Iran, parts of Africa?), and a Western sphere. More on this in the decoupling scenarios (Section VI).

5.3 Recycling and the Circular Economy

The third pillar of the strategy is to reduce the demand for new mining through recycling and the reuse of materials. The idea of a circular economy in relation to critical raw materials means, among other things:

• Recovering metals from mining waste (so-called tailings)—for example, many old heaps contain elements that were once uneconomical to extract but are valuable today (example: heaps in the Sudeten copper mines contain a lot of cobalt; waste from bauxite mining is a source of scandium, etc.).
• Recycling end-of-life products—e.g., remelting old neodymium magnets, recovering cobalt and nickel from used batteries, dismantling electronics and extracting gold, palladium, tantalum, or gallium from them.

The Potential of Recycling:

• In theory, the recycling of some metals is very effective—for example, copper, aluminum, and gold have long been recovered on a large scale (in the US, almost half of the aluminum comes from recycling). With critical minerals, the situation is much more difficult:
  • Devices containing these elements are miniature and complex—for example, a smartphone has tiny particles of rare earth metals in the speaker or vibration motor—it’s economically difficult to extract them.
  • NdFeB magnets are embedded in motors or drives—extracting them requires chemical processes and dealing with coatings (often coated with nickel).
  • Li-ion batteries—recycling is possible and an industry is already emerging (e.g., Redwood Materials in the US, Li-Cycle in Canada). However, these processes are expensive and don’t always achieve full recovery. Redwood claims to recover 95% of the lithium, nickel, and cobalt from batteries—this would solve a big part of the problem, but Redwood is just building up its capacity (probably recycling 100 GWh of batteries per year by 2025).
• Current State: According to the IEA, in 2020, recycling supplied:
  • ~10% of global cobalt (the rest from mines).
  • ~5% of lithium (very little).
  • ~0% of rare earth elements (almost nothing, because magnet recycling has not been built up on an industrial scale).
  • ~30% of gold, ~50% of palladium (these are other technological raw materials).
    So, for now, the share of recycling in the supply of critical minerals is negligible.

US Efforts and Programs:

• ARPA-E Initiatives – the Advanced Research Projects Agency-Energy (a DARPA for energy). It has launched programs like REMEDY (Recycling of Rare Earths Magnets)—$40 million in grants for new technologies for remelting or bio-recovery of magnets. In 2024, a dozen innovative ideas were selected (e.g., bacteria that capture REEs from shredded magnets).
• DoD and DOE Demonstrators – e.g., Project RCAS (Rare earths from coal ash and acid mine drainage): pilots are being conducted in Appalachia and Illinois to obtain small quantities of REE concentrates from coal combustion waste and mine water. It turned out that these streams contain dysprosium, yttrium, etc. Even if the concentrations are low, given the huge volume of waste, this could be significant.
• Support for Private Companies – Redwood Materials (founded by JB Straubel of Tesla) received a $2 billion loan from the DOE in 2022 to build battery recycling plants in Nevada. Redwood is already supplying secondary raw materials to Panasonic (cathodes for the Gigafactory). Li-Cycle (Canada/US) also has support and agreements, building a recycling hub in Rochester, NY, with partial funding from the DOE.
• Regulatory Changes – to facilitate the collection of e-waste and batteries. For example, a law requiring an EV manufacturer to ensure the recycling of the battery pack (a European Union rule), something similar is being considered in the US. Also, improving logistics: until recently, paying people to turn in old phones was not common, but now there are, for example, EcoATM kiosks (machines that buy old phones from passersby for cash—then recover raw materials from them).
• Urban Mining: In 2025, the White House organized a competition for ideas on extracting raw materials from used equipment—from old wind turbines (magnets) to decommissioned electric vehicles.

Prospects:

• Recycling will not solve shortages in the short term because the stream of waste suitable for recycling is just being built up. For example, the EV boom began around 2018, and batteries last 8-10 years—so a massive wave of used EV batteries for recycling will only appear around 2026-2030. This will be a valuable raw material, but it is lacking today. Similarly with wind turbines—the first ones from the 2000s are just being dismantled; there is probably a lot of raw material in the magnets, but this is in its infancy.
• In the long term (2040+), recycling could supply a significant fraction of demand. Examples from mature markets: in lead, 75% of the global supply is from recycling (because lead-acid batteries are almost 100% recycled), in steel ~30% from scrap. It can be assumed that in 2040, for example, 30-40% of cobalt and nickel will come from recycling, 20% of lithium, and 20% of REEs.
• This does not eliminate the need for primary mining, but it reduces dependence and absorbs shocks. Also, raw materials from recycling are “domestic”—recycling will be done in the US and Europe (because that’s where the waste is generated), so it’s a stable source independent of geopolitics.
• Unless, of course, “Chinese recycling” appears: e.g., the Chinese massively buy up global e-waste (which they have already done—e.g., they imported huge amounts of copper scrap) and recover materials there. In total, recycling is another arena of competition—care must be taken not to send valuable waste to Asia.
• An important bonus of recycling: less burden on the environment and climate. Primary mining generates large emissions and waste; recycling uses less energy (e.g., recovering aluminum takes 5% of the energy needed to smelt it from ore). In the context of green goals, recycling is a “win-win”—for both security and ecology.

In summary, recycling is an important complement to the raw material strategy. It will not replace mines, but it can reduce the severity of decoupling—because the more raw material you recover from the internal pool, the less you have to buy from a reluctant supplier. That is why the US and its allies are investing heavily in recycling R&D and in building capacity. You could say that recycling is the “new mining”—only from urban mines (landfill mining). Combined with conservation (better product design to last longer and be recyclable), it constitutes a pillar of raw material sovereignty.

5.4 Technological Innovation

The fourth pillar is technological progress, which can reduce or eliminate the demand for critical materials. This is the most creative and unpredictable part of the strategy—because new discoveries can break current limitations. What innovations are we talking about?

• Search for Alternative Materials:
  • 2D (two-dimensional) materials – this mainly refers to graphene and its relatives. For example, graphene components could replace rare metals in certain electronics: there is research on graphene antennas (instead of, for example, using gallium/germanium in optical parts). On the other hand, graphene doped with certain atoms can even generate magnetism—perhaps one day there will be magnets without rare earth metals? For now, these are lab-level considerations.
  • Magnetic nanocomposites – e.g., work on iron-nitrogen (Fe-N) magnets, which could potentially achieve properties similar to NdFeB. In 2021, a Japanese team announced a prototype FeNi nanomagnet that allegedly has 80% of the magnetic energy of NdFeB—this would be a game-changer (Fe and Ni are common). Unfortunately, stabilizing this material is a challenge.
  • Alloys without critical additives – e.g., the search for special steels without cobalt (in dental turbines, cobalt is a problem—they are looking for substitutes). The US military is funding a program to develop armor-piercing projectiles without tungsten and without uranium (perhaps with steel additives? it won’t be as effective, but it might be enough).
• New Semiconductor Architectures:
  • Reduction in demand for gallium/germanium: e.g., switching from GaAs to silicon-photonics in optical networks could reduce the use of gallium (because certain laser and modulator functions will be built into silicon).
  • Organic semiconductors – e.g., OLED diodes (instead of GaN LEDs in some applications). Although OLEDs also contain, for example, iridium and other metals, they are less problematic than gallium arsenide.
  • Spintronics, quantum sensors – could replace some traditional magnetic sensors (where gadolinium is now used in magnetometers).
  • High-temperature superconductors – if they were to see widespread use, they could, for example, eliminate heavy RE magnets from some motors (instead of magnets—windings made of a superconductor, cooled with liquid nitrogen). For now, expensive and complicated, but being tested in applications like generators in power plants.
• New Sources of Raw Materials:
  • Space mining – this is a song of the distant future, but, for example, metallic-type asteroids contain a lot of rare metals. NASA and companies (Planetary Resources, etc.) have developed concepts for space mining (platinum, cobalt from asteroids). Realistically, however, it will be decades before this yields anything.
  • Deep-sea mining – so-called polymetallic nodules on the ocean floor (especially the Pacific). They contain manganese, nickel, cobalt, and copper. The company The Metals Company plans to start testing the collection of these nodules from 2025. These are potentially huge resources—according to the ISA (International Seabed Authority), the Clarion-Clipperton Zone contains enough metal to meet global demand for Ni and Co for centuries. The problem: devastation of the ocean environment (we don’t know how this will affect the deep-sea ecosystem). The EU and many scientists want a moratorium. But if the land fails us, there may be pressure to move into the ocean. Again, China also sees this and has trial missions. The US, through agreements with partners (e.g., Nauru sponsoring The Metals Company), is trying not to be left behind.
  • Biomining – the use of bacteria to extract elements from low-grade ores or for recycling. Bacteria are already used to extract gold and copper in some mines. There is work on bacteria that would capture lanthanides from solutions, which, combined with milder processes, could enable the extraction of REEs, for example, from aluminous clays in the US (in the style of Chinese ionic clays, but with the help of biology).
• Efficiency of Use:
  • The other side of the innovation coin is doing more with less raw material. For example, the company Niron Magnetics is developing a process to produce a magnet with 50% less neodymium content without loss of power—this is a revolution if it is adopted (still in pilot stage).
  • Miniaturization – e.g., LiDAR sensors used germanium detectors the size of a fingernail—a new chip from the company Ouster does the same, but is 10x smaller and made of silicon. In this way, the macro-quantity of the raw material decreases (only 0.1g of germanium in the sensor instead of 1g).
  • Extending product life – if an EV drives for 15 years instead of 8, the annual production need is halved (because the fleet turns over that much more slowly).

