In October 2025, Beijing imposed sweeping controls on rare earth exports. The controls have been suspended in short reprieves — the latest until November 10, with a broader trade truce through January 10, 2027 — but each reprieve has come only after American concessions. Even during the truce, China has constricted sales, and in June 2025 placed MP Materials and USA Rare Earth, the two companies Washington is counting on, on an export control list. The pattern is deliberate: Beijing controls the chokepoint and modulates the pressure. The article, written by three authors working at the intersection of finance and national security, frames the core problem with unusual precision. China refines more than 90 percent of the world's rare earths and close to 99 percent of heavy rare earths. The entire market for rare earth oxides is worth less than $10 billion. That a $10 billion market can grind to a halt trillions in global GDP is the definition of a chokepoint — and Beijing built it on purpose. Deng Xiaoping ordered rare earth development in 1964 alongside steel at an iron ore mine near the Mongolian border. Xi Jinping now openly speaks about maintaining global dependency on China's industrial supply chains. The U.S. didn't sleepwalk into this. It walked in with open eyes and rational spreadsheets. Until the late 1980s, America was the world's leading rare earth producer and refiner. But the Mountain Pass mine in California leaked roughly 600,000 gallons of radioactive waste into the Mojave. Cleanup costs mounted, margins collapsed, and the mine went fully idle by 2002. In 1995, General Motors sold Magnequench, its magnet unit, to a Chinese-backed consortium. By 2006, the last U.S. plant had closed and the machine tools had shipped to China. Economists at the time called this comparative advantage working as designed. The category error was treating rare earths as a market rather than a geostrategic chokepoint. The structural trap is elegant and vicious. When Beijing lets material flow, no private actor will build alternative supply, because Chinese state-funded producers can sell at or below cost indefinitely. When China cuts supply, the incentives reverse overnight — but capacity cannot follow overnight, because rebuilding takes a decade or more. In 2010, during a maritime dispute with Japan, Beijing reportedly halted rare earth shipments and Tokyo quickly conceded. The short-term truces of 2025 further entrench the cycle, keeping the U.S. off balance and frustrating any long-term reduction of leverage. Washington's response has been real but structurally confused. The One Big Beautiful Bill Act earmarks up to $100 billion in loan authority for critical minerals. The Pentagon's July 2025 deal with MP Materials includes $400 million in convertible preferred stock, loans, equity warrants, a 10-year guaranteed price floor, and a 10-year offtake commitment. But the deal blurs two roles: in ordinary years, the government is a lender financing capacity the market won't; in a crisis, it's an insurer against a geopolitical event. These roles call for different return profiles. Combining them puts the government in the position of simultaneously absorbing losses and inviting charges of nationalization, with no clear exit strategy — and whatever Washington builds must outlast the administration that built it. The authors propose a contingent convertible security — a CoCo bond — issued by the producer to the government and any private lenders, paired with guaranteed offtake at a price floor. In quiet years it functions as a simple loan paying interest. Two triggers change its form: a capacity threshold the producer must cross by a fixed date, and Beijing's behavior. If China weaponizes supply, the instrument converts into ownership. The design separates the lending function from the insurance function, giving investors clarity on which risk they're bearing and when. The proposal is genuinely novel financial engineering aimed at a real structural problem. But it exists on paper in a political system that has failed to hold a course on this issue across multiple administrations. The $100 billion in authorized lending means nothing if alignment between private investors, congressional appropriators, and executive-branch dealmakers cannot survive a single budget cycle. The CoCo bond mechanism is clever. Whether American politics can sustain it for the decade-plus timeline the supply chain requires is the real question the article leaves unanswered.
