Building a New Market to Counter Chinese Mineral Market Manipulation

Because the United States accounts for only a small portion of global consumption of critical minerals, it should partner with allies to build a shared “anchor market” and coordinate policy measures—such as export restrictions and investment incentives. A unified market of this scale would be capable of challenging China’s dominance and providing the West with meaningful strategic leverage. The United States is not the only country negatively impacted by China’s export restrictions. The European Association of Automotive Suppliers issued a warning last week that multiple auto supplier plants and production lines in Europe have been forced to shut down due to China’s rare earth export restrictions. Japanese carmakers, including Nissan and Suzuki, have also reported supply chain disruptions linked to China’s rare earth export controls, with Suzuki halting production of its Swift model.

China would be less likely to impose export restrictions on critical minerals if doing so risked reciprocal measures—such as restrictions on Australian lithium exports. Currently, Australia is the world’s largest lithium producer and sends 51 percent of its lithium exports to China for refining; without that, China’s grip on lithium-ion battery production would be significantly weakened. Collaborating with Australia on an anchor market would be crucial, given both its significant resource endowments with 31 critical minerals, but also because it is home to the most advanced capabilities for the mining industry outside of China. Mining accounted for 13.6 percent of Australia’s gross domestic product in 2023, compared to 1.3 percent in the United States. Australia has taken an increasingly hardline stance against China. It became the first country to ban Huawei from rolling out its 5G network in 2018, citing national security concerns and the potential for a foreign government to exert undue influence or control over critical infrastructure. In the same year, the Australian Department of Education imposed restrictions on its higher education and research sector to counter the risks of foreign interference. This year, Australia committed to setting up a strategic mineral reserve to reduce Australia and like-minded allies’ reliance on China, and recent federal funding for Iluka Resources’ Eneabba Rare Earths Refinery in Western Australia was contingent on offtake agreements with like-minded countries. Ideally, the shared leverage generated by an anchor market would act as a deterrent, making China less willing to initiate punitive actions in the first place.

Which Countries Could Be in the Anchor Market?

The larger the anchor market, the more effective it will be in countering China. If countries continue to operate independently instead of collectively, China will retain its dominant position because no single nation has enough market leverage on its own. The anchor market can leverage existing multilateral frameworks, such as:

• The Minerals Security Partnership (MSP), which brings together 14 countries plus the European Union: Australia, Canada, Estonia, Finland, France, Germany, India, Italy, Japan, Norway, South Korea, Sweden, the United Kingdom, and the United States. Collectively, the MSP represents a market of approximately 2.79 billion people, which is double the size of China’s population of 1.41 billion. By contrast, the United States on its own would command a market of just 340 million people. Beyond market scale, the MSP also provides access to the advanced technical expertise of countries like Australia and Japan, both of which are leaders in mineral processing—a capability that the United States itself lacks. Ultimately, the MSP offers an opportunity to move beyond symbolic agreements and build a market with sufficient scale to effectively challenge China’s dominance, using coordinated tariffs, quotas, and incentives.
• The Group of 7 (G7) plus Australia: As the G7 convenes its 51st Summit in June 2025 in Kananaskis, Canada, critical mineral security is expected to be a central topic. Each of the G7 countries—Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States—has identified securing critical minerals as a key strategic objective. Establishing a unified anchor market across the G7 to counter China’s dominance aligns with the interests of all member nations.

Recommendations for Leveraging an Anchor Market to Counter China:

1. Harmonize tariffs across anchor market countries. Allied nations are already looking at ways to protect their markets from Chinese dominance using price support tools like price floors, contracts-for-differences, strategic stockpiling, and tariffs. Supporting higher prices is essential to attract Western investment in markets overwhelmed by Chinese companies producing at razor-thin or negative profit margins, subsidized by the Chinese Communist Party. While tariffs can be an effective instrument, a single country acting alone is unlikely to make a significant difference for mineral prices given the small size of their offtake markets. Instead, establishing a unified market where tariffs aren’t used against one another—but are instead applied consistently to Chinese imports—will be vital for securing supply from allied nations and creating a tariff policy against China that delivers meaningful results.
2. Implement gradually increasing quotas that require mineral inputs to be sourced from anchor market countries. For example, the quota could begin at 10 percent in the first year, 25 percent by year three, and 60 percent by year ten. This approach goes beyond the Inflation Reduction Act, which incentivized but did not mandate mineral procurement from the United States and its free trade agreement partners. Unlike that incentive-based system, this policy introduces a binding requirement, though phased in over time and calibrated to actual supply capacity within anchor markets. It also sends a clear long-term market signal that encourages investments and capacity-building in the anchor market countries.
3. Strengthen investment screening mechanisms and, when necessary, prohibit Chinese acquisitions of critical mineral assets within anchor market countries. Despite low global commodity prices, Chinese companies continue to acquire stakes in key minerals such as rare earths, cobalt, nickel, and lithium—assets that will eventually enter production and further suppress prices. Curbing future Chinese acquisitions is essential to protecting the economic stability of anchor markets.

The United States currently utilizes the Committee on Foreign Investment in the United States, an interagency body that reviews foreign investments for potential national security risks. Expanding similar frameworks across allied countries will be crucial to limiting China’s ability to distort global markets. Australia has already taken steps in this direction: In 2024, Treasurer Jim Chalmers ordered several China-affiliated investors to divest from Northern Minerals, a rare earths producer, on national interest grounds. The directive specifically required the Yuxiao Fund to sell 80 million shares within 60 days.

Conclusion

China’s strategic manipulation of critical mineral markets poses a direct threat to global supply chain resilience, the viability of non-Chinese mining operations, and the broader transition to a secure, sustainable industrial base. Without coordinated policy responses, efforts to diversify supply chains will continue to falter under artificially suppressed prices and weaponized export controls.

The United States and its allies cannot afford to act in isolation. Unilateral efforts—whether through tariffs, subsidies, or investment restrictions—will remain insufficient given the relatively small market share of individual countries. Instead, building a unified anchor market that aligns the policies of like-minded nations is the only realistic path to confronting China’s dominance. By harmonizing tariffs, establishing collective quotas, and coordinating investment protections, the anchor market can shift leverage away from Beijing and toward a more resilient, rules-based minerals ecosystem.

Gracelin Baskaran is director of the Critical Minerals Security Program at the Center for Strategic and International Studies in Washington, D.C.