U.S.’ inability to replace rare earths supply from China poses a threat to its defense, warns CSIS
Workers transporting soil containing rare earth elements for export at a port in Lianyungang, Jiangsu province, China, Oct. 31, 2010.
Stringer | Reuters
As China imposes export controls on rare earth elements, the U.S. would be unable to fill a potential shortfall, according to the Center for Strategic and International Studies — and this could threaten Washington’s military capabilities.
Amid U.S. President Donald Trump’s escalating tariffs on China, Beijing earlier this month imposed export restrictions on seven rare earth elements and magnets used in defense, energy and automotive technologies.
The new restrictions — which encompass the medium and heavy rare earth elements samarium, gadolinium, terbium, dysprosium, lutetium, scandium and yttrium — will require Chinese companies to secure special licenses to export the resources.
Though it remains to be seen exactly how China will implement this policy, the CSIS report, published Monday, warns that it will likely result in a pause in exports as Beijing establishes the licensing system, and cause disruptions in supply to some U.S. firms.
The New York Times reported earlier this week that a pause in China’s rare earth element exports was already occurring.
As China effectively holds a monopoly over the supply of global heavy rare earths processing, such restrictions pose a serious threat to the U.S., particularly its defense technology sector.
“The United States is particularly vulnerable for these supply chains,” CSIS warned, emphasizing that rare earths are crucial for a range of advanced defense technologies and are used in types of fighter jets, submarines, missiles, radar systems and drones.
Along with the export controls, Beijing has placed 16 U.S. entities — all but one in the defense and aerospace industries — on its export control list. Placement on the list prevents companies from receiving “dual-use goods,” including the aforementioned rare earth elements.
Not ready to fill gap
According to CSIS’s report, if China’s trade controls result in a complete shutdown of the medium and heavy rare earth element exports, the U.S. will be incapable of filling the gap.
“There is no heavy rare earths separation happening in the United States at present,” CSIS said, though it noted the development of these capabilities is underway.
For example, the Department of Defense set a goal to develop a complete rare earth element supply chain that can meet all U.S. defense needs by 2027 in its 2024 National Defense Industrial Strategy.
Since 2020, the DOD has committed over $439 million toward building domestic supply chains and heavy rare earths processing facilities, according to data collected by CSIS.
However, CSIS said that by the time these facilities are operational, their output will fall well short of China’s, with the U.S. still far from meeting the DOD’s goal of an independent rare earth element supply.
“Developing mining and processing capabilities requires a long-term effort, meaning the United States will be on the back foot for the foreseeable future,” it added.
U.S. President Trump has also been seeking a deal with Ukraine, which would give it access to its deposits of rare earth minerals. However, questions remain about the value and accessibility of such deposits.
Implications
The CSIS report warns that the export controls pose direct threats to U.S. military readiness, highlighting that the country is already lagging behind in its defense manufacturing.
“Even before the latest restrictions, the U.S. defense industrial base struggled with limited capacity and lacked the ability to scale up production to meet defense technology demands,” its authors said.
They cite an estimate that China is acquiring advanced weapons systems and equipment five to six times faster than the U.S., originating from a U.S. Air Force official in 2022.
“Further bans on critical minerals inputs will only widen the gap, enabling China to strengthen its military capabilities more quickly than the United States,” the report concludes.
The U.S. is not alone in its concerns about China’s monopoly on rare earths, with countries like Australia and Brazil also investing in strengthening domestic rare earth elements supply chains.
CSIS recommends that the U.S. provide financial and diplomatic support to ensure the success of these initiatives.
However, China’s new export licensing system for the rare earths could also incentivize countries across the world to cooperate with China to prevent disruptions to their own supply of the elements, CSIS said.
A research report from Neil Shearing, group chief economist at Capital Economics, on Monday also noted how controls on rare earths and critical minerals have become part of Beijing’s playbook in pushing back against Washington.
Shearing notes that in addition to China’s hold on some rare earths, the supply of many other critical minerals, including cobalt and palladium, is concentrated in countries that align with Beijing.
“The weaponising of this control over critical minerals — and the race by other countries to secure alternative supplies — will be a central feature of a fractured global economy,” he said.
Palantir co-founder and CEO Alex Karp attends meetings at the U.S. Capitol in Washington on Oct. 18, 2023.
Jonathan Ernst | Reuters
With Palantir’s stock plummeting more than 11% this week despite a better-than-expected earnings report, CEO Alex Karp took aim at investors betting against the software company.
Karp, who co-founded Palantir in 2003, went after short sellers in two separate interviews on CNBC this week. After “Big Short” investor Michael Burry revealed bets against Palantir and Nvidia, Karp on Tuesday accused short sellers of “market manipulation.”
He repeated that message on Friday in an interview with CNBC’s Sara Eisen, again knocking Burry’s wager against the stock.
“To get out of his position, he had to screw the whole economy by besmirching the best financials ever … that are helping the average person as investors [and] on the battlefield,” Karp said.