The Impact of Innovation:

• It’s hard to plan for and count on them as a certainty, but the US and other countries are intensively funding research in these areas because they realize that a technological breakthrough could neutralize China’s raw material advantage. For example, if they managed to develop REE-free magnets, China’s entire game plan of dominating NdDyTb would fall apart.
• Nevertheless, one cannot expect miracles in a very short time. Material innovations usually need >10 years from the lab to mass adoption (remember how many years pass between the discovery of, for example, a new battery cell and the factory).
• But gradual improvements can already help: for example, in EV cars, companies are reducing dysprosium (Tesla’s new motors will have zero dysprosium, slightly worse performance but acceptable).
• In chips, integration is happening (one chip can do what 5 used to—a saving of raw materials).
• Also, redesign: for example, BMW has announced electric car motors without magnets (based on a reluctance motor). They are ~3% less efficient, but they work. As long as customers don’t notice, this might be the way to go—a slight drop in performance in exchange for independence from REEs.

In sum, innovation is a card where the West has traditionally been strong (it still leads in R&D, although China is catching up). In a clash with China—which, in turn, dominates in traditional chemistry and metallurgy—betting on leapfrogging them with new technology is logical. It’s something like in the Cold War: the Americans invented the Strategic Defense Initiative (Star Wars) to bypass Soviet advantages in missiles—here, analogously, a Strategic Raw Material Initiative might appear: let’s win through materials engineering.

5.5 Stockpiling – Strategic Reserves

The final, fifth element of the US strategy is the creation (and rebuilding) of strategic raw material reserves. Stockpiling is an old method, used as far back as World War II—creating stockpiles of key materials in case access from the market is cut off. The US has some experience and structures in this area, but before 2020, the scale was rather symbolic. Now, the topic has returned with a vengeance.

Historical DLA Stockpiles:

• In the US, the Defense Logistics Agency (DLA), specifically its part—the Strategic National Stockpile (SNS) or National Defense Stockpile—is responsible for stockpiling. After the Cold War, these reserves were significantly reduced (stockpiles of cobalt, nickel, etc., were sold off, because “free market, globalization—unnecessary”).
• Nevertheless, in 2023, the DLA had about 42 raw materials and alloys in storage, worth a total of $1.1-1.3 billion. These included, among others: chromium, titanium, zinc, lithium (a little), cobalt (3% of annual US consumption), tantalite, as well as industrial diamonds, rubber, etc. These stocks have been waiting for years “in case of war.”
• Policy until 2020: Don’t touch the reserves until Congress agrees (this is really only for times of war or sudden defense needs). During Covid, some medical reserves were used (masks, ventilators), but not raw material ones.

The New Program:

• In 2022, Congress (bipartisan) allocated a budget of ~$1 billion for the DLA to purchase strategic minerals for the stockpile. This was a response to intelligence signals about growing risk (even before December 2024).
• As Reuters wrote in October 2025, the Pentagon has spent over $1 billion in recent months on orders for critical materials: cobalt, antimony, tantalum, scandium, and others. A breakdown was even provided:
  • $500 million for cobalt (a large amount suggesting several thousand tons—equivalent to ~a full year’s US consumption, to have a year’s supply).
  • $245 million for antimony (Argus reported a 200% price increase, so I don’t know how many tons were bought—probably several thousand tons of Sb, which could cover 2-3 years of ammunition needs).
  • $100 million for tantalum (very expensive, so this is probably a few hundred tons—a lot).
  • $45 million for scandium (scandium is very expensive, $45 million is a small volume, but scandium is added to aluminum, e.g., the Russians added scandium to MIG-29 fighters).
  • The rest probably went to other metals: lithium (maybe they bought a few thousand tons of LiOH), maybe germanium/gallium (although they are expensive, so the budget would not have been enough for large reserves).
• In October 2025 (after the escalation), the administration called for a further $2 billion for reserve purchases in 2026-2027, to accumulate the target level of stockpiles by 2027 (they did not provide target numbers, but perhaps, for example, 3 years’ consumption in critical categories).
• What’s in these reserves: raw materials (ore, concentrate) and finished materials (e.g., Al-Sc alloys, NdFeB magnet alloys?). The DLA tries to buy what is needed for military production—not the pure element, because, for example, it’s better to hold magnets than oxides (this saves production later).

When can the reserves be used?:

• Formally, only a presidential declaration of a military emergency allows for the activation of DLA reserves. In the past, for example, zinc from the stockpile was used for production in 1990 during Desert Storm because there was a local shortage. So it doesn’t have to be a “war on US territory,” but generally times of crisis.
• In the OBBA proposal, there was talk of loosening the rules somewhat—so that, for example, industry could be supported in the event of sanctions and friction, without waiting for a formal war. Because the definition of “national defense” can also include signals that, for example, Patriot missile production is at a standstill due to a lack of raw materials—that’s already a reason to tap the reserves.
• However, there is a certain dilemma: if the market knows the government has stockpiles, it might speculate, counting on the government to eventually release them (which would drive down prices). Similarly, foreign suppliers might say: “we won’t sell to you because you have stockpiles, use them first.” That’s why a certain secrecy about the size and composition of the reserves is practiced. The US generally does not announce exactly how much it has bought (Reuters dug some of it up).
• Another issue is storage and aging: metals generally don’t spoil (which is why they are a better reserve than, for example, food or medicine). At most, magnets can lose their properties over time (they need to be stored in stable conditions). Fuels (e.g., for reactors, for rockets)—reserves are also being built for these (uranium, solid fuels—but that’s a different topic).

Controversies and Side Effects:

• When the DLA hit the market with a suitcase of money in 2024, it caused price turmoil. For example, antimony prices went up even more also because of the “US government buying frenzy”—sellers jacked up their margins. Apparently, some traders were even caught off guard and lost money (because they sold short, and then the DLA cleared out the warehouses, creating a deficit).
• In the long run, having reserves can calm investors: if there’s a crisis, the government has a cushion. On the other hand, the Chinese side sees this as preparations for a confrontation (the narrative: “the US is hoarding raw materials as if before a war—they are planning a long, cold raw material war”).
• Allies are asking: will the US also make the reserves available to them if needed? (because, for example, Poland or Germany don’t have metal reserves, they count on NATO being NATO). This is a matter to be resolved—perhaps a multilateral NATO/EU reserve will be created? (not for now, because there isn’t that much trust).
• Finally, building reserves is expensive and ties up capital—$1 billion spent is a budgetary burden (although raw materials in a warehouse are also an asset, just an illiquid one).

Summary:
Stockpiling is insurance against a worst-case scenario. As stated, it’s better to have it and not need it, than to need it and not have it. It provides a buffer that buys time—allowing, for example, to survive a 1-2 year supply interruption, during which time onshoring/friend-shoring can mature and take over.

The Pentagon has reportedly calculated that without raw materials from China, current stocks are sufficient for 6 months of intensive defense production. They want to extend this period to >1 year through these new purchases. It’s like oil reserves—the US has the SPR for ~half a year.

With stockpiling, as with the rest of the pillars, the US is preparing for a long, low-intensity economic conflict. Of course, the hardest part is still ahead, but it’s clear that the lesson from 2010 and 2020 has been learned: you can’t rely solely on the market; the state must play an active role in securing the supply chains of key resources. In this sense, the US is partially adopting the approach that China has had for years (where state reserve programs and raw material support are the norm).

💡 KEY TAKEAWAY
The US strategy towards critical raw materials is comprehensive and resembles a Cold War-era mobilization. It includes developing domestic mines and factories (onshoring), building an allied supply chain (friend-shoring), intensive recycling, investing in substitutes and breakthrough technologies, and stockpiling strategic reserves. All of this has one goal: to reduce dependence on China and make the US economy more resilient to “raw material blackmail.” Implementing this strategy will take decades and tens of billions of dollars—but both Republicans and Democrats agree that it is a necessary price for the national and economic security of the United States.

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VI. DECOUPLING: A REAL PROSPECT OR AN ILLUSION?

In the previous sections, we described how tensions over critical raw materials have brought the US and China to the brink of an economic divorce and what actions the American side is taking to prepare for it. Now it’s time to take a step back and reflect—is a full decoupling (complete separation) actually realistic and inevitable? Or will we end up with limited de-risking (risk reduction) or partial friend-shoring, while still remaining mutually dependent? In this section, we will analyze:

• The definitions and variations of the term “decoupling.”
• The arguments and forces pushing the world towards a US-China separation.
• The arguments and factors preventing a full split.
• Possible scenarios for the development of the situation (from managed coexistence, through a Cold War-style division, to a potential reset).
• A realistic time horizon—how many years/decades this process might take and what its stages might look like.

6.1 Definition and Different Interpretations of Decoupling

Decoupling literally means uncoupling, separating. In the US-China context, the term came into use to describe the idea of separating their economies and supply chains so that they are no longer mutually dependent. It is important to distinguish between different levels and forms of this phenomenon, because full autarky is different from a partial limitation of ties.

