What exactly is the panic in critical minerals about? An economic perspective

• The dominant geopolitical narrative of Critical Minerals (CM) overstates China’s “weaponization” of its export position. • China’s CM policies reflect standard Public Choice logic for a near-monopolist seeking to capture surplus through supply restrictions and higher prices. • Comparing CM dependence to past commodity dependencies—especially oil—current risks are far smaller in macroeconomic terms. • Using elasticity analysis and historical experience, it can be seen that market forces are already driving diversification and new supply. • Government responses—typically subsidies, tariffs, or strategic interventions—are costly and mostly unnecessary, except in narrowly defined military uses. This paper reassesses current anxieties about Critical Minerals (hereafter CMs). Although China holds a large share of CMs mining and processing, its policies reflect standard Public Choice logic for a near-monopolist seeking to capture surplus through supply restrictions and higher prices. Episodes described as geopolitical retaliation have been rare (though increasing) and economically limited. Comparing CMs dependence to past commodity dependencies, current risks are far smaller in macroeconomic terms, given the low import value of CMs relative to total trade. Drawing upon the concept of elasticity as well as historical experience, it is argued that market forces are already driving diversification and new supply. Fears of China’s dominance as a major threat may be overstated. Government responses—typically subsidies or other strategic interventions—are costly, and the case for them is not always compelling, except in narrowly defined military uses. Cross-national evidence indicates that China’s behavior is typical of states with strong market power.