Welcome back to Critical Supply, a newsletter on trade, economic security, and EU-US-China relations. I’m Eduardo Castellet Nogués, the author of this newsletter.
After weeks of intense, high-level political engagement on critical minerals, geoeconomics seems to have slipped out of the news cycle. But the sector has not been quiet — all the opposite. Strategic actors from the government and the private sector in the US, Europe, and Africa have been moving to materialize pledges towards supply chain security. Today, we debrief on some of the most significant policy developments.
On March 19, the US-Japan Critical Minerals Action Plan entered into force. Led by USTR Jamieson Greer, the plan is rather short — only three pages — but commissions both parties with great responsibility. Chief among them, Tokyo and Washington must coordinate a “border-adjusted price floor”: a guarantee that specific minerals could only enter both markets above a set price. This would ensure China cannot dump prices at will, which harms Western firms, though mechanisms to enforce that price floor remain unspecified.
A commonly discussed approach is a G7-wide agreed-upon tariff, which would apply only above the mentioned price. While appealing, the idea is already receiving pushback in capitals senstive to tariff measures. Precisely because of the political cost, it is notable that Japan and the US are moving forward, inviting allies to join a “plurilateral framework” led by the two capitals. The text on this issue has not changed much from the Critical Minerals Summit hosted by the US Department of State only a few months ago.
The plan calls for alignments on standards, trade rules, and technical assessments, for which the two sides should consider a “Mutual Recognition Agreement.” An MRA is a recognition of conformity with another country’s regulatory standards, often resulting in a “tariff-exempt status” for a specific product. By pursuing this approach (which does not require Senate ratification, unlike an FTA), both capitals could agree on specific standards while acknowledging their differences over a large swath of domestic laws, ranging from environmental to land regulations, which would otherwise drain massive political capital.
Unsurprisingly, the EU-US Agreement on Critical Minerals is moving ahead more slowly than intended, but it is still advancing. Originally scheduled to reach an “Action Plan” on March 4th of this year, more than a month has passed, casting doubt on the likelihood of such an agreement. Despite the constant travel and enormous efforts by Trade Commissioner Maroš Šefčovič and his team, the reason might not be as much technical as it is political. Frustrations in Washington with certain European allies over the conflict in the Middle East appear to be a key factor — and some European leaders, led by PM Pedro Sánchez, are currently less focused on transatlantic cooperation.
Do not despair, however. Bloomberg has reportedly accessed a draft version of a potential action plan between the two Atlantic powers, which seems rather similar to that of the US and Japan. As a reminder, this deal has been “in the works” since the very early days of the Biden administration, which was unable to materialize it due to intense pressure from progressive, labor, and environmental groups. Leaders on both sides of the Atlantic should recognize that, despite disagreements over other issues, the two blocs face exactly the same threat from Beijing’s chokehold on critical minerals and its use of export controls.
Last year, the US and the Democratic Republic of Congo signed a strategic partnership dubbed the “minerals for security agreement,” aimed at bringing an end to a war with Rwanda and accelerating mineral investment. Those pledges have now materialized in a deal: Virtus, a national security investment firm, has purchased Chemaf, a cobalt and copper giant in the DRC that had become heavily overleveraged. The acquisition, valued at $30 million with a pledge to raise over $700 million to pay off the debts, is notable given its long timeline. The risky business environment in Congo and the infamous reputation of Chemaf’s debt had stalled this deal since the days of the Biden administration. After securing financing from venture capital firm Orion, however, Chemaf was saved. Orion itself has already acquired 40% of mining giant Glencore’s operation in the country, run by Mutanda Mining and Kamoto Copper Company, valued at $9bn.
Oddly enough, Chemaf’s largest creditor is Trafigura, which is also the leading firm involved in the Lobito Corridor, an EU-US-backed railway connecting mineral-rich regions in the DRC with the Angolese port of Lobito. Moreover, these minerals cannot be exported unrefined, as the DRC has strict rules demanding processing by local firms. As these investments materialize alongside those of the Lobito Corridor, the US will be able to secure the extraction, processing, and export of these minerals, a rare level of control across the supply chain.
