AsianFin -- The Trump administration will strengthen its supply chain by acquiring stakes in strategic industries in the face of China’s new rare earth export controls.
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U.S.Treasury Secretary Scott Bessent on Wednesday told CNBC that China's new export restrictions on rare earth minerals and magnets requires America to be self-sufficient in critical materials or shift more of supply chain to trusted allies.
“I wouldn’t be surprised,” Bessent said when asked about additional equity stakes. “When we get an announcement like this week with China on the rare earths, you realize we have to be self-sufficient, or we have to be sufficient with our allies.”
More stakes are possible for sectors important to U.S. national security, including in rare earths, semiconductors, pharmaceuticals and steel, Bessent said, adding that the White House has identified seven industries and nonstrategic industries would not be under consideration. “We do have to be very careful not to overreach,” said the Treasury chief.
In rare earths, the Trump administration will set price floors across a range of industries to combat market manipulation by China, according to Bessent. He claimed China has been leveraging its dominance in refining and processing to cut prices, thus driving foreign competitors in the rare earth industry out of business over the past two decades. "So when you are facing a non-market economy like China, then you have to exercise industrial policy," he said.
The Trump administration will also build strategic mineral stockpiles, Bessent revealed. JPMorgan Chase is interested in working with the administration to create such a reserve, he said.
Bessent also criticized the practices of some defense contractors like late delivery, saying the government may have to put more pressure on them to improve performance."I do think our defense companies are woefully behind in terms of deliveries, so we may have to, as their biggest customer ... prod them to do a little more research, a little fewer stock buybacks, which is really what got Boeing into trouble," he said.
The U.S. government has shifted from subsidies to direct stakes in Intel Corporation and some critical mineral miners earlier this year. MP Materials, America’s only integrated rare earth producer,on July 10 said the U.S. Defense Department will become its largest shareholder after it agreed to buy $400 million of its preferred stock.
U.S. President Donald Trump on August 22 announced his administration now “fully owns and controls 10% of ”Intel, a company that is “fundamental to the future of our Nation.” Intel that day confirmed it agreed to give a nearly 10% stake to the Trump administration in exchange for a total of $11.1 billion funding under the CHIPS and Science Act of 2022 (CHIPS Act) .
The U.S. Department of Energy in late September agreed to take a 5% equity stake in Lithium Americas, a Canadian miner, and a separate 5% stake in its Thacker Pass mining project, the largest lithium deposit in the country. The White House last week confirmed a partnership that give the Pentagon a 10% stake in Canadian miner Trilogy Metals.
Bessent in late August hinted the Trump administration is eyeing more government stakes in the private sector, expanding its deal with Intel.
When asked if the administration is considering taking stakes in further semiconductor companies, Bessent replied:”I don't think Nvidia needs financial support.” Bessent added that companies in other industries that are critical for the United States could be the government’s target.
“So, you know, that that seems, not on the table right now, but could there be other industries, where you know, that we're reshaping, something like shipbuilding, that.Sure. There could be things like that. And these are critical industries that we have to, we have to be self-sufficient in the United States,” said Bessent.
