# America Didn't Lose Its Rare Earth Industry. It Sold It.

> U.S. sold rare earth industry to China for economic gain, now faces supply chain risks.
- Title: America Didn't Lose Its Rare Earth Industry. It Sold It.
- Summary: U.S. sold rare earth industry to China for economic gain, now faces supply chain risks. The U.S. voluntarily transferred rare earth production to China in…
- Keywords: rare earths, china, u.s. supply chain, critical minerals, one big beautiful bill, mp materials, usa rare earth, treasury secretary, scott bessent, beijing, export controls, supply chain resilience
- Source: Default — https://lawfaremedia.org/article/america-didn-t-lose-its-rare-earth-industry.-it-sold-it
- Read time: 2 min
- Topics: rare earths, china, u.s. supply chain, critical minerals, one big beautiful bill, mp materials, usa rare earth, treasury secretary, scott bessent, beijing, export controls, supply chain resilience
## China's Rare Earth Controls
In October 2025, Beijing imposed sweeping controls on rare earth exports, suspended until Nov. 10 with a broader trade truce through Jan. 10, 2027.
## U.S. Companies on Export List
Beijing placed MP Materials and USA Rare Earth, the U.S. companies building alternative supply chains, on an export control list in June 2025.
## U.S. Supply Chain Efforts
Washington has $100 billion in loan authority for critical minerals under the One Big Beautiful Bill Act but lacks political alignment to scale supply chain rebuilding.
## Historical Context
The U.S. was the world's leading rare earth producer until the 1990s when the Mountain Pass mine shut down due to radioactive waste leaks.
## China's Strategic Shift
China now processes 99 percent of heavy rare earths and nearly all materials for precision-guided weapons and advanced chips.
## Market Failure
The rare earths market is worth less than $10 billion but can halt global economic activity, making it a strategic chokepoint controlled by China.
## U.S. Strategic Mistake
The U.S. sold its rare earth industry to China in the 1990s for economic efficiency, creating long-term dependency on Chinese supply chains.
## Beijing's Leverage
Beijing uses rare earth exports as a geopolitical tool, cutting supply during disputes to maintain leverage over the U.S. and its allies.
## Government Financing Challenges
Government financing for rare earth supply chains faces misaligned interests between private investors, lenders, and Congress.
## CoCo Bond Proposal
A contingent convertible security could align interests by converting into ownership if Beijing weaponizes rare earth supply.
## Capacity Trigger
The CoCo bond triggers when a producer meets a capacity threshold, sharing profits with lenders to incentivize build-out.
## Beijing's Behavior Trigger
The CoCo bond also triggers if Beijing cuts supply through export controls or bureaucratic delays, converting lenders into equity.
## Risk Sharing
The CoCo bond shares the risk of Beijing weaponizing supply with private investors, avoiding nationalization or welfare concerns.
## Implementation Challenges
Statutory authority, trigger definitions, and CFIUS integration must be addressed to make the CoCo bond work in practice.
## Long-Term Solution
The U.S. needs a financial instrument that can absorb decades of investment while protecting against Beijing's supply cuts.
## Key takeaway

The U.S. voluntarily transferred rare earth production to China in the 1990s, creating long-term dependency on Chinese supply chains.