Trump Thinks the Feds Can Fix America's Critical Mineral Supply Chain

Invoking the Defense Production Act won't boost the supply of critical minerals.

On his first day in office, President Donald Trump signed an executive order to unleash American energy by reducing regulations and shrinking the size of government. "Burdensome and ideologically motivated regulations have impeded the development of [energy and natural resources], limited the generation of reliable and affordable electricity, reduced job creation, and inflicted high energy costs upon our citizens," the order read. 

Trump's campaign to downsize government involvement in energy and natural resources appears to be over. On Thursday, the president signed an executive order to expand the federal government's authority in domestic critical mineral production. 

Specifically, the order invokes the Defense Production Act (DPA) to direct the secretary of defense "to create, maintain, protect, expand, or restore domestic industrial base capabilities essential to the national defense" by buying critical minerals, making subsidy payments for domestically produced materials and "purchasing equipment for government and privately owned industrial facilities to expand their productive capacity." 

The order confers DPA authority to federal agencies to issue loans and loan guarantees to shore up the supply of critical minerals "or essential materials needed for defense purposes." Agencies are also directed to identify "priority" critical mineral projects and expedite their permitting process. 

The DPA was passed during the Korean War to give presidents broad authority to "influence domestic industry in the interest of national defense," according to the Congressional Research Service. National defense activities can include programs for military and energy production and homeland security or stockpiling. The DPA grants authority to the president (with minimal Congressional oversight) to prioritize and accept contracts for materials needed to secure national defense, use loans and loan guarantees to incentivize domestic manufacturing, and block foreign corporate mergers and acquisitions that "undermine national security." 

Unilaterally granting the executive branch broad powers with little oversight has time and again led to wasteful spending. The first Trump administration used the DPA to expand the production of masks and vaccines for COVID-19, including issuing a $138 million grant to a medical supply company to develop an innovative syringe pre-filled with COVID-19 vaccine. The company failed to produce a single syringe to administer the vaccine. 

The Biden administration used the DPA to supercharge domestic production of green energy and grid technology, circuit boards from Canada and the U.S., and critical minerals and mines. Legislation under the Biden administration—including the Inflation Reduction Act (IRA), the second Ukraine funding package, and federal appropriations—gave the Department of Defense billions of dollars for DPA-related activities. 

Through IRA funding, the Defense Department dolled out $250 million to 12 domestic critical mineral projects. The Loan Programs Office, which is administered by the Energy Department and whose budget was supercharged by the IRA, dispersed $2.6 billion to finance the construction of a lithium processing facility in Nevada. 

More government involvement and funding have not bolstered America's critical mineral supply chain—the United States still largely relies on imports (especially from China) to meet the nation's demand—or fixed the regulatory issues that have shuttered domestic mining and processing for decades. 

In his executive order, Trump says, "It is imperative for our national security that the United States take immediate action to facilitate domestic mineral production to the maximum possible extent." Increasing the federal government's reach in the economy is the wrong way to accomplish this objective.