With the largest reserve of critical minerals outside China, Brazil has a key role to play in the supply chain. Originally targeted in Biden’s “Americas Partnership for Economic Prosperity (APEP),” Brazil is both a member of BRICS and a country vying for global influence through MERCOSUR. Both Washington and Brasilia signaled interest in a deal, although follow-up is scarce due to political tensions.
On March 18th, the US Embassy in Brazil hosted a Critical Minerals Summit aimed at showing the bilateral relationship was open for business. However, no high-level Brazilian officials attended, citing scheduling conflicts. While the traffic in Brazil is notoriously terrible, the situation might be explained by political disagreements.
First and foremost, President Lula da Silva vowed to pass critical minerals legislation through his legislature to make the country more “business-friendly” alongside needed standards for a critical supply chain. Only that such a bill is stuck in Congress, and the government is yet to introduce a critical minerals strategy.
US support for former President Bolsonaro and his son (who is running against Lula this year) complicated good relations at the start, but as time has passed, so have diplomatic channels. A US minerals deal with the conservative-led state of Goias made the capital feel “out of the loop,” and soured relations with high-level officials in charge of the mineral portfolio. US diplomats, however, are not giving up and are reportedly persisting in achieving a deal, much to their credit. Hopefully, a recent agreement on transnational crimes between the two countries will motivate agreements on this front too.
China Gets Aggressive on Industrial Policy: On April 7th, Chinese Premier Li Qiang unveiled measures aimed at widening Beijing’s economic arsenal, drawing criticism. The 18-point plan calls for the government to identify vulnerable assets that need particular attention, and entitles the State Council (the cabinet) to investigate external policies that endanger the “global supply chain.” The plan establishes a set of early warning mechanisms for the selected supply chain, calling on local organizations and industry groups to report issues at the county level. One would have assumed Beijing already had such mechanisms in place, and while a few capitals involve local government in industrial policy, none do in national security matters. Moreover, the plan gives the State Council, not the Ministry of Commerce, broad powers to respond to external pressures through investigations, tariffs, and other “emergency measures,” which is likely to lead to quick escalations in a conflict-prone era. The move is a response to both similar Western policies targeting China’s control of supply chains and the challenges with oil exports out of the Middle East.
DeepSeek Expands into Mongolia: After a media boom due to its competitive algorithm, DeepSeek has gone by unseen in recent months. The Chinese AI firm, however, may now be moving into Mongolia to build new data centers, the first time it has done so publicly. DeepSeek hopes to run its models on NVIDIA advanced chips, the trading of which is highly volatile and illegal in China due to US export control regulations. The move showcases two trends: the first is that no matter how innovative, the best AI firms will continue to rely on US chips to train their models, which should encourage US policymakers to recognize NVIDIA’s innovation superiority. The second, however, showcases a long-acknowledged issue: computing power is not location-restricted. Indeed, the sale of H200 to China is highly regulated, but not to other countries. In this scenario, a Chinese firm uses data centers abroad to rely on the US tech stack, but others could simply outsource their cloud services, questioning the very nature of an export controls strategy.
America’s Seed Fund Gets Re-Authorized: On April 13th, President Trump signed the “Small Business Innovation and Economic Security Act,” which funds Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs through 2031. While SBIR and STTR have not attracted too much attention, they are critical assets in the economic security race. The two programs provide seed funding for American innovators contributing to the “national interest” to help reach the commercialization stage. Here is a great piece on how they can help the US compete with China.
70% of Europe’s R&D annual expenditure goes into legal compliance costs.
The Protectionist Nixon Redux Takes a Darker Turn Than the Original — FT — Alan Beattie
Geology Is Not Destiny: Brazil — PIIE — Monica de Bolle
The Face of America Abroad — Substack — US Secretary of State Marco Rubio
The Man Who Shaped Washington’s View of the Middle East — Foreign Policy — Dion Nissenbaum
Global Critical Minerals Jurisdiction Policy Analysis — Weaponized Economy — Rachel Ziemba
Practical Advice to Avoid Getting Pwned by AI — Choosing Victory — Ryan Fedasiuk
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