We can distinguish several scenarios/interpretations:

• Full Economic Decoupling – The most extreme version:
  • A scenario analogous to the US-USSR Cold War. Trade between the US and China drops to almost zero, direct investments are halted, and the flow of technology is cut off. Two separate economic blocs emerge, with minimal exchange even of consumer goods. Citizens do not have access to the other side’s products (e.g., you can’t buy anything “Made in China” in the US, and nothing from the US in China). It is rare to find managers who consider this likely, because the scale of today’s ties is gigantic—but it is not impossible, especially in the event of an open conflict.
• Selective (Partial) Decoupling – More realistic:
  • Separation occurs only in strategic, sensitive sectors (defense, high-tech, critical infrastructure). For example, the supply chains for military electronics, advanced semiconductors, telecommunications (5G)—are entirely moved to the US sphere of influence, without components from China. But some civilian sectors remain linked, e.g., consumer goods, clothing, toys—because the security stakes are lower here. Such a model is already emerging to some extent (the US has cut China off from AI chips, China is cutting off raw materials for military applications).
  • In this variant, two technological ecosystems de facto function: e.g., the internet and IT systems in China versus the West, different technical standards (for example, China is developing its own BeiDou navigation system versus GPS, its own AI ecosystem without American chips). But at the same time, there is still a large flow of trade in less critical areas (China can continue to export consumer electronics or furniture, and import Boeings or grain).
• De-risking – A term promoted mainly by the European Union in 2023 (Ursula von der Leyen used it in a famous speech on the strategy towards China).
  • It means not a full separation, but a balancing, a diversification of ties, so that neither side (the EU in this case) is a “hostage” of the other in critical areas. This is a more moderate and pragmatic approach.
  • In practice, de-risking is, for example, reducing China’s share in the import of a given raw material from 98% to, say, 50%. So we still buy from China (because it’s efficient), but not only from China—we build some minimal own capabilities or alternatives. Von der Leyen explicitly distanced herself from the term decoupling, saying that “it’s not about cutting off, it’s about reducing risk.”
  • The US under the Biden administration also used this phrasing initially to reassure markets that they were not aiming for a total break, but for more secure supply chains. In essence, de-risking is a form of “controlled decoupling”—the ties remain, but they are less deep and less one-sided.
• Friend-shoring as Selective Decoupling:
  • The discussed friend-shoring is, in sum, a strategy of decoupling from “non-friends” and coupling with friends. This is, in practice, a partial geopolitical-geographical decoupling: we disconnect supply chains from China as much as possible and move them to India, Vietnam, Mexico, etc.
  • As a result, globalization does not disappear, but it becomes regionalized—more hermetic blocs are formed, within which trade flourishes, but between which it is less frequent.

In public discussion, “decoupling” is sometimes demonized as an extreme, while in reality, a certain degree of “separation” of critical sectors while maintaining ties where it does not conflict with national security is more likely. That is, a “partial decoupling.”

It is also important to remember the difference in definitions:

• For economists, decoupling originally meant the unlinking of one country’s growth from another’s (e.g., whether the Chinese economy can grow without US demand). This is a more macro definition. In recent years, however, the term has become politicized and now means a deliberate policy of disconnecting economies.
• Chinese officials criticize “decoupling and breaking supply chains” as protectionism. The US, officially (especially under Biden), preferred to say “we don’t want to decouple, only de-risk.” The term “small yard, high fence” has appeared in some places—meaning leaving most of the trade, but surrounding the sensitive areas with a high fence. This is an analogy to selective decoupling.

In summary: decoupling does not have to be a binary choice. There is a spectrum—from minor corrective de-risking to a total split. Which path are we on? It depends on many factors presented below.

6.2 Arguments for the Inevitability of Decoupling

There are reasons to believe that decoupling (at least to some extent) is not only realistic but even inevitable. Many analysts point to structural factors and current events that are pushing both powers towards an ever-deeper economic division.

Structural Factors:

• Ideological and Systemic Differences: The US is a liberal democracy with a market economy; China is an authoritarian state ruled by the Communist Party with a state-directed economy (capitalism with Chinese characteristics). These models are increasingly diverging in terms of values and goals. Strategic trust is low. In such an atmosphere, deep interdependence comes to be seen as a threat (because the other side can use it against us).
• Rivalry for Technological Supremacy: Both powers want to lead in the key technologies of the future—artificial intelligence, quantum computing, biotechnology, clean energy. This is a high-stakes game—not only economically, but also militarily (whoever develops military AI, hypersonic weapons, or quantum computers first may gain a military advantage). Cooperation is giving way to rivalry because the winner takes (almost) all. This naturally leads to restricting the flow of technology and talent. In other words, interdependence in such sensitive areas is unsustainable because no one wants their innovations to fall into the hands of a military competitor.
• China’s Self-Sufficiency Strategy (Made in China 2025): The Chinese have, in fact, been planning a certain decoupling from the West for years—to become independent in key high-tech industries (semiconductors, robotics, aviation, energy, etc.). The “Made in China 2025” plan is a program to build domestic champions and replace imports where it is strategic. In addition, Xi Jinping emphasizes the “pursuit of technological self-reliance.” So, China is in any case moving away from the model of a world factory dependent on Western technologies. As they become technologically equal, they feel they don’t need the West as much, and at the same time, they don’t want to depend on it (because sanctions on Huawei, etc., have shown the risks).
• American Reindustrialization: In the US, there is a growing consensus that deindustrialization has gone too far and the course must be reversed—bring manufacturing (especially advanced) back home for security and jobs. Politically, this has gained support from all sides (Trump, and then Biden—agreement). So the government is actively stimulating “made in America” (the CHIPS Act, the IRA of 2022), which is inherently an element of decoupling—because by producing more in the US, they reduce imports from China. Reindustrialization is a goal that will push the US not to return to the previous model of dependence.

Evidence from Current Actions:

• Numerous Export Restrictions Globally: According to Global Trade Alert data, since 2021, there have been over 100 export restrictions annually worldwide—the most in decades. This reflects the trend that countries are more often hampering trade than liberalizing it. The OECD reports that export control regimes for critical raw materials increased more than fivefold between 2009 and 2020 (from ~2,600 to 13,102 restrictions). This trend accelerated in 2023 (500 new restrictions in one year). This means that, systemically, the world is moving towards protectionism and blockades—which is fuel for decoupling. Politicians have understood that restrictions are a “weapon,” so they are happy to use them (especially in a climate of economic nationalism).
• Tit-for-Tat Sanctions: Recent years have seen an escalation—the US restricted chips, China restricted raw materials, the US imposed tariffs, China imposed tariffs… Such a chain of retaliation is difficult to break completely because both sides are afraid of looking weak (the logic: “we can’t give in, because that will embolden them”). As the White House stated in 2025 that China’s new restrictions were a “global supply-chain power grab,” it therefore announced an intensification of its own restrictions if China did not reverse its moves. This signals that politicians are willing to go far, which could entrench decoupling.
• Statements by Decision-Makers:
  • Janet Yellen (Treasury Secretary) said in 2022: “We want secure supply chains even at the cost of some efficiency.” This was a signal that the era of pure globalization is ending—what matters is reducing dependence on “unreliable sources.”
  • Scott Bessent (Treasury Secretary 2025) – quoted earlier: “We don’t want to decouple, but China is sending a decoupling message.” This means that even if we officially don’t want to, China is forcing us to do so with its actions. This builds the conviction that decoupling is China’s fault and choice, so the US is just adapting.
  • Jamie Dimon (CEO of JPMorgan) warned: “It has become painfully clear that the US has allowed itself to become too dependent on unreliable sources.” In practice, the country’s most important banker has supported the thesis of the need for independence—which will permeate investor decisions (since JPMorgan plans to strengthen domestic supply chains by $1.5 trillion, others will do the same). This normalizes decoupling in the business world—it becomes a mainstream strategy, not the whim of protectionists.
• Statistics: Some separation is already visible—China’s share in US imports is falling in some categories (e.g., pharmaceuticals, where they have stocked up elsewhere, or telecommunications equipment after the Huawei ban). 2023 and 2024 saw the first declines in overall US-China trade in years (after a record $690 billion in 2022, it fell in 2023). Of course, some of this is due to cyclical factors, but the decoupling trend is contributing.

Bipartisan Consensus in the US:

• Rarely, Republicans and Democrats agree on a hard line towards China in the economic sphere. In 2023, a Special Committee on Competition with the CCP was created in Congress, which almost unanimously supports initiatives to limit dependence (see the CHIPS Act passed with bipartisan support, Hong Kong sanctions, blacklists of Chinese companies, etc.).
• This means that regardless of the change of power (Trump or Biden or someone else), the course is likely to remain restrictive. Even the rhetoric aligns: Trump speaks openly about tariffs and sanctions, Biden calls Xi a dictator and maintains most of the restrictions from the Trump era. The differences are in style, not substance—both want to move production from China, limit its access to sensitive tech, and strengthen alliances against it.
• In the long term, this embeds decoupling into US policy. In the past, there have been thaws (e.g., after the harsh sanctions of 2018 came the mini-deal of 2020), but this time it seems that the fundamental change is permanent because both parties are on board.

Pressure on Allies:

• The US is not only decoupling itself but is persuading (or forcing) others to do so. When the EU was criticized for its “weakness towards China,” Washington threatened, for example, tariffs in 2023 if they did not ban the export of lithography machines (the Netherlands eventually did so).
• Washington warns hub countries: for example, in 2023, Senator Rubio proposed tariffs on products from outside China that contain Chinese components (to prevent China from circumventing sanctions via intermediary countries). Such a second-order mechanism would expand decoupling more broadly—because, for example, Vietnam, in order not to lose trade preferences, would have to ensure that its exports to the US were not “of Chinese origin.”
• There is even talk of secondary sanctions—the US threatens that companies from third countries that sell sanctioned tech to China could themselves be punished (e.g., entrepreneurs from the UAE and Hong Kong have ended up on the BIS blacklist). This forces the alignment of allies—further pushing globalization into blocs.

In summary, the factors above create strong momentum towards at least a partial decoupling. It is becoming a kind of self-fulfilling prophecy: China and the US—mutually distrustful—are making defensive moves that increasingly separate their economic systems. The question is whether this process can be stopped or limited.

