Investment Implications of Shifting Global Supply Chains and Critical Mineral Dependence

The global transition to clean energy hinges on a fragile web of critical minerals—lithium, cobalt, rare earth elements (REEs), and graphite. Yet, the United States' reliance on China for refining and processing these materials has created a strategic vulnerability with profound investment implications. As China consolidates its grip on the supply chain, U.S. policymakers and investors face a stark reality: the clean-energy revolution is being powered by a competitor with the means to disrupt it.

China's Strategic Monopoly: A Looming Risk for Investors

China's dominance in critical mineral processing is not merely a function of scale but of deliberate policy. By 2025, it controls over 85% of global rare earth refining capacity and more than 90% of graphite processing China Consolidated its Rare Earth Industry–2025 is Here: How …^[1]. This monopoly is reinforced by state-backed investments in mining projects abroad, such as Ganfeng Lithium's 46.7% stake in Argentina's Caucharí-Olaroz lithium brine project China funnelled $57 billion to control critical mineral supply chain^[2]. Such vertical integration ensures China's influence extends far beyond its borders, even as raw materials are sourced from other nations.

Recent export restrictions further underscore this leverage. In April 2025, China imposed a de facto freeze on seven rare earth elements and related magnets, citing national security under its "Made in China 2025" initiative China’s rare earth curbs strain supply chains | Freshfields^[3]. The move triggered production halts in the U.S. automotive sector and price spikes for dysprosium and terbium, essential for electric vehicle (EV) motors and wind turbines China’s rare earth curbs strain supply chains | Freshfields^[3]. For investors, this signals a systemic risk: supply chain disruptions tied to geopolitical tensions could destabilize entire industries.

U.S. Efforts to Close the Gap: Progress and Pitfalls

The U.S. has launched a multi-pronged strategy to reduce dependency, including $400 million in Defense Department funding for MP Materials, a domestic rare earth producer, and the development of uranium facilities in New Mexico Despite Progress, Work Remains to Achieve
 U.S. Critical Mineral Independence^[4]. However, these efforts face headwinds. Domestic refining capacity remains negligible, with the U.S. producing less than 1% of China's magnet output How do China's Export Restrictions on Rare Earths …^[5]. Regulatory inertia and fluctuating market prices have also deterred private-sector investment, leaving the U.S. 100% import-dependent on 12 critical minerals and over 50% dependent on 29 others The U.S. Critical Minerals Dilemma: What to Know^[6].

The Trump administration's Section 232 tariffs and trade policies aim to counter Chinese market manipulation, but retaliatory measures—such as export restrictions on gallium and germanium—have already disrupted semiconductor supply chains US Critical Minerals Action Plan^[7]. Meanwhile, the Department of the Interior's 2025 Critical Minerals List, while a step toward prioritizing domestic production, lacks the infrastructure to scale rapidly Department of the Interior Releases Draft 2025 List of Critical Minerals^[8].

Investment Implications: Navigating a Fractured Landscape

For investors, the U.S.-China critical mineral rivalry presents both risks and opportunities. Short-term risks include supply chain bottlenecks and price volatility, particularly in sectors reliant on rare earths and cobalt. The automotive and renewable energy industries, for instance, face production delays as China's export curbs ripple through global markets China’s rare earth curbs strain supply chains | Freshfields^[3]. Geopolitical tensions could exacerbate these issues, with China's control over 90% of global REE refining capacity ensuring that even non-Chinese-sourced raw materials often require final processing in China How do China's Export Restrictions on Rare Earths …^[5].

Long-term opportunities, however, lie in diversification and innovation. The U.S. and its allies are exploring "friend-shoring" partnerships with Australia, Canada, and G7 members to create a unified "anchor market" capable of challenging China's dominance Building a New Market to Counter Chinese Mineral Market Manipulation^[9]. Investments in recycling technologies and alternative materials—such as solid-state batteries that reduce lithium dependency—could also mitigate supply chain risks A Federal Critical Mineral Processing Initiative: Securing U.S.^[10].

Conclusion: A Call for Asymmetric Resilience

The U.S. lag in clean-energy commodities is not a temporary setback but a structural challenge rooted in China's strategic control of processing and refining. While domestic initiatives and international alliances offer hope, investors must prepare for a prolonged period of supply chain fragility. The key lies in asymmetric resilience: leveraging niche technologies, recycling, and diversified sourcing to reduce exposure to China's dominance. In this high-stakes race, the winners will be those who anticipate disruptions and adapt before the next export freeze.