Critical Minerals and Geopolitical Risk: Strategic Opportunities in a Tense US-China Landscape

The global race for critical minerals has intensified in 2025, driven by the U.S.-China rivalry and the urgent need to secure supply chains for clean energy, defense, and advanced technologies. As China consolidates its dominance over refining and processing-controlling 60% of rare earth production and 85% of refining capacity, according to a Geopol report-the U.S. has pivoted to a dual strategy of onshoring and friendshoring to mitigate risks. This shift, coupled with innovations in recycling and processing, is reshaping investment landscapes and creating actionable opportunities for stakeholders.

Geopolitical Tensions and Supply Chain Vulnerabilities

China's strategic control over critical minerals has long been a lever of geopolitical influence. Recent export restrictions on rare earth elements and refined manganese underscore its willingness to weaponize supply chains, according to an Atlantic Council brief. For the U.S., this poses a direct threat: over 50% of its demand for minerals like lithium, graphite, and rare earths is met through imports, according to a Carnegie Endowment report. The Trump administration's response includes a 50% tariff on copper, effective summer 2025, as reported by a Rare Earth Exchanges article, and the One Big Beautiful Bill Act (OBBBA), which streamlines permitting for domestic mining projects. However, physical limitations persist. Even with all U.S. projects operational, the nation will remain heavily reliant on imports for key minerals by 2035, the Payne Institute report finds.

Onshoring and Friendshoring: A Dual Strategy

To counter China's dominance, the U.S. is diversifying supply chains through friendshoring-partnering with allies like Canada, Australia, and Ukraine. A landmark 2025 agreement with Ukraine established a joint investment fund to develop lithium, graphite, and rare earth resources, according to a MetalTech News article, while Greenland's Tanbreez and Amitsoq projects position it as a key Arctic node in IISD coverage. These partnerships aim to reduce dependency on adversarial nations while leveraging resource-rich allies.

Domestically, the U.S. Department of Energy (DOE) has allocated nearly $1 billion in 2025 to bolster critical minerals resilience. Key programs include:
- $500 million for battery materials processing and recycling, as outlined in an HK Law brief, targeting lithium, nickel, and rare earths.
- $135 million for rare earth element (REE) demonstration facilities, detailed in a market report, focusing on unconventional feedstocks like mine tailings.
- $250 million for byproduct recovery from industrial operations, per a Clarios announcement, extracting cobalt, gallium, and antimony.

These initiatives emphasize avoiding foreign entities of concern (FEOCs) and prioritizing domestic production. Yet, as the Carnegie Endowment notes, a purely onshoring approach is insufficient; the U.S. must balance domestic development with international collaboration.

Recycling and Processing Innovations: Closing the Loop

Recycling is emerging as a cornerstone of U.S. strategy. The Payne Institute's 2025 report highlights that retaining and recycling copper scrap could reduce import dependence from 45% to 15%, as outlined in Refining the Future. Similarly, byproduct recovery from existing mining operations could eliminate imports of 27 critical minerals if just 10% of available byproducts are processed, the Payne Institute report finds.

Private-sector innovation is accelerating this transition. Clarios, the world's largest low-voltage battery recycler, is investing $1 billion in a U.S. facility to extract antimony and other minerals from recycled materials. Valor, a startup founded by Glencore's former recycling head, is developing cost-effective refining technologies for copper and rare earths, according to a Reuters report. These efforts align with the DOE's $50 million Critical Minerals and Materials Accelerator, which funds advancements in direct lithium extraction and magnet supply chains.

Emerging Markets and Strategic Alliances

Emerging markets are playing a pivotal role in reshaping supply chains. Kazakhstan, with its vast reserves of copper and uranium, is a focal point for U.S. offshoring efforts, as argued in a Forbes column. Meanwhile, the G7's 2025 roadmap emphasizes standards-based markets and innovation in the Indo-Pacific and Africa. These regions offer not only raw materials but also opportunities for value-added processing, reducing reliance on China's refining infrastructure.

However, challenges persist. Opaque U.S. legislation, such as the broad definition of FEOCs, risks alienating key mineral-producing nations, a point raised in the Forbes column. A balanced approach-combining domestic industrial policy with strategic offshoring-is critical to ensuring resilience without stifling global trade.

Investment Opportunities: Where to Focus

For investors, the critical minerals sector presents three key opportunities:
1. Recycling and Processing Firms: Companies like Clarios and Valor are positioned to benefit from DOE funding and growing demand for circular economy solutions.
2. Friendshoring Partnerships: Projects in Ukraine, Greenland, and Kazakhstan offer exposure to resource development and geopolitical diversification.
3. Technology Innovation: Startups advancing direct lithium extraction, rare earth separation, and byproduct recovery are likely to attract capital as supply chain security becomes a priority.

Conclusion: Navigating a Fractured Landscape

The U.S.-China rivalry over critical minerals is not a zero-sum game but a catalyst for innovation and collaboration. While geopolitical risks persist, the combination of domestic industrial policy, recycling advancements, and strategic alliances is creating a more resilient supply chain. For investors, the path forward lies in supporting technologies and partnerships that align with both economic and national security imperatives.