6.3 Arguments Against Full Decoupling

On the other hand, there is much to suggest that a full and permanent separation of the US from China is very difficult, costly, and may prove impossible to achieve in the intended timeframe. There are strong economic, social, and political arguments for not burning bridges completely:

Economic Barriers:

• China’s Technological-Production Advantage in Processing: As already mentioned with Wood Mackenzie, China has world-class technologies for processing many raw materials (rare earth separation, production of magnets, batteries). The West cannot build this overnight. The irony: to quickly build it at home, they would have to invite Chinese experts. And that is politically unacceptable. Investing from scratch requires years of trial and error—in the meantime, we are partly condemned to import from China. In many sectors, “Chinese know-how” is unavoidable. Julian Kettle: “It’s sobering for the West that it would have to go to China and say: show us how it’s done—but that’s the reality.” The conclusion: the West cannot simply cut off China because it lacks certain skills and capacity—it would first have to acquire them, which will take decades.
• Costs of Alternative Supply Chains: Various estimates suggest that building duplicates of global supply chains (fabs, refineries, assembly plants) would cost hundreds of billions, perhaps trillions of dollars. Who will pay for this? Ultimately, the taxpayer or the consumer. High costs mean more expensive products. Both economies will lose efficiency. The OECD and the World Bank warn that full fragmentation could lower global GDP by several percent by 2030. This would affect people’s standard of living. Politicians are afraid of being blamed for high prices—this holds back extreme moves.
  • For example, the US CHIPS and IRA budget is ~$500 billion in subsidies. This is just the beginning—and it is already facing problems (lack of skilled workers, construction costs of factories in the US are 2-3x higher than in Asia). Who knows if the political will will survive when the budgetary pain sets in?
• Timeline for Building Alternatives: As above—real independence will take decades. Even for raw materials like lithium, the European plan is to reduce dependence by 2030, but it won’t be 100% independent. REEs—the US is aiming for some capacity by 2027, but a full mine-to-magnet chain will probably only be up and running in 2035 (for example).
  • The question is whether geopolitics will allow for waiting? If not, and a crisis occurs before then, decoupling could happen abruptly in an incomplete state—which means severe shortages and recessions. No one likes that idea, so it curbs the impulse to go “all-in” and break away now. It’s more likely to be a transition phase that could drag on—and in practice, the longer the dependence, the harder it is to give up later (because people have adapted to the new status quo).
• Trade and Interdependence: Many sectors have nothing to do with security, and there, the ties are symbiotic:
  • American companies sell several hundred billion dollars worth of goods in China annually (Apple, GM, Nike, Boeing, Caterpillar, etc.). China is the largest market for, for example, automotive companies (GM sells more cars in China than in the US), and agricultural firms (China buys ~30% of American soybeans). Such companies fight politically not to lose access to China. And they have influence—their lobbying can tone down extreme government moves. For example, in 2019, lobbying by the tech industry led to some Huawei sanctions being postponed (because Qualcomm and Intel, for example, would have lost a large market).
  • On the other hand, the US is a key market and source of technology for China. If China were completely cut off from the US, its growth could fall by several percentage points. It’s no coincidence that Beijing, despite its rhetoric, tries to stabilize relations (visits, minor concessions like increasing LNG imports from the US, etc.)—China does not want to abandon the American market because, for example, it would lose millions of jobs (exports), and its companies would lose key elements (e.g., even to build windmills, they need certain American software).
  • Global supply chains are deeply integrated—purely American products barely exist, and neither do purely Chinese ones. For example, the iPhone is a symbol: design in the US, chips from Taiwan, screens from Korea, assembly in China, ores from Africa, patents from Japan, software from India—a global puzzle. To separate this cleanly into two baskets is a logistical nightmare. Instead of one ecosystem, there would have to be two—a decrease in scale = a decrease in the profitability of many innovations. The entire global R&D model (based on amortizing R&D costs through global sales) would be disrupted.
• Risk of Mutual Destruction:
  • Mutual sanctions encourage the worst impulses. When China reacted to tariffs, it devalued the yuan, which hit EM currencies, which in turn ricocheted back to US exporters. The 2018-19 tariffs reduced US GDP by about 0.5% according to the Fed, but did not eliminate the deficit (costs were passed on to US importers).
  • There is a fear that progressive decoupling could spin out of control and turn into a global recession. For example, sudden 100% tariffs—markets fall, companies cut investment, confidence plummets, global demand falls—the OECD has already revised its 2025 global growth forecast down from 3.3% to 2.9%, arguing that US-China tensions are cooling activity. In a worse scenario (full trade war), it could be 0-2% globally. When companies and people lose jobs and savings, political pressure to de-escalate grows.
  • The gains from globalization were large: lower prices for goods, lifting hundreds of millions out of poverty, boosting corporate profits. Completely reversing them means “shooting oneself in the foot” for the world. In simple terms: decoupling = more expensive production = inflation = reduced consumption = a decline in well-being = social discontent. To what extent are governments prepared to go against public opinion? In China, it may be easier to impose, but in democracies, citizens may rebel if they feel it strongly in their wallets. This is a political brake.

Voices for Dialogue and Halting Escalation:

• After October 2025, intensive back-channel talks took place (a weekend of White House-Beijing communication). Scott Bessent mentioned that “substantial communication” with China “de-escalated the situation.” President Trump, in turn, softened his stance, saying he hoped for the “short-term nature of the dispute” and was open to negotiations.
• These are signals that even hawks understand the limits of madness. A Trump-Xi meeting is planned on neutral ground (APEC 2025). Perhaps some agreement will be reached (Scenario 3 below).
• Goldman Sachs and other market analysts assess that the most likely scenario is a moderate one—both sides will back down from their most aggressive actions and conclude a minimal truce because a full economic war would be too costly. The bank, in fact, advises its clients that the gloom over decoupling may be somewhat overpriced (exaggerated in risk valuations).
• Allies also prefer calm: Europe and ASEAN countries clearly say: “we don’t want to choose sides in a new cold war.” Even if they participate in friend-shoring, they will pressure the US not to go for a total split—because they would suffer greatly (Germany, for example, with its exports to China). These signals probably reach Washington and temper it.
• Chinese Statements: Despite the harsh rhetoric, Beijing also declares that it does not want a full conflict. A spokesman for the Chinese Foreign Ministry in October 2025: “it is the US that is deepening the misunderstanding and panic… we call for dialogue and consultation on an equal footing.” Of course, this is propaganda, but it signals a willingness to come to the table.
• China has also taken small steps: for example, in October, it issued export licenses for gallium and germanium to some European companies to show that it does not want to shake the whole world—only to demonstrate strength, and then rationally select who gets what and who doesn’t. Such discreet relaxations (e.g., American companies also, in practice, getting some minimal supplies so they don’t go under) are a signal that they are not going for a full confrontation “no matter what.”

From these arguments, it follows that although decoupling is progressing, a complete separation creates so many problems and threats that decision-makers may ultimately limit it to a certain level and seek a modus vivendi. In the next subsection, we will analyze what scenarios might materialize.

6.4 Possible Scenarios for Future Development

No one knows the future, but we can outline a few scenarios of how the issue of decoupling might play out in the coming years and decades. Below are three leading visions:

Scenario 1: Managed Coexistence (Most Likely)
In this variant, the US and China avoid a complete break, although their relationship remains turbulent.

• Characteristics:
  • Periodic flare-ups and escalations—crises like October 2025 will occur from time to time (e.g., an incident in the South China Sea or over Taiwan, another round of sanctions), leading to sharp economic moves from both sides. However, after each escalation, negotiations and temporary de-escalations follow—neither side crosses certain red lines (e.g., they do not introduce absolute sanctions).
  • Gradual but incomplete diversification of supply chains—both sides continue to build alternatives (US friend-shoring, China self-reliance), which reduces interdependence. After a decade, China’s share in US imports of critical raw materials falls to, say, 20%, and the share of the US/allies in China’s imports of key tech falls to 20%. But some exchange in these areas still exists (e.g., China buys 20% of its chips from Korea, not 0%; the US imports 20% of its magnets from China, not 0%).
  • Maintenance of partial interdependence in some sectors—trade in consumer goods, clothing, toys, home appliances, or, for example, the work of Chinese factories for Western corporations (though perhaps on a smaller scale). iPhones will still be partially produced in China (alongside India), Nike in Vietnam (but the Chinese produce materials there), etc. Global commodity markets (oil, LNG, iron ore) remain integrated—because China and the West cannot monopolize them.
  • Emergence of “gray zones” of cooperation—where interests overlap. For example, the fight against climate change—the US and China may continue to cooperate on renewable energy projects or setting standards (because it benefits both). Similarly, for example, global financial stability—China is unlikely to suddenly sell off US bonds (because it would harm itself). These areas remain “depoliticized” to some extent.

This is a scenario in which decoupling occurs, but is limited to critical spheres. The world is partially divided, but does not fall into completely hostile blocs—rather, it resembles a rivalry of hegemons in the role of global partners-enemies. This scenario is considered “most likely” by many institutions (because it reflects trends, while not ignoring the brakes).

Scenario 2: Structural Decoupling (Pessimistic)
This is a variant in which, despite the costs, an almost complete economic separation and a bloc-based division of the world occurs.

• Characteristics:
  • Complete cutoff of trade in strategic sectors—virtually no flow of high-tech between blocs: China produces its own chips, airplanes, software, financial systems, and the West produces its own. Even in the consumer sector, decoupling occurs: two separate internet ecosystems (which is already happening), separate e-commerce platforms (or a complete ban on TikTok and Alibaba in the West and vice versa), electronic equipment (e.g., the Chinese only buy domestic equipment instead of Apple, and Americans avoid Chinese brands).
  • Two separate economic blocs—democracies and partners gather around the US (NATO, G7, parts of the Indo-Pacific), while authoritarian or dependent countries gather around China (Russia, Iran, some of Africa). Trade within blocs is intense, but minimal between blocs (perhaps only some neutral raw materials).
  • Global technological fragmentation—standards diverge (China, for example, introduces a digital yuan and a separate payment system, a full-blown splinternet, GPS vs. BeiDou, etc.). The creation of a “Chi-net”—a network of cables and satellites connecting China and its sphere, physically disconnected from the rest (in case of fear of being cut off)—is likely.
  • Economic Cold War 2.0—constant hostility, a technological arms race, sanctions for sanctions, high military spending, and a low level of people-to-people contact (limited visas, students).
  • Drastic decline in global efficiency and growth—a return to an era of autarky means we pay a “security premium” on all goods. The world may fall into stagnation because innovation will slow down (less knowledge sharing, barriers to the exchange of talent—e.g., Chinese STEM students no longer go to the US; this is a blow to US universities and at the same time a brake on Chinese innovation because they lose some know-how, but they build their own—different paths).
  • This scenario is generally a bleak vision of a new cold war, where people and economies suffer, and global problems (climate, poverty) are harder to solve due to a lack of cooperation between superpowers.

