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Dispute for critical minerals gains new geopolitical weight with billion-dollar investments from the United States, advancement over assets in Brazil, and attempt to reduce Chinese dependence on magnets used in defense, electric cars, and high-value industrial technologies.
The Pentagon has intensified a financial offensive to reduce the United States’ dependence on rare earths and magnets controlled by China, in a strategy that now includes Brazil after the purchase of the Serra Verde mining company by the American USA Rare Earth.
Valued at about US$ 2.8 billion, the operation fits into a broader Washington plan to form supply chains outside Chinese influence in critical minerals used in defense, electric vehicles, and industrial equipment.
Although they appear in small quantities in final products, these inputs support high-value-added sectors and have become strategic for governments seeking to reduce industrial vulnerabilities in the face of trade restrictions and geopolitical disputes.
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At the center of this initiative is an internal group from the Department of Defense informally known as “Deal Team Six”, a nickname that refers to the elite unit Seal Team Six of the United States Navy.
Formed by former Wall Street professionals, the team works a few blocks from the White House and has been mandated to structure billion-dollar operations at an accelerated pace, using financial instruments uncommon in the Pentagon’s traditional routine.
Among the tools under discussion are equity purchases, minimum price guarantees, long-term acquisition contracts, loans, and purchase commitments aimed at companies considered strategic for American national security.
According to Bloomberg, the team claims to have US$ 200 billion in financing capacity for the next three years, a value that reveals the extent of the attempt to reposition the United States in the global critical minerals market.
Brazil enters the center of the dispute for rare earths
The acquisition of Serra Verde has placed Brazil in a more relevant position in the global dispute for rare earths, especially because the company operates the Pela Ema project in Goiás, aimed at producing elements used in permanent magnets.
In this set, dysprosium and terbium appear as heavy materials of high industrial interest, as they are used to enhance the efficiency and resistance of magnets applied in electric motors, defense systems, and clean energy technologies.
The agreement announced by USA Rare Earth includes payment in cash and shares, as well as integrating Brazilian production into a chain that also involves industrial and mineral assets in the United States and the United Kingdom.
As the transaction still depends on regulatory and corporate steps, completion is expected by 2026, according to information released by the companies involved and international agencies monitoring the mining sector.
Since the start of commercial production in 2024, Serra Verde has been seen as one of the few relevant suppliers outside Asia capable of delivering rare earth magnetic elements at scale.
For Washington, this characteristic makes the Brazilian asset especially sensitive, as the permanent magnet supply chain remains concentrated in China and relies on technical steps that are difficult to quickly replicate in other countries.
However, the American presence in the business did not begin only with the purchase by USA Rare Earth, as Serra Verde had already received financing linked to the United States International Development Finance Corporation.
Used by Washington to support projects considered strategic in other countries, the financial agency extends the reach of the American policy on critical minerals and reinforces the United States’ interest in assets located outside of China.
China dominates rare earth magnet production
Over decades, China has consolidated its advantage in rare earths by dominating steps from separation and refining to the manufacturing of permanent magnets, creating an integrated chain that is difficult to replace in the short term.
According to the International Energy Agency, the country accounted for 94% of global rare earth magnet production in 2024, a figure that highlights the industrial concentration in a technology essential for different production chains.
This dependency became more visible when Beijing began restricting exports of critical minerals and magnets, a measure that exposed the vulnerability of Western industries dependent on Chinese components to keep production lines running.
Automakers and industrial equipment manufacturers warned of risks of shutdowns, while governments began treating the supply of these inputs as an issue of economic, industrial, and military security, not just a commercial matter.
In the United States, the episode reinforced the perception that Chinese dependency has ceased to be just a market problem and has come to involve direct risks to the defense industrial base.
Rare earth magnets are used in defense systems, missiles, radars, drones, electric motors, and clean energy technologies, which explains the pressure to create alternative suppliers in allied or politically aligned countries.
“We are at a maximum alert level,” said Rush Doshi, former director for China at the National Security Council during the Joe Biden administration, commenting on the urgency of the American reaction to Chinese dominance.
In his assessment, there is currently a perception in Washington that there is no time to rely solely on a market-driven solution, especially after the restrictions imposed by Beijing on sector exports.
Pentagon expands direct intervention in companies
The change in American stance became more evident in July 2025, when the Pentagon closed a $400 million deal with MP Materials, the only rare earth producer operating in the United States.
With the transaction, the government became the largest shareholder of the company and began using instruments typical of private investors to support companies considered essential to American industrial autonomy.
The package included minimum price guarantees for certain products, support for a new magnet facility, and a commitment to purchase production by defense and commercial sector clients.
