US Mobilizes Global Allies for Critical Minerals Trade Bloc to Counter China

2026-02-05 economy

Washington, Thursday, 5 February 2026.
On February 4, 2026, the United States escalated its economic strategy against China by unveiling a preferential trade bloc for critical minerals. Vice President JD Vance proposed a coordinated system of price floors and adjustable tariffs designed to insulate allied supply chains from Beijing’s market dominance. This initiative, supported by the newly launched $12 billion “Project Vault” reserve, seeks to stabilize prices for materials essential to AI and defense sectors, which have historically been undercut by Chinese oversupply. While officials from over 50 nations participated in the Washington summit to launch the Forum on Resource Geostrategic Engagement (FORGE), the immediate market reaction was volatile, with critical mineral stocks dropping up to 7%. This move signals a pivotal shift toward managed trade to secure geostrategic resources.

Architecting a New Global Market

The cornerstone of this new economic architecture was laid during the “Critical Minerals Ministerial” held in Washington on February 4, 2026, attended by representatives from 54 nations and the European Union [1]. During the summit, Secretary of State Marco Rubio formally introduced the “Forum on Resource Geostrategic Engagement” (FORGE), a platform designed to foster collaboration and coordinate policy across a network of global partners [1]. Under the proposed framework, the United States aims to establish reference prices for critical minerals at every stage of production [2]. Vice President JD Vance explained that for members of this preferential zone, these prices would function as a floor, maintained through adjustable tariffs to uphold pricing integrity and prevent undercutting by non-members [1][2]. Interior Secretary Doug Burgum acknowledged the departure from traditional economic orthodoxy, noting that while the U.S. typically favors free markets, intervention is necessary when a dominant player floods the market to destroy the economic value of competitors [7].

Strategic Alliances and Diplomatic Hesitations

While the initiative has garnered significant interest—with Secretary Burgum noting that up to 30 countries are seeking to join the “club”—the path to a unified bloc faces diplomatic hurdles [7]. On February 4, Washington announced bilateral critical minerals agreements with 11 countries, adding to 10 similar pacts secured over the previous five months [1]. Major economies such as Japan, Germany, Australia, and South Korea were present at the talks [2]. However, not all allies are immediately committing to the sector-specific deal. Canadian Foreign Affairs Minister Anita Anand stated that Ottawa would assess the bloc within the context of the broader United States-Mexico-Canada Agreement (USMCA) review scheduled for 2026, rather than signing a standalone deal [3]. Consultations regarding the trade zone pact are scheduled to continue until April 1, 2026 [3].

Financial Volatility and “Project Vault”

To underpin this trade policy with financial muscle, President Donald Trump unveiled “Project Vault” earlier in the week on February 2 [2]. This initiative establishes a strategic critical minerals reserve valued at approximately $12 billion [8]. The funding structure relies heavily on federal support, utilizing a $10 billion loan from the U.S. Export-Import Bank alongside approximately $2 billion in private capital [2][7]. The stated goal is to insulate domestic manufacturers from price volatility caused by foreign market saturation [7]. Ironically, the announcement of these protective measures triggered immediate instability in the very sector they aim to bolster. Following the news of the trade bloc, shares of critical mineral and rare earth companies fell, with general sector declines ranging from 1.8% to 7% [4], while specific firms like MP Materials and USA Rare Earth saw drops between 6% and 14% [2].

Breaking the Stranglehold

The urgency of these measures stems from China’s overwhelming control of the sector, which includes 70% of global rare earths mining and 90% of processing capacity [6]. The vulnerability of Western supply chains is particularly acute in Europe; a recent audit highlighted that the EU imports 97% of its magnesium and 71% of its gallium from China [5]. Furthermore, in 2024, Chinese suppliers provided 17,000 of the 20,000 tonnes of permanent magnets used by EU industry, representing a dependency rate of 85% [5]. This dependency has become a geopolitical leverage point. While Washington and Beijing have been operating under a one-year trade truce since October 2025 [6], the formation of this bloc represents a structural decoupling. Chinese President Xi Jinping reportedly communicated with President Trump on February 4, though diplomatic channels emphasize that countries should follow market economy principles [6][8].

Sources

Geopolitics Supply Chain