Scenario 3: Reset and Renormalization (Optimistic)
Less likely given current trends, but not impossible. It assumes a breakthrough agreement and a halt/reversal of the escalation.

• Characteristics:
  • A Trump-Xi summit (or subsequent leaders) brings a “New Deal”—e.g., China agrees to certain concessions (limits subsidies, guarantees a certain level of raw material exports, opens its market), and the US withdraws the threat of 100% tariffs, lifts some tech sanctions, and resumes military dialogue. A format for regular consultations is established (something like the Strategic Economic Dialogue from the Obama era).
  • Gradual easing of export controls on both sides—e.g., the US allows companies to sell some advanced chips to China (with certain conditions), and China, in turn, lifts licensing requirements for some minerals and technologies (like graphite). Business would breathe a sigh of relief, stock markets would soar, and a new mini-investment boom would be initiated.
  • A return to the status quo ante with some safeguards—the key is that some lessons would be learned: for example, the US would still diversify its supply chains (once burned, not forgotten—”trust but verify”), but it would do so more slowly and rather in the background. Trade and investment would return to growth. Companies like Apple would again plan large projects in China, etc.
  • Overall, the rhetoric would warm up—less mutual blaming, more talk of “finding ways to coexist.”
  • Such a scenario seems unlikely given current trends, as it would require considerable trust and concessions, and in both the US and China, politics has rather shifted to hardline positions. What could make it possible? Perhaps an external shock (e.g., a major recession causes both sides to conclude “we can’t afford a trade war, let’s make a deal”). Or a change in leadership (a more pragmatic leader comes to power in China, a centrist president in the US—though this is not very realistic).
  • Nevertheless, history knows surprising detentes—for example, the US and the USSR managed to limit the arms race with SALT, and Reagan, after calling the USSR an evil empire, later made a deal with Gorbachev. If analogies were to work, then perhaps in X years, a “China detente” will occur.

Summarizing the Scenarios:

• The most realistic seems to be Scenario 1: “limited bifurcation”—a long-term rivalry, but with care taken not to cause global devastation.
• Scenario 2 is, unfortunately, a possible path if, for example, a military incident occurs (Taiwan?), which would radicalize both sides.
• Scenario 3 is more of a variant that would require a paradigm shift—e.g., a great common threat (perhaps an alien attack?).

On a side note: The Atlantic Council, in a 2023 report, suggested that “controlled partial decoupling” is the most realistic, while also presenting worst-case scenarios of a global recession with full decoupling—and stated that there are market brakes.

6.5 Time Perspective – A Realistic Assessment

Finally, let’s consider how long all this might take and what the stages of decoupling (or de-risking) might look like. Let’s distinguish the horizons:

• Short Term (2025–2027):
  • A period of “damage control” is possible—that is, holding back the most drastic moves to avoid triggering a financial crisis.
  • Perhaps after October 2025, there will be a temporary truce before 100% tariffs and other drastic steps are implemented—because the parties will want to avoid an immediate recession. This gives time for negotiations (possibly in 2026).
  • During this period, friend-shoring agreements are finalized—e.g., the US-Japan-Korea, US-EU implement their arrangements (IRA regulations, raw material cooperation mechanisms).
  • Use of strategic reserves is possible if a raw material becomes unavailable in the meantime (as mentioned above, activating reserves is being considered).
  • The first tranches of funding and construction of domestic projects—by 2027, a few new mines (Stibnite?), refining plants, and factories (MP Materials magnets, TSMC chip fabs in Arizona) will be up and running. But they will not yet be able to cover the gap in case of a complete cutoff from China. Realistically, until 2027, the West will still be heavily dependent on China for a large portion of its raw materials and components. It may be possible to avoid major shortages through diplomacy and reserves.
  • Potential shortages could appear in some sector (e.g., certain battery metals?), but they would likely be manageable—because China also does not want to overdo it and ruin its reputation as a supplier to the rest of the world.
  • This could be a phase of “false calm”—officially, there is talk of negotiations and “preventing decoupling,” but secretly, both sides continue to plan for separation (they are just stretching it out over time).
• Medium Term (2028–2032):
  • The first domestic projects come online—e.g., Stibnite produces antimony (2028 is the plan), Lynas Texas has started (2026?), MP Materials heavy separation (2025-26?). This means a gradual increase in independence, although it is still a marginal percentage of needs.
  • Expansion of processing capacities in allied countries: Redwood’s recycling capacity grows, cathode factories in the EU (built with EU funds) produce 1/3 of the demand. Overall, friend-shoring brings results, even if it is more expensive—dramatic shortages are avoided.
  • Pilot recycling projects enter a commercial scale. For example, Redwood already covers 5-10% of the raw materials for Tesla from recycling. Magnet scrap is melted down and new ones are made (perhaps 5% of production).
  • Relations with China—here, much depends on politics: if Scenario 1 prevails, tensions may fluctuate cyclically—sharp periods around presidential elections (2028?), then a calming down, etc. Version 2 (cold war)—by this period, two almost hermetic blocs would have formed, and if a hot war doesn’t break out, trade would have fallen to a low level anyway.
  • Assuming Scenario 1: partial diversification is achieved, but China still plays a significant role:
    • Maybe in 2030, China produces 70% of magnets instead of 92%, and the rest of the world produces the rest—considerable progress, but dominance still exists.
    • Maybe the US has domestic lithium and cobalt for 20% of its needs, the rest imported from allies, but something probably still flows from China (in an indirect form).
  • In summary, by 2032, a clear reduction in dependence will likely be visible, but not independence. The world, however, will be bipolar in strategic tech—for example, the global internet and technological ecosystem may be half-divided (a Chinese bloc and the rest).
• Long Term (2033–2040+):
  • In this horizon, true Western independence in selected key raw materials is possible: for example, by 2035, the US or its allies may not need Chinese rare earths at all, because MP, Lynas, Energy Fuels, etc., will cover the demand.
  • For some raw materials, this is difficult (graphite—because if not from China, then from Africa, and China has influence there; manganese—China processes 90%, so that has to be built—it’s possible).
  • Substitute technologies will mature: maybe by 2035, EV motors won’t need magnets (a breakthrough in superconductors?), or sodium-ion batteries will dominate and lithium will be less strategic. If innovations help, a large part of the pressure could disappear.
  • Blocs will mature—that is, parallel systems will be created in almost every field: a global financial system (a Chinese clearing zone vs. the Western SWIFT), global telecom standards (China and its allies have a Sino-5G standard, the rest a global standard). A NEO-WTO—a trade organization for the Western sphere, and a BESETO—an Eastern analogue, might be created. Decoupling would be an institutional fact.
  • This world would be very different from the globalization of 1990-2020. Possible, but not a foregone conclusion—because so many years could bring various unforeseen factors (a regime change in China? an alliance? or conversely, a kinetic war).

REALITY: Achieving full self-sufficiency by 2040 is possible, but it requires maintaining political determination and funding for decades. This is not easy—along the way, there could be elections, a different priority (e.g., a new main enemy other than China—perhaps AI?). History teaches that for strategic programs to survive changes in administration, they must have a really strong consensus (like Kennedy’s Apollo program—the space race, supported by his successors).

In practice, a “partial decoupling equilibrium” is possible—that is, we will separate to a certain extent and it will stay that way because further steps will not be worth the cost. A state may be reached where it’s “well, this is enough, we can manage with a certain remaining dependence because it’s no longer threatening.”

From the point of view of business and investors (which we will discuss in the next section, VIII), what matters is that the next 5-10 years will be a period of high uncertainty and volatility, because this is the transition phase of decoupling, where politics strongly interferes with the rules of the game. Later (in 15 years), the system will reach a new stability—but that is futurology.

We now move to Section VII, to look at our region and Europe in this puzzle.

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VII. IMPLICATIONS FOR POLAND AND EUROPE

The US-China raw material conflict, although playing out between superpowers, also has a direct impact on Europe, including Poland. European countries find themselves in a difficult situation: on the one hand, they are close allies of the US and share many concerns about China; on the other hand, they themselves have benefited greatly from cheap Chinese supplies and are counting on the Chinese market. In this section, we will analyze:

• Europe’s general position in the US-China conflict and its strategy (de-risking vs. decoupling).
• Potential benefits and opportunities for Poland (and the region) resulting from changes in supply chains.
• Threats and challenges for the Polish economy and industry.

7.1 Europe’s Position in the US-China Conflict

The European Union is trying not to blindly pursue full decoupling, but to develop its own tactic—often referred to as “de-risking.” What does this mean in practice, and how does the EU balance between the US and China?

