The Global Significance of Rare Earth Minerals
While we continue to focus on local matters, significant events unfold in the global arena beyond our public discussions. Last week, I described a new front in the trade war between China and E.: rare earth minerals. These minerals, which are not truly rare, are crucial to the 21st-century economy as they are used in semiconductor manufacturing, AI chips, batteries, electric vehicles, and advanced military and defense applications.
US Dependence on China for Rare Earth Minerals
Currently, the US relies on China for these materials. This dependency is partly due to China’s massive investments, which ironically began in the 1990s with the purchase of Magnequench, a General Motors division. This acquisition moved production and specialized equipment from Indiana to China, transferring American knowledge and technology.
US Initiatives to Reduce Dependence on China
In response, the US is seriously considering an “Operation Warp Speed” to decrease its growing reliance on China. The plan includes financial incentives to encourage local competition, the creation of international coalitions to share risks and aggregate demand, urgent reforms in permitting processes to eliminate legal barriers, and a firm stance on export restrictions of advanced technology. Inspired by the success against COVID-19, this approach combines state investments, purchase guarantees, and the establishment of a strategic reserve to stabilize volatile prices. This is a direct response to China’s recent export controls imposed on October 9, 2025, which made it clear that relying on China for these critical inputs is too risky.
Mexico’s Potential in the Rare Earth Mineral Supply Chain
Mexico has immense potential to become a strategic partner in supplying critical minerals for North America. We have lithium deposits in Sonora, potential for rare earth minerals in Oaxaca and Chiapas, and are already a significant copper producer. These resources could be vital in establishing a regional rare earth mineral supply chain.
Moreover, Mexico offers logistical advantages, established industrial infrastructure, and a skilled workforce, which could facilitate refining and intermediate manufacturing processes. If nearshoring materializes, the country would have the opportunity to deeply integrate with the US in the production and transformation of critical minerals, reducing China’s influence and fostering development in lagging regions.
Challenges to Realizing Mexico’s Potential
However, such a plan would face self-imposed obstacles. The centralization of exploration in state hands, the suspension of new mining concessions, and regulatory uncertainty have stalled strategic investments and reduced international investor confidence. Additionally, increased mining taxes make Mexico less competitive compared to countries like Chile or Canada, and a slow, opaque permitting process further discourages investment. Furthermore, these industrial processes are energy-intensive, and Mexico currently lacks the necessary energy resources.
Key Questions and Answers
- What are rare earth minerals, and why are they important? Rare earth minerals are not truly rare but are crucial for the 21st-century economy due to their use in semiconductors, AI chips, batteries, electric vehicles, and advanced military applications.
- Why is the US concerned about its dependence on China for these minerals? The US relies heavily on China for these materials, partly due to China’s massive investments that have transferred American knowledge and technology. Recent export controls imposed by China highlight the risks of this dependency.
- What role could Mexico play in reducing US dependence on China for rare earth minerals? Mexico has significant potential due to its mineral resources, logistical advantages, and skilled workforce. It could become a strategic partner in the North American rare earth mineral supply chain, fostering development and reducing reliance on China.
- What challenges does Mexico face in realizing this potential? Centralized exploration, regulatory uncertainty, increased mining taxes, a slow permitting process, and energy constraints pose significant challenges to attracting the necessary investments.
