The Trump Administration recently hosted high-level discussions with officials from certain European, Asian, and African countries focused on critical minerals cooperation. During these meetings at the U.S. Department of State, the Office of the U.S. Trade Representative announced a “first-of-its-kind” action plan with Mexico as well as strategic partnerships with Japan and the European Union, each aimed at strengthening supply chains for materials essential to defense, advanced manufacturing, and clean energy. The Argentine Foreign Ministry likewise signed a framework arrangement in connection with the meetings, although details of that framework have not yet been released. In addition, the White House called upon the 54 countries in attendance to sign a nonbinding agreement to identify and support projects within 6 months that deliver materials to the United States and its allies.
Background: Addressing Critical Mineral Supply Chain Concerns
The push reflects growing concern over the People’s Republic of China’s (PRC) dominance in rare earth elements. The PRC controls approximately 70 percent of global rare earth mining and 90 percent of processing capacity, creating vulnerabilities for the United States and its allies, who find themselves susceptible to the PRC’s geopolitically driven export restrictions on rare minerals.
The United States and its partners have pursued a variety of initiatives in response. For example, this week saw the announcement of Project Vault, a critical minerals stockpiling initiative funded by a $10 billion direct loan from the U.S. Export-Import Bank and roughly $1.67 billion in private capital. It is described as a “partnership between original equipment manufacturers and private sector capital providers,” but details have not yet been publicized.
Yesterday’s ministerial meeting emphasized the importance of building resilient supply chains through allied cooperation in order to sustain industrial capacity and long-term economic growth. Vice President Vance characterized it as “an opportunity at self-reliance that we never have to rely on anybody else except for each other, for the critical minerals necessary to sustain our industries and to sustain growth.” The action plan and partnerships announced are designed to operationalize these goals through coordinated trade and market-based mechanisms.
Japan-US-EU Critical Minerals Cooperation
The European Commission, the United States, and Japan announced a “strategic partnership” to strengthen the resilience of global critical minerals supply chains, citing shared economic and national security concerns arising from the existing distribution of sourcing and processing capacity.
The cooperation framework includes two principal components:
- U.S.-EU Memorandum of Understanding: Within the next 30 days, the United States (led by the State Department) and the European Union plan to conclude a memorandum focused on diversifying supply and stimulating demand across the critical minerals value chain, including mining, refining, processing, and recycling. The memorandum is expected to address supply-chain disruptions, promote research and innovation, and facilitate information-sharing on stockpiling. The initiative builds on an existing U.S.-Japan framework covering similar cooperation on critical minerals and rare earths, and follows other critical mineral dealmaking with, e.g., Australia, Malaysia, and Thailand.
- Plurilateral trade coordination: The United States (led by USTR), the European Union, and Japan also intend to develop action plans and explore a plurilateral trade initiative with like-minded partners. Tools under consideration include coordinated trade policies and market-shaping mechanisms such as border-adjusted price floors, standards-based markets, price-gap subsidies, and long-term offtake agreements.
The three partners also stated their intent to “explore additional possibilities for critical minerals resilience” in international fora, including the G7 and the Minerals Security Partnership.
Mexico-US Critical Minerals Action Plan
In parallel, USTR and the Government of Mexico announced a “first-of-its-kind” joint Critical Minerals Action Plan, marking a new phase of bilateral cooperation aimed at strengthening North American supply chains for critical minerals. Indeed, insofar as it is characterized as “a new paradigm for preferential trade in critical minerals,” this action plan and its outcomes should be considered indicative of what the United States hopes to attain in the forthcoming U.S.-EU-Japan action plan.
Essentially, the U.S.-Mexican action plan establishes a 60-day negotiation window for U.S. officials (led by USTR) and Mexican officials (led by the Secretariat of Economy). The parties’ primary focus will be to “discuss the feasibility and development” of border-adjusted price floors, among other coordinated trade policies and mechanisms. The two countries will also identify critical minerals projects of mutual interest for priority financing and “other policy support.” Finally, the action plan indicates an intent to share government survey information about the location of potential critical mineral deposits.
These bilateral discussions will also have an eye toward a future plurilateral agreement embodying critical mineral price floors. Beyond that key term, the scope of the envisioned plurilateral agreement is broad. It “may include” trade measures, shared regulatory standards for mining, processing, or trade, regulatory cooperation, investment screening and promotion, coordination on surveying and stockpiling, and a sort of rapid response mechanism in the event of supply disruptions.
Trade Implications
Agreements that incorporate border price floors appear likely to impact trade, notwithstanding uncertainty evident in the U.S.-Mexico Action Plan concerning how exactly to implement such a mechanism. In addition, these initiatives interact with the Trump Administration’s recent Section 232 investigation on processed critical minerals. USTR and Commerce were instructed to undertake negotiations aimed at “adjusting” processed critical mineral imports, including via price floors, to address threats to U.S. national security. However, the relevant Proclamation also entertains the potential for “alternative remedies in the future, including minimum import prices for specific types of critical minerals.” It is possible that a regime for critical minerals may evolve that is akin to the existing IEEPA “reciprocal” tariff regime in the sense that generally higher baseline rates are established for some countries, whereas other countries that make a “deal” thereby obtain generally preferential treatment.
Optimizing Supply Chains
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