Even with Palantir’s slide this week, the stock is up 135% in 2025 and has multiplied 25-fold in the past three years, an extended rally that’s lifted the company’s market cap to over $420 billion. While revenue and profit are growing rapidly, the multiples have shot up much faster, and the stock now trades for about 220 times forward earnings, a ratio that rivals Tesla’s.
Nvidia and Meta, by contrast, have forward price-to-earnings ratios of about 33 and 22, respectively.
In August, Citron Research’s Andrew Left, a noted short seller, called Palantir “detached from fundamentals and analysis” and said shares should be priced at $40. It closed on Friday at $177.93 after late-day gains pushed the stock into the green.
Palantir, which builds analytics tools for large companies and government agencies, reported earnings and revenue on Monday that topped analysts’ estimates and issued a forecast that was also ahead of Wall Street projections.
But the stock fell about 8% after the report and then slid almost 7% on Thursday. Karp told Eisen that the recent boom in Palantir’s share price isn’t just for Wall Street.
“We’re delivering venture results for retail investors,” he said.
While Palantir has in the past faced a fairly heft dose of short interest, there are currently relatively few investors placing big bets against it. The short interest ratio, or the percentage of outstanding shares being sold short, peaked at over 9% in September and is now at a little over 2%, which is about as low as its been since the company went public in 2020.
Still, calling out the doubters is a common occurrence for Karp, who has previously said on CNBC that people should “exit” if they “don’t like the price.”
In May, after the stock plummeted following earnings, Karp said ,”You don’t have to buy our shares.”
“We’re happy,” he said. “We’re going to partner with the world’s best people and we’re going to dominate. You can be along for the ride or you don’t have to be.”
The company has also faced backlash over its work with government agencies like U.S. Immigration and Customs Enforcement, and Karp has admitted that his strong pro-Israel stance led some people to leave the company.
The boisterous CEO has been particularly vocal this week. On Monday’s earnings call, he questioned how happy the people are who didn’t invest in the company, and told them to “get some popcorn.”
And on CNBC he aimed much of his ire at Burry after the investor revealed his short positions in Palantir and Nvidia.
“The two companies he’s shorting are the ones making all the money, which is super weird,” Karp told CNBC’s “Squawk Box” on Tuesday. “The idea that chips and ontology is what you want to short is bats— crazy.”
Affirm CEO Max Levchin said Friday that while the buy now, pay later firm isn’t seeing credit stress among federally employed borrowers due to the government shutdown, there are signs of a change in shopping habits.
“We are seeing a very subtle loss of interest in shopping just for that group, and a couple of basis points,” Levchin told CNBC’s “Squawk on the Street.”
At least 670,000 federal employees have been furloughed in the shutdown, and about 730,000 are working without pay, the Bipartisan Policy Center said this week.
Levchin said he’s closely watching employment data for signs of major disruptions, but the company is “capable” of adjusting credit standards when needed.
“Right now, things are just fine,” he said. “We’re not seeing any major disturbances at all.”
The federal funding lapse, which began Oct. 1, is the longest in U.S. history and has halted work across agencies with an impact beyond those who are government employees. The SNAP food benefit program, which serves 42 million Americans, has also been cut off.
The comments from Levchin followed a fiscal first-quarter earnings report that blew past Wall Street’s estimates. Affirm posted earnings of 23 cents per share on $933 million in revenue. Analysts polled by LSEG expected earnings of 11 cents per share on $883 million in sales.
Revenues climbed 34% from a year ago, while gross merchandise volumes jumped 42% to $10.8 billion from $7.6 billion a year ago. That surpassed Wall Street’s $10.38 billion estimate.
The fintech company, which went public in 2021, also lifted its full-year outlook, saying it now expects gross merchandise volume to hit $47.5 billion, versus prior guidance of $46 billion.
Affirm also said it renewed its partnership with Amazon through 2031. The company has also inked deals with the likes of Shopify and Apple in a competitive e-commerce landscape.
Long-time partner Walmart recently ditched Affirm for Swedish buy now, pay later firm Klarna, which went public in September after delaying its public offering due to market uncertainty caused by President Donald Trump‘s tariff plans. Worries of a pullback in discretionary spending due to tariffs ignited fears across the fintech sector.
Levchin said categories such as ticketing and travel have seen an uptick in interest, and consumer shopping remains strong. Active consumers grew to 24.1 million from 19.5 million a year ago.
“We’re every single day out there preaching the gospel of buy now, pay later being the better way to buy, and consumers are obviously responding,” he said.
-
Sports2 years agoStory injured on diving stop, exits Red Sox game
-
Sports3 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports2 years agoGame 1 of WS least-watched in recorded history
-
Sports3 years agoButton battles heat exhaustion in NASCAR debut
-
Sports3 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports4 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment2 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment1 year agoHere are the best electric bikes you can buy at every price level in October 2024