• The De-risking Strategy vs. American Decoupling:
  • While the rhetoric from Washington (especially under Trump) focuses on “becoming independent of China at all costs,” Brussels emphasizes reducing excessive dependence without severing normal trade relations. Ursula von der Leyen said in March 2023: “It’s about de-risking, not decoupling.” In a 2023 strategic document, the EU described China as a “systemic rival, competitor, and partner at the same time.” This shows a more nuanced approach: the EU sees the need for cooperation, e.g., on climate, with China (partner), competes in the economy (competitor), but also feels a threat in certain areas (systemic rival).
  • In practice, the EU is also toughening its stance: for example, the new foreign direct investment (FDI) screening mechanism—this is clearly an action inspired by the US to prevent Chinese takeovers in critical industries (after the lesson of COVID and masks).
  • But at the same time, European leaders (e.g., Emmanuel Macron) say that Europe should not be a vassal of the US in the conflict with China and promote the idea of “strategic autonomy.” What does this mean? That the EU wants to diversify from China, but not close the door completely—rather, to build a position from which it can conduct its own policy (not always identical to the American one).
• EU Critical Raw Materials Act: In March 2023, the European Commission presented a draft of the Critical Raw Materials Act. Its main goals:
  • By 2030, at least 10% of the EU’s consumption of each critical raw material should be mined within the EU.
  • At least 40% should be processed (refineries, smelters) in the EU.
  • At least 15% of annual consumption should come from recycling.
  • And the key concentration limit: no more than 65% of the import of any raw material from a single third country.
  • This last provision is directly aimed at China’s dominance: the EU imports, for example, 98% of its neodymium magnets from China—the CRMA mandates reducing this to a maximum of 65%. Similarly for lithium or graphite—China’s share is ~80%, it needs to be <65%.
  • The provision does not say not to import at all—so it allows for de-risking, not decoupling (because, for example, 64% can still come from China—which is a lot).
  • The CRMA covers several raw materials (including lithium, cobalt, nickel, REEs, gallium, germanium, platinum group metals, tantalum). So, this is a program to build domestic capabilities (mines in Scandinavia, refineries in France, etc.), as well as partnerships (Canada, Ukraine, Kazakhstan, and Australia were mentioned as raw material partners, among others).
• Accelerated Alignment with the US on Sanctions: A few years ago, the EU was slow in sanctioning China (example: chip restrictions—the Netherlands only restricted the export of lithography to China in the summer of 2023, 9 months after the US). Also, sanctions on Huawei—countries like Germany only decided in 2023 to remove Chinese 5G equipment from their networks (the US had been doing this since 2019). The delay was ~6-12 months.
  • Recent events (especially October 2025—China restricting raw materials, and the US tariffs) seem to be consolidating the West’s position more quickly. In 2025, after a G7 meeting and US sanction announcements, the EU joined after 6 weeks, not months. It seems that Europe’s policy is moving closer to the US because the threat has become tangible and it cannot afford to be the “soft underbelly” (China could circumvent sanctions through Europe, which annoyed Washington).
  • Poland is playing the “hawk” here—we and the Baltic states have been warning about China for years (Poland was one of the first in Europe to exclude Huawei from building its 5G network).
• Its Own Dependencies on China: The EU knows it has serious “soft spots”:
  • The German automotive industry is heavily dependent on the Chinese market. For example, VW has ~40% of its sales in China. Mercedes and BMW as well. At the same time, the future of electromobility—batteries, components—is supplied mainly by Chinese companies (CATL has a factory in Germany). So for Germany, decoupling is a shock (hence their initial “China is a partner, not a rival”—but the narrative is changing, as Berlin is learning from the mistake of depending on Russia).
  • France—less industrial exposure, but has large investments in China (LVMH—the luxury market is dependent on Chinese customers; Airbus sells a lot to China).
  • Eastern Europe—fewer ties here, as our trade with China is in deficit (we import a lot, export little). But we, in turn, are a supply chain for the German industry, which is linked to the Chinese one—so we are indirectly connected.
  • Europe imports 98% of its generic drugs from Asia (mainly China and India). The pandemic showed the problem (lack of masks, ingredients for medicines). Hence, the EU is also planning to re-shore pharmaceuticals (Recovery Plan funds).

Summary of Europe’s Position:
Europe is trying not to burn its bridges with China, but it also does not want to be the weak link that China will use to divide the Western alliance. After the experience with Russia (dependence on gas ended in blackmail and crisis), there has been a serious revision of thinking. That is why the de-risking narrative is gaining general support, and even traditionally China-friendly countries (Greece, Hungary) are not blocking EU actions (perhaps delaying them minimally).

EU policy is like driving on a bumpy road: on the one hand, delegations travel to Beijing (Macron, Scholz in 2023) because business pressures them to maintain relations; on the other hand, they are pushing through legislation like the CRMA and screening mechanisms, which signals preparations for a certain degree of independence. Ursula von der Leyen described it as follows: “we are reducing risk in key areas, but we are not turning our backs on China.” And that is the essence—Europe prefers to put its eggs in several baskets, not to throw out the entire Chinese basket.

How this will work out remains to be seen—after all, it doesn’t just depend on the EU: if the US and China go for the jugular, Europe will have to choose a side more clearly (most likely the US, due to security alliances and values). For Poland, this is better, as we feel safer in the Atlantic camp.

7.2 Opportunities for Poland

Poland, as a large EU country with industrial ambitions, can benefit from the rearrangement of supply chains—provided it presents itself appropriately and leverages its strengths. Here are the potential opportunities:

• Potential in Processing:
  • Poland has a favorable geographical location (in the heart of Europe, close to EU markets, at a crossroads of routes). It can attract investment in critical raw material processing plants. For example, there is already talk of a lithium refinery near Szczecin (the company Northvolt has built a battery systems factory there, maybe battery chemistry will follow—because of the ports).
  • We have a relatively skilled workforce (chemical and mining engineers—e.g., AGH University of Science and Technology trains metal specialists, and technical universities train chemical process specialists). Historically, the Silesian metallurgical and chemical industry—that’s a wealth of knowledge.
  • If Germany avoids building “dirty” installations at home (e.g., graphite refineries, which generate toxic waste), Poland can propose: “build it here, we have the traditions and we need the investment.” Especially post-industrial regions (Silesia, the Legnica-Złotoryja copper region)—the local population is familiar with heavy industry, unlike, for example, Bavarians.
  • Similarly for assembly plants and high-tech factories: friend-shoring means, for example, moving production from China to Eastern Europe. We are already seeing this: LG, SK, Mercedes, Volkswagen are building battery or EV component factories in Poland, Hungary, and Slovakia. Poland is distinguished by having the largest production of traction batteries in Europe (LG Chem Wrocław). This is a direct result of the desire to diversify away from Asia. More investments are likely to come (Northvolt considered Poland but chose Germany for its gigafactory—however, it chose Poland for a module factory). We have a chance to establish our position as an e-mobility hub (which has already partially happened).
• Historical Traditions of the Mining Industry:
  • Poland is not rich in raw materials like lithium or rare earths (although there are some quantities of copper with cobalt, e.g., in “deep potash+magnesium” projects), but we have a large raw material company, KGHM—the world’s 2nd largest silver producer, a large copper producer. KGHM is a mine of competencies—its own hydrometallurgy departments, laboratories. This base can be adapted to other metals.
  • In the Lower Silesia region, in Złotoryja, there is the Stanisławów project—Czech companies are exploring deposits of tin and tungsten (also antimony)—this is in Poland. If it were to start, Poland would become a supplier of antimony and tungsten—this has been an exotic sphere so far, but it could become real (for now, these are plans).
  • Coal mining is declining—miners could be retrained for critical metal mining (if there were any). In an ideal scenario—e.g., Silesia becomes a center for raw material recycling (there is metallurgical infrastructure, e.g., the Głogów Copper Smelter—perhaps electronics recycling?), and the Lubin region (KGHM) could process new metals like cobalt (it already does—it extracts some cobalt from copper ores).
• Opportunity to Attract Investment as part of Friend-shoring:
  • I have already written about factories. I will add: American investments in raw materials—e.g., USA Rare Earth or MP Materials are looking for allies in the EU. Poland, due to its pro-American orientation, may seem like a natural partner. Imagine a joint Polish-American project: building a rare earth refinery in Poland (using raw material from Australia, for the European magnet industry).
  • Also, Japanese and Korean companies—e.g., Sumitomo Electric is building a cable factory in Wrocław, perhaps the next step is producing superconducting wires (which require tantalum)? Mitsui has invested in a lithium project in the Arctic—maybe they want to refine lithium in the EU? Poland could offer special zones and subsidies.
  • Polish ports (Gdańsk, Szczecin) can become hubs for importing raw materials from outside China. For example, if rare earth concentrate flows from Canada to Europe—why not to a Polish port and be processed here? Lower costs than Germany or the Benelux countries.
• Cooperation with Ukraine after the War:
  • Ukraine has enormous wealth: lithium (a Danish company transferred the license?), titanium ores, manganese, rare earths. As early as 2021, the EU signed a raw material agreement with Ukraine (it was calculated that Ukrainian resources could meet 1/5 of the EU’s needs for critical minerals).
  • Poland, as a neighboring country that will integrate Ukraine after the war, can become a gateway to the EU for Ukrainian raw materials. This means: Polish companies can invest in mining there, and transport and process it at home. Polish chemistry and industry could take a piece of the value-added instead of letting it go straight to Germany.
  • This is also a matter of geopolitics: it is better for Polish and Western companies to develop these deposits than, for example, Chinese ones (the Chinese had already bought 10% of Motor Sich before the war and had contracts for raw materials—this fell apart due to sanctions and Ukraine’s hostile attitude towards the PRC).
  • Alternatively, Poland could be a logistics hub: transshipment terminals in Hrubieszów and Dorohusk—a stream of raw materials from Ukraine could flow through there. This is already happening with iron ore, for example (after the destruction of the Black Sea ports, they exported it by rail through Poland).
• Political Significance:
  • If Poland actively participates in friend-shoring, it will strengthen its role in the EU and NATO. We will become, for example, a key hub in the battery supply chain in Europe (Poland already accounts for 30% of Li-ion cell production!). This translates into jobs and influence in decision-making (Germany and France will have to take our opinion into account in industrial policy).
  • Well-used EU funds (e.g., the National Recovery Plan) can encourage Polish companies to enter new industries—recycling, raw material chemistry. We already have a few champions (e.g., Elemental Holding—electronics recycling, investing globally; Synthos—investing in recycling, etc.).
  • Participation in transatlantic supply chains (e.g., building components for the F-35—could Polish companies produce parts from domestic raw materials? why not)—this integrates us even more strongly with the Western sphere.

