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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
The writer is the senior fellow for geoeconomics and defence at the Council on Foreign Relations and served as the first US assistant secretary of defence for industrial base policy from 2023-25
The Pentagon’s recent investment in MP Materials, in which it committed to purchase 100 per cent of the mining company’s rare earth magnets for 10 years, is a creative game-changing potential use of America’s Defense Production Act (DPA). It offers the kind of clear demand signal that the private sector requires from the federal government.
When overseeing Pentagon efforts to make supply chains independent of foreign adversaries I learnt that money and time are the real enemy. And mining and processing critical minerals eat up both. Investors don’t like costly endeavours that take 20-30 years to reap the benefits. As the cost of capital increases, the market will take time to adjust for the risk. Shortages in critical minerals and rare earth magnets are already causing backlogs in key defence systems. But public funding can quickly crowd in private capital when the market is slow and national security needs are acute. China’s moves to limit rare earth exports create a battle over the very minerals that many industries desperately need.
The US government has many levers to combat Beijing’s weaponisation of minerals. But Washington tends to propose new initiatives rather than look closely at what already works. And the DPA is the one tool that has actually delivered results.
It’s set to expire in September unless Congress reauthorises it immediately. Letting it expire would jeopardise the US’s best chance to counter Chinese manipulation of critical minerals processing. Congress needs to reauthorise the DPA and fund it aggressively.
First enacted by Congress in 1950, the act allows the president to ensure the availability of industry for US defence, and essential civilian and homeland security requirements. It allows the government to prioritise federal contracts, allocate scarce material, and incentivise industry to produce for national security needs through grants, purchase commitments, loans and loan guarantees.
Working with Congress, the Trump administration seeks to extend DPA authorities to the Development Finance Corporation and the Export-Import Bank, the US’s official export credit agency. It also proposes to increase appropriations for and reorient the defence department’s newest initiative, the Office of Strategic Capital, to expand mining and mineral production.
Getting things done in government is difficult and onshoring supply chains will take time. But with the right leadership and levels of Congressional funding, the DPA is the most effective supply chain stabilisation lever we have.
While the MP Materials investment shocked the market, the reality is that the Pentagon has been using the DPA aggressively for the past four years. When I served in the Pentagon, the defence department made over $1bn in grants under the act for strategic and critical materials.
But such grants aren’t just a one-stop shop for free government dollars — the DPA can spur additional private investment. For example, when we awarded Graphite Creek a $37.5mn DPA grant for an Alaska graphite mine, it triggered a private investor-supported project to establish a downstream $435mn graphite processing plant in Ohio.
With the right level of Congressional funding, the Pentagon can enter into more long-term purchase agreements, as it did with MP Materials, helping innovative companies seeking to solve the critical minerals crisis.
So rather than debating reauthorisation, Congress should be aggressively increasing the monies available for the DPA and supply chain resilience. Without the act, the US would lose the most effective tool in our arsenal for ensuring economic security, spurring innovation and addressing critical supply chain gaps. Congress needs to act now.
