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Building America’s Defense Critical Metals Supply
Faced with China’s dominance, Washington is directly taking equity stakes in key companies, reshaping its industrial policy and global supply chains.
In a strategic pivot away from traditional free-market doctrine, the U.S. government is deploying what analysts call a “new state capitalism” to secure supplies of critical minerals. This approach involves using state capital to directly purchase equity stakes in core domestic companies, a move designed to rapidly build strategic industrial supply chains independent of China.
The shift is driven by a stark assessment: traditional tools like tariffs and loans are insufficient to quickly reduce U.S. vulnerability. China controls an estimated 90% of global rare earth refining capacity, and minerals like gallium, cobalt, and lithium are vital for semiconductors, advanced weapons, electric vehicles, and green energy. To win what officials term the “21st-century resource race,” the U.S. is transitioning from a market referee to an active investor and strategic shareholder.
“We’re literally buying equity… because that’s the only way we’re going to catch up with China on these things,” stated Jarrod Agen, executive director of the National Energy Dominance Council. This underscores the strategy’s essence: using equity stakes to create deep alignment between state interests and private companies, leveraging both public credit and market forces to accelerate domestic production.
Since 2024, the U.S. has invested over $10 billion using this model, taking positions in at least nine core firms across the supply chain:
This approach essentially constitutes the state picking winners. The government is deploying a massive financial toolkit—including the Defense Production Act and Energy Department loan programs—to back chosen strategic firms. The White House defends this as correcting market failure. “If business-as-usual policies worked, America would not be reliant on foreign countries,” a spokesperson argued, asserting equity stakes ensure “taxpayers get a good bargain” and spur private investment.
However, the strategy sparks significant debate. Critics warn that direct government investment sends a powerful political signal that could distort markets, crowding out unchosen competitors and warping capital and innovation flows. On transparency, Columbia University scholar Aaron Bartnick fears a lack of a clear public framework could lead to “arbitrary deals that favor friends or disfavor foes.” A deeper philosophical conflict exists: this marks a fundamental shift in U.S. industrial policy, blurring the lines between developmental finance and state-led venture capitalism by turning the government from a rule-maker into a direct market participant.
The strategy extends beyond U.S. borders. Washington is actively constructing a global “minerals diplomacy” network aimed at containing China’s resource influence. In October 2025, it signed multi-billion-dollar mineral cooperation agreements with five nations, including Japan and Australia. It also established a $150 million joint development mechanism with Ukraine, securing preferential access to its mineral resources. These actions indicate an effort to replicate and upgrade China’s own state-capital-driven global resource integration model, uniting allies to build a “de-risked” critical minerals supply chain that excludes China.
The move from loan guarantees to direct equity stakes marks a new phase in great-power competition, centered on “state capital + strategic industry.” This race is not only about technology and markets but about how national will reshapes global industrial chains through capital tools. Its ultimate success hinges on Washington’s ability to balance breaking market dogma with avoiding inefficiency, truly building a secure and competitive domestic supply chain. This strategy is set to intensify the global scramble for resources and profoundly reshape the geopolitical economic landscape.
