Trump Invokes War Powers to Boost Production of Rare Earths and Other Critical Minerals, Accelerating Project Launches and Financing

During Trump's first term, he relaxed production controls through executive actions, boosting US oil and gas production. Now, he seems prepared to take similar measures in the mining sector, particularly for rare earths.

On Thursday, Trump signed an executive order invoking wartime powers to mobilize and expand domestic production of critical minerals. By citing the Defense Production Act from the Truman era, the US President can mobilize the domestic industrial sector to provide materials deemed crucial for national defense.

(Source: White House)

Trump's latest executive order is broad in scope, covering not only strategic minerals like rare earths but also gold, copper, potash, and other elements, compounds, or materials as confirmed by the newly established "National Energy Dominance Council" chair. According to media reports citing White House officials, this designation could even include coal.

Speaking at the White House on Thursday, Trump emphasized that the order would "significantly increase the production of critical minerals and rare earths."

Due to the decline of US manufacturing in recent years, this law has become a "frequent visitor" to the White House. During his first term, Trump invoked the law to accelerate the production of ventilators and personal protective equipment, while Biden used it to address the shortage of infant formula and to speed up the production of key minerals related to the green energy transition.

Global capital markets were also impacted by the executive order. Australian lithium miner Liontown Resources closed down 5.71% on Friday, and graphite producer Syrah Resources fell over 3%. Chinese mining stocks were also affected to some extent.

On the other hand, as of the time of writing, US rare earth developer MP Materials rose more than 4% during the night session.

According to the executive order, relevant federal agencies will submit a list of projects for approval and identify priority mineral production projects that can be "immediately approved" or granted permits. The order also allows the government to prioritize federal lands for mining over other uses and to provide loans for new projects through the U.S. International Development Finance Corporation.

It is no surprise that Trump values rare earths and other minerals. In his congressional speech this month, he mentioned plans to take "historic action" to significantly expand the production of critical minerals and rare earths.

Many of his diplomatic moves in the past two months have been closely related to mining resources. The US government has already begun negotiations with the DRC to secure access to mineral resources, and on Thursday, Trump also stated that the previously stalled Ukraine mineral agreement would be signed.

In his speech, he said, "This is a big deal for our country, and you know we are signing agreements all over the place to unlock rare earths, minerals, and many resources around the world, especially in Ukraine."

Looking further ahead, rare earth development could be a potentially important part of future economic cooperation between the US and Russia. One of the reasons Trump is interested in Greenland, a Danish autonomous territory, is its rich rare earth resources.

The US is currently a major importer of metal raw materials, including aluminum and copper, which are widely used in construction and manufacturing, as well as rare earth products used in consumer electronics and the defense industry.

JPMorgan once estimated that about 80% of US aluminum demand relies on imports. Data from ING also shows that nearly half of the copper consumed in the US needs to be imported.