Of course, these opportunities will not realize themselves. Active government and business policy is needed to attract these projects. The government should, for example, offer Special Economic Zones, tax breaks, and promote in the US and Japan that “Poland is your friend-shoring destination.” Similarly, regions—for example, Katowice should say: “we have educated workers and infrastructure for a new clean technology industry.”

In summary, Poland can benefit as an indirect beneficiary of decoupling, becoming one of the “friendly” countries to which some production and processing will be moved.

7.3 Threats to the Polish Economy

Unfortunately, there are also serious threats related to decoupling that could affect Poland:

• Dependence of Polish Industry on Chinese Raw Materials and Components:
  • In the years 2010-2020, Poland also benefited extensively from globalization: our assembly industry (home appliances, electronics, automotive) is largely based on imported components—many from China. For example, TV factories in Poland (LG in Mława, TCL, Samsung) import most of their electronics from Asia, only assembling them here. When there was a chip shortage in 2021 (due to the pandemic), Polish car production fell drastically (by 40%). This shows how vulnerable we are to supply chain disruptions.
  • If decoupling restricts access to chips or modules from China (e.g., tariffs increase or sanctions—China could, for example, halt the export of some microelements in retaliation against the entire West, not just the US), Polish companies may have problems: for example, the Solaris e-bus project—is there 100% certainty that their batteries and systems do not depend on Chinese sensors? Probably not; they import a lot.
  • Polish agriculture—not linked to China (we export almost nothing there, we import some feed and chemicals), so minimal impact here. But, for example, Polish pharmaceuticals rely on Chinese and Indian APIs (active pharmaceutical ingredients). If China restricts drug exports (as it threatened in 2023), Polish patients will feel the shortages (there were already antibiotic shortages in 2023 due to “issues at Chinese factories”).
• Risk to Sectors: Automotive, Electronics, Energy:
  • Automotive: Poland produces a lot of components (cables, batteries, parts) for cars assembled in Germany and the EU. If these factories slow down due to a lack of supplies from China, they will pull us down with them. In 2022, for example, a lack of semiconductors halted VW’s production lines—Polish supplies of seats and wiring harnesses had to wait, and people were put on standby. Decoupling ultimately means building our own chips—but before that happens, there may be a period of shortage (China won’t sell, and new fabs won’t be ready yet—this is a worst-case scenario for 2025-28). Polish subcontractors must plan carefully and diversify.
  • Electronics and Home Appliances: A lot of production in Poland (we are a home appliance powerhouse—Whirlpool, Electrolux, etc., have factories). These products are assembled from hundreds of components, the lion’s share of which comes from Asia. Miele (a German home appliance company) is already building a factory in Poland—it will probably bring its supply chain here too. But still, certain “smart” modules in washing machines or refrigerators come from China. If a customs war breaks out, the prices of home appliances will jump, and demand may fall (ordinary people in Poland will feel the higher prices).
  • Energy: Poland’s energy transition (wind farms, PV)—heavily based on imports of Chinese equipment (almost 100% of panels are from China). If the EU imposes tariffs (the plan from 2024 is to tax the carbon footprint of panels from China more heavily)—the cost of renewable energy investments in Poland will rise, and the pace of construction may fall. Of course, we are ultimately building our own panel capacity (e.g., the company PVELS plans a panel factory in Poland, which is a plus), but this is in its infancy. Graphite for energy storage—almost certainly from China, etc. So climate goals may be more expensive for us to achieve, and therefore electricity more expensive.
  • Chemical and Materials Industry: Nitrogen concerns (Orlen, Azoty) import certain catalysts and raw materials (phosphate rock?), some from China. If supply chains are broken, they will have to find other, more expensive sources or limit production.
  • The IT services sector in Poland—many global R&D centers. If global IT slows down because of decoupling (e.g., separate ecosystems and building proprietary solutions from scratch—this could mean more projects, but also higher costs and delays)—Polish engineers in outsourcing may feel the turmoil, or even benefit (because the demand for devs will grow as new apps have to be written from scratch).
• Potential Increase in Production Costs:
  • In short: the era of “cheap because it’s from China” is over, and the era of “more expensive because it’s from friend-shoring/reshoring” is beginning. For Poland, as a country in the catch-up phase, this is a problem—because until now, we have benefited from globalization (our inflation was curbed by imports of cheap electronics and clothes from Asia; our companies could compete because they had access to cheap semi-finished products).
  • When these costs rise, inflation may be more persistent, and GDP growth lower, because Poles have to spend more on basic goods. We are already seeing this, for example, in construction: the price of reinforcing steel (once partially imported from Asia)—if it becomes more expensive, apartments become more expensive.
  • Polish companies that do not find alternatives may lose margins or even go bankrupt if they are unable to pass on higher costs to the customer.
  • On a macro scale, decoupling is a global phenomenon that is moving us from a low-inflation regime (1990-2020) to a higher-inflation one (2021+), because of the security premium described. For Poland, which is already fighting ~10% inflation, this is bad news—it may be harder to bring it down to 2.5% as before. So interest rates may remain high for longer, a brake on loans, etc.

In sum, the Polish economy faces a challenge of adaptation: it must quickly diversify its supply chains, become independent where it is dangerous (e.g., medicines—build its own API factories?), and at the same time, seize the opportunities to become a supplier in the new ecosystem. The government and business should prepare a plan—for now, this is not being loudly articulated, as the topics of war and energy have dominated, but critical raw materials also affect us (in 2022, Poland adopted a “State Raw Material Policy,” but it is a rather general document).

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VIII. CONCLUSIONS AND OUTLOOK

As we approach the end of this extensive analysis, let’s try to gather the most important theses and observations and outline the prospects for the future. The stakes in the US-China game over critical raw materials are enormous—they concern not only trade balances but also national security, the pace of technological progress, and the configuration of the global economic order. What can we already state with certainty, and what remains in question?

8.1 Key Theses

• Decoupling is a process, not a one-time event: As we have shown, the potential separation of the US and Chinese economies is happening gradually, in waves—sanction for sanction, tariff for tariff, project for project. It is more of a long-term series of moves than a single official “breakup.” We are already observing its successive stages (2018—tariff war, 2020—tech sanctions, 2023-25—raw material war). Each of them gradually transforms the trade and investment landscape. Therefore, asking “will decoupling happen” is a simplification—it is already happening; the question is how far it will go.
• Full separation is unlikely in the medium term for economic reasons: At least until the 2030s, a complete cutoff of the US and the West from China seems unrealistic—the economic cost would be too high, and alternatives would be unable to fully fill the gap. Yes, there will be a significant reduction in dependence (by half? two-thirds?), but a 100% “cord-cutting” would be too painful for the global economy. Too many companies and countries would have too much to lose. Therefore, it is most likely that it will end in a kind of compromise: selective and incomplete decoupling. Both superpowers will limit ties where it is critical (e.g., military technologies, some raw materials), but will maintain them where they are mutually beneficial and carry little risk (consumer goods, bulk commodities).
• However, the trend towards greater strategic autonomy is irreversible: Even if a total break does not occur, there will be a permanent reorientation of economic policy—the US, the EU, Japan, and others will strive to achieve the greatest possible independence in critical areas. This is a consequence of the lost trust in globalization in its previous form. States have understood that certain dependencies are an existential threat—and they will make efforts to eliminate them, even at the cost of economic efficiency. We can expect concepts like “security of supply” and “resilience” to become permanent fixtures in the vocabulary of trade policy. In other words: the era of naive faith in a self-regulating free global market has come to an end; the era of economic geopolitics is back.
• A world of two partially separated technological ecosystems is emerging: We already have signs of the formation of two spheres: e.g., a Chinese and a Western internet, navigation systems (BeiDou vs. GPS), telecommunication standards (China is working on 6G independently). This trend will likely deepen—we may see, for example, two separate semiconductor networks (China building a full stack from lithography to chips at home, while the West does not use Chinese know-how). Artificial intelligence may also develop along two tracks (different models trained on Chinese data and chips, others on Western ones), as may the space industry, etc. This does not mean a complete lack of contact (there will probably be some bridges and minimal compatibility), but the global economy will no longer be monolithic, as it was in the WTO era. For companies, this is a challenge: they will have to decide which ecosystem to focus on (e.g., Apple would have to have two parallel operating systems—one permissible in China, the other outside, due to restrictions). Some companies are already feeling this—for example, the equipment manufacturer ASML has to build a “light” lithography machine for China (less advanced), and a super-advanced one only for the West.
• Geopolitics will permanently feature in business decisions: The final thesis—business can no longer ignore politics. The period when pure profitability and cost minimization were the deciding factors has passed. Now, when planning a supply chain or the location of a factory, companies must factor in political risk (will country X be in a “friendly” bloc? could a given raw material be subject to sanctions?). This is a fundamental paradigm shift after 30 years of globalist carelessness. It means, among other things, that the CFO and supply chain manager in a company must now be almost international risk analysts. This may be difficult, but it is becoming necessary.