Behind this structure, the logic is to offer financial predictability to companies competing in a market dominated by already consolidated, subsidized Chinese suppliers capable of competing with lower costs.
The Economic Defense Unit, formalized in April, operates under the authority of Deputy Secretary of Defense Stephen Feinberg, a billionaire in the private equity sector and a central figure in the articulation of new financial instruments.
In coordination with areas of the Department of Defense, the Department of Commerce, and American government financial agencies, the structure seeks to transform critical minerals into a permanent part of national security policy.
This coordination represents a shift in the United States’ stance, which has begun to treat critical minerals as strategic infrastructure, similar to sectors considered essential for energy, technology, and defense.
Instead of merely granting traditional contracts, the government now attempts to directly influence the productive capacity of relevant companies, assuming financial risks that were previously almost always restricted to the private sector.
Critics point to risk of haste and conflict of interest
The speed of negotiations, however, has sparked criticism among experts and industry representatives, who see a risk of public support for companies without sufficient operational history to deliver complex industrial projects.
Some of these critics argue that the policy may create incentives for companies to exaggerate their capabilities in search of financing, especially in a market marked by sensitive technology, high costs, and significant geopolitical pressure.
Derek Scissors, a senior fellow at the American Enterprise Institute, said that the Trump administration “practically shouts from the rooftops” that decisions may be made with a focus on financial gain, not just on building independent supply chains.
The Pentagon rejects this assessment and states that it maintains selection criteria focused on defense needs, with an analysis of the capabilities promised by each company before signing contracts or financial agreements.
The spokesperson Sean Parnell stated that the department maintains “strict impartiality” and prioritizes solutions that directly benefit the combatants, in addition to applying a rigorous process to evaluate partners and verify marketing claims.
The doubts have also reached Congress, where lawmakers have begun to question how the new equity participation operations fit into existing laws for federal government investments and contracts.
In a hearing held in February, Republican Senator Roger Wicker, chairman of the Senate Armed Services Committee, stated that there are few rules to regulate this type of participation and advocated for greater coordination with lawmakers.
Strategic Magnets are a Central Target of Washington
The most ambitious goal of the American government is to develop the capacity to produce enough magnets to meet half of the world’s demand by 2030, a goal considered difficult even by analysts favorable to the strategy.
To reach this level, it will be necessary to combine mining, separation, refining, metallurgy, and large-scale industrial manufacturing, steps that require high capital, technical knowledge, and contracts capable of sustaining continuous production.
In addition to the agreement with MP Materials and the acquisition of Serra Verde by USA Rare Earth, the American government has been pressuring automakers and major consumers to sign purchase contracts with non-Chinese suppliers.
These commitments are seen as a way to ensure demand even before part of the production reaches commercial scale, reducing risks for companies that need to invest in factories and processing technology.
The challenge, however, goes beyond mineral extraction, because the rare earth supply chain depends on specialized processing and magnet manufacturing, stages in which China has industrial scale and accumulated experience.
This bottleneck helps explain why new mines, on their own, are not enough to alter the global structure of the sector, even when they are located in countries with significant reserves and international financial support.
Even so, the American strategy gained momentum after Chinese export restrictions, which showed how decisions made in Beijing can quickly affect automakers, defense suppliers, and clean technology manufacturers.
For authorities in Washington, creating alternatives outside China has become a requirement to protect both the civilian industry and the defense industrial base, especially in light of the growing global demand for magnets.
Supply Outside China Depends on Scale and Time
Even with billions of dollars in incentives, the Pentagon’s plan is not expected to produce immediate results, because mining and processing projects require years of licensing, construction, industrial testing, and commercial consolidation.
The most optimistic projections indicate that American and partner supply should only gain significant traction towards the end of the decade, while global demand for permanent magnets continues to expand.
Bloomberg Economics analysts estimate that rare earths support an added value production of up to US$ 1.2 trillion, despite being used in small volumes in final products.
This relationship helps explain why governments have started to compete more intensely for mines, processing plants, and long-term contracts, in a race involving defense, energy transition, and industrial competitiveness.
Brazil’s entry into this board occurs precisely when the United States, European Union, India, and other countries seek to reduce vulnerabilities in critical chains exposed to trade restrictions and diplomatic tensions.
With significant reserves and projects in development, the country has come to be seen as a potential supplier in an industry marked by geopolitical risks, high technical requirements, and direct competition for international financing.
The progress, however, will depend on the ability to transform mineral potential into stable, traceable, and competitive production, with adequate processing, continuous financing, and buyers committed to long-term contracts.
Without these conditions, new mines outside China may continue to be far from altering the global structure of the sector, despite the growing interest of governments and companies in alternative sources of rare earths.
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