8.2 Factors Determining the Future

What will decide how far decoupling will go and what the world will look like in 5-10-15 years? Here are a few key variables:

• The results of the Trump-Xi negotiations and subsequent summits: If a real high-level dialogue and agreements to halt the escalation occur in the near future, it could set the tone for the rest of the decade. For example, if the US and China agreed on some framework (guardrails)—e.g., China promises not to touch the export of certain raw materials, and the US in return lifts some tariffs—then decoupling would slow down. Conversely, if subsequent summits end in failure or do not happen at all, the drift towards confrontation will accelerate (because a lack of dialogue channels promotes misunderstandings and unilateral actions).
• The success of onshoring projects in the US (and friend-shoring in general): If the United States and its allies successfully build the missing links in their supply chains (mines, chip factories, etc.) on schedule and within budget, then in a few years, the argument “we are ready to disconnect from China” will gain real power. If, however, they fail (prolonged construction, budget overruns, technical problems), then decision-makers will face a dilemma: continue with decoupling and risk shortages, or soften their stance and temporarily return to importing from China. Example: If, for instance, the TSMC factory project in the US gets stuck (lack of engineers, rising costs), while the demand for advanced chips grows, the US might be forced to loosen sanctions to allow Intel to buy equipment from… China. This is hypothetical, but the success of alternative ventures is a condition for the coherence of the decoupling strategy. In short: “will plan A work?”.
• The pace of technological innovation: As we discussed, technology can neutralize raw material advantages. If, for example, a breakthrough occurs in 2028—the invention of sodium-ion batteries with the performance of lithium-ion—then the role of China (which dominates lithium) diminishes. Or if magnet-free motors in EVs become the standard—the demand for Chinese REEs drops drastically. Each such game-changer alters the parameters of the rivalry. In this race, the US and its allies still lead in R&D, so this is an asset for decoupling—they can “innovate their way ahead.” On the other hand, if China manages some breakthroughs (e.g., its own 7nm chip without Western machines, which they are trying to do), it reduces the effectiveness of US sanctions. Then, decoupling would only solidify two equal blocs because China would not need Western technology at all.
• The evolution of the geopolitical situation (Taiwan, trade war): This is the most difficult factor to predict.
  • The Taiwan issue: This is a ticking time bomb. An invasion or a serious crisis over Taiwan would automatically sever most ties—draconian sanctions would follow, perhaps even a “hot war.” Then, decoupling would immediately go into full mode. The world would have to do without Chinese goods overnight, and China without Western ones—a worst-case scenario (the stagflation of the 1970s would be an understatement). This is an extreme, hopefully avoidable—but the risk exists until the 2030s, as China grows militarily and Taiwan is ruled by a government inconvenient to them.
  • China’s stability: A potential internal crisis (e.g., the real estate bubble bursts to the point that the CCP fights for survival) could cause China to withdraw from the confrontation and focus on itself (like Japan after 1990). Then, decoupling would happen “naturally” (China weakened, less globally significant). Or conversely, the Chinese government could intensify its anti-Western course to divert attention.
  • Change of power in the US: The return of Donald Trump or another extreme politician could maximize protectionism (Trump 2.0 reportedly plans to impose high tariffs on all imports from China). On the other hand, he likes deal-making—maybe he would make a transaction with Xi (“raw materials for lifting tariffs”). A more centrist president (e.g., Biden or his mainstream successor) would likely be tough on tech but accommodating on the rest, maintaining a certain balance.
  • The war in Ukraine: This is already ongoing—what if, for example, Russia asks China for open support and China provides it? Then the West would likely impose sanctions on China (something like secondary sanctions). This would be a trigger for an almost-full decoupling. For now, China is playing it cautiously to avoid this.

All these factors mean that the future of decoupling is not predetermined—it is a dynamic process that reacts to events. Leaders on both sides must weigh the risks on an ongoing basis and may correct their course. For observers and participants (businesses, investors, employees), this means the need to monitor these premises and be flexible in their plans.

8.3 What This Means for Business and Investors

In the world described above, businesses and investors must adapt their strategies to navigate a new normal—one that is more unpredictable and divided:

• The need to prepare for higher volatility and uncertainty: As we mentioned, political factors will increasingly determine raw material prices, component availability, and production costs. Companies must therefore implement geopolitical risk management. For large corporations, this means having contingency plans (backup supplies, a diversified portfolio of suppliers—not relying on a single country). For SMEs, this is more difficult, but industry groups, for example, can jointly lobby governments for support (as Polish drug manufacturers are asking for tax breaks to build API factories in the country to become independent of India/China).
• Financial investors should expect sharp market movements more often than before (although 2020-2022 has already accustomed us to great volatility—the pandemic, war, inflation). Perhaps certain asset classes (e.g., companies heavily exposed to China) will be traded at a discount, while others (the mining industry for raw materials in “safe” jurisdictions) will have a premium.
• The need to diversify supply chains: Until now, just-in-time optimization and cost minimization dominated. Now, redundancy and multiple sourcing are becoming an advantage, not a disadvantage. Businesses must build “resilience”—for example, by having 2-3 suppliers for a key component in different regions. Of course, this is more expensive (less economy of scale), but it’s better than risking a production stoppage. Example: Apple is intensively moving part of its production to India and Vietnam to avoid keeping all its eggs in the Chinese basket (they plan to have maybe 25% of iPhones made in India by 2025). Polish companies, although smaller, can also change: for example, clothing importers are trying to expand their list of suppliers to include Turkey and Bangladesh, not just China.
• Investment opportunities in the critical raw materials sector: The situation, as can be seen, favors the raw materials industry—we may be on the verge of a new supercycle for critical metals, driven by both demand (energy transition, armaments) and supply constraints (sanctions, deglobalization).
  • Long-term investors may consider getting involved in mining and processing projects outside of China—states are supporting these initiatives (financially and regulatorily), which reduces the risk. Companies from Canada, Australia, or even Poland’s KGHM with its American projects, can benefit from rising metal prices.
  • Also, recycling and the circular economy are expected to grow. Recycling companies (Li-Cycle, Umicore, Elemental in Poland) will likely be in demand because recycling is the “new mining,” and governments are also promoting it (subsidies).
  • Of course, as with raw materials, price volatility will be great (due to manipulation and speculation, as described). This is a sector for investors with strong nerves.
• The strategic importance of resource-rich regions:
  • Global politics and capital will pay more attention to countries rich in critical raw materials. These include Australia, Chile, Indonesia, South Africa, Brazil, Congo, and Kazakhstan. Geopolitically-minded investors may look for opportunities there (and factor in the risks). As we have seen, China and the West will compete for influence there. There may even be a “new scramble for Africa”—where Chinese and Western funds and companies fight for concessions.
  • For businesses, for example, in Europe, building alliances with suppliers from these regions will become crucial (through JVs, offtake agreements, etc.). Example: BMW has invested in a lithium project in Argentina to secure supplies—there will be more such moves.
  • Certain regions that have been forgotten until now will become geopolitical “swing states”—e.g., Latin America (the lithium triangle)—their decisions (nationalization vs. partnership with the West vs. a pivot to China) will change the game. Businesses must monitor the raw material policies of Peru, Indonesia, or Zambia as closely as they monitor EU law—because this could determine the cost and availability of a key raw material.

In summary, for economic entities, flexibility and proactivity will be key. Those who are the first to adapt their operating models to the new architecture of trade can win. Those who stick to old habits (e.g., single sourcing from China because it’s cheap, ignoring the risks) may be painfully disappointed.

8.4 A Final Word

The dispute over critical raw materials is more than just another round of a trade war. It is systemic and long-term in nature because it touches upon the fundamental foundations of the modern economy and security. It can be argued that we are witnessing a reorganization of the world’s economic order.

The stakes are not just GDP growth here and now, but:

• National security – because without secure raw materials, modern armies cannot function.
• The technological future – because whoever has access to key materials develops key technologies (AI, green energy). Critical raw materials are like the “oil of the 21st century”—they decide who will be the leader and who will be dependent.
• The global order – because the outcome of this dispute will decide whether the world will be unipolar (dominated by one group of states), bipolar (divided between two blocs), or perhaps multipolar (several regional blocs). It is clear that a game for spheres of influence is being played around raw materials, analogous to the old colonial rivalries for resources.

The coming years will show whether the world will be divided into rival blocs or will manage to find a way to coexist while maintaining some strategic autonomy. Much here depends on the wisdom and foresight of the leaders on both sides.

One thing is certain: critical raw materials are no longer a niche industry topic but have become a vital issue discussed at the highest levels. Whoever controls the minerals controls the future—everyone has learned this lesson.

Poland and Europe are also drawing conclusions—waking up from a certain geopolitical lethargy, they have understood that economics cannot be separated from politics.

Ultimately, in the coming years, the key will be whether efforts to diversify and build independence can keep pace with growing geopolitical pressure. Let us hope that decision-makers will find a balance between security and cooperation—because the stakes are not only economic competitiveness but also world peace. A division that is too deep threatens a new cold war (or a hot confrontation), whereas effective risk management can prevent the worst.

The tensions over critical raw materials are not just a simple trade dispute—they are a front on which the fate of the global balance of power is being weighed. As Gracelin Baskaran of CSIS noted: “China’s raw material weapon is backing us into a corner on national security.” And as Jamie Dimon warned: “We have learned the hard way that we are relying on unreliable sources.”

The world has entered a new era, in which dependencies, once seen as economically beneficial, have become weapons and weaknesses. The course of events in this decade will show whether we can build a more secure, sustainable model of globalization—or whether we are threatened by an era of fragmentation and bloc rivalry.

This story is still being written—and we all, as consumers, citizens, and participants in the economy, will feel its effects. One thing is certain: the times of carefree abundance of cheap raw materials are over. An era of conscious resource management and strategic autonomy is beginning. Now, the decisions made today will determine what the world of tomorrow will look like.