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Episode: Can the US Break China's Grip on Rare Earths?

Host: Jacob Goldstein
Guest: David Abraham (Author, The Elements of Power; Co-founder/CEO, Outpost)
Date: March 12, 2026

Episode Overview

This episode dives into the growing geopolitical and technological crisis around rare earth elements, essential for modern electronics, defense systems, and green technologies. With the U.S. facing a potential supply crunch after China imposed restrictions in retaliation for new tariffs, Jacob Goldstein interviews David Abraham, a rare earths expert, to unravel how China achieved dominance, what’s at stake, and whether America can—and should—break free from Beijing’s grip.

Key Discussion Points & Insights

1. How China Gained Dominance in Rare Earths

• China’s Strategy:
  • In the 1980s-90s, China began producing rare earths primarily to earn hard currency while manufacturing low-value goods. Gradually, recognizing the strategic importance of these elements in high-tech products, the Chinese government incorporated rare earths into its long-term industrial planning.
  • David Abraham (04:39): “No one wants a mine in their backyard. The Chinese raise their hand and basically say, hey, listen, we'll do this work. We need the money, and we're starting to see that these materials are critical to the products we want to make in the future.”
• Mismatch of Priorities:
  • Western countries lost interest in mining and processing, pushing those activities (and expertise) to China.
  • “People graduate college or high school wanting more comfortable jobs. In China, they're willing to do this work.” (04:55)

2. Global Wake-up Calls: 2010 and 2025 Supply Chain Shocks

• 2010 Japan Incident:
  • After a territorial dispute, China cut off rare earth exports to Japan, causing factory stoppages and sparking global concerns about material dependencies.
  • Jacob Goldstein (09:23): “All of a sudden we can't make those things now because China stopped sending us rare earths.”
  • David Abraham (09:41): “These are such small things... It's just like yeast for bread. If you don't have yeast, then you can't make bread.”
• 2020-2025 Rising Awareness:
  • Covid-19 and just-in-time failures revealed broader supply chain vulnerabilities, accelerating U.S. and Congressional focus on where critical inputs come from.
  • David Abraham (15:25): “There started to be some smarter people who are connecting the dots... Where are rare earths coming from?”
• 2025 Trade War—Tensions Escalate:
  • Following U.S. tariffs, China imposed new restrictions on rare earths.
  • David Abraham (16:56): “My first thought was this. This is not good.”

3. The Choke Points: Magnets and Know-how

• The Magnet Problem:
  • China now produces over 80-90% of high-specification rare earth magnets, and their industry is calibrated to meet exacting customer requirements.
  • David Abraham (27:42): “It's not like this is one magnet. There's such a diversity of magnets... To meet the spec of individual producers is the real challenge.”
  • Quality and reliability matter for national security and advanced industries; it's not just about volume.
• Loss of Industrial Knowledge:
  • The U.S. lacks not only the supply chain but also the human capital to rebuild it quickly.
  • David Abraham (29:51): “There's just a handful of people, a handful of universities in the US studying [this]. We have a missing generation. In China, that's when they just started.”
• Innovation Challenges:
  • Without a strong domestic industry, “you lose the capacity to innovate because you just have to get to the basics.” (30:13)

4. The U.S. Response: Options and Obstacles

• Strategic Dilemmas:
  • Four described U.S. options:
    1. Stay the course and remain reliant
    2. Strike a “big deal” with China
    3. Build comprehensive domestic supply chains (Abraham’s preferred route)
    4. Spend billions inefficiently with no real competitive outcome
• Domestic Industry Not Instantly Competitive:
  • “There's this preconceived notion that, oh, if we produce it in the U.S. then it's going to be cost competitive. And the answer to that is no...” (23:21)
• Why Focus on Electric Vehicles?
  • Abraham frames EVs as the anchor industry needed to underpin U.S. capacity for both green tech and defense.
  • David Abraham (33:06): “It’s the largest consumer of battery materials. It's the largest consumer of magnet materials... If you don't have the base industry, you're undermining all the other industries.”
• Unlikelihood of Quick Turnaround:
  • Both guest and host express skepticism about fast American solutions, citing scientific complexity and China's entrenched investment.
  • Jacob Goldstein (34:45): “Doesn't feel likely to me.”

5. Global Supply Chain Realities

• Not All or Nothing:
  • Abraham argues it's not about full self-sufficiency but resilient, diversified supply.
  • David Abraham (22:58): “All those things need to be able to happen with a reliable system... You just have to make sure the economy can get what it needs.”
• China’s Strategic Export Policy:
  • China selectively allows export of finished magnets, not raw rare earths, to maintain control over the highest value segments.
  • David Abraham (20:23): “They have said from 2010... we want to use Chinese resources for Chinese products.”

Notable Quotes & Memorable Moments

• On the Broader Importance of Rare Earths:
  • Jacob Goldstein (01:49): “You need small amounts of various rare earth elements for basically anything with an on-off switch... for laptops, phones, electric vehicles, drones, missiles.”
• On the ‘Yeast for Bread’ Analogy:
  • David Abraham (09:41): “These materials... It's just like yeast for bread. If you don't have yeast, then you can't make bread.”
• On American Overconfidence:
  • David Abraham (16:56): “My concern was, we’re going to have this confidence that we can do things fast in this space.”
• On Industrial Culture:
  • David Abraham (28:50): “I would go into an event... and there a thousand, fifteen hundred people in the industry—academics, industry officials—working in rare earths every day. Back in 2013 [in the U.S.], there would be 10, 15 people there.”
• On the Need for a Focused Industrial Strategy:
  • David Abraham (33:06): “You want a great robotics industry, we need a dynamic battery industry. We need a dynamic magnet industry... If you don't have the base industry, then you're undermining all the other industries.”
• On Digital Nomad Life:
  • David Abraham (41:31): “It is as fun as it looks on Instagram and in some cases more fun. But a lifestyle where you're uninhibited and you're not building and you're just soaking up services... there's less meaning there.”

Timestamps for Important Segments

• [01:49] – Introduction to rare earths, why they matter, and the current U.S.-China tensions
• [04:39] – How China took over rare earth production
• [09:23] – 2010 China-Japan rare earth crisis and its lessons
• [15:06] – How Covid-19 further highlighted global supply chain weaknesses
• [16:56] – The 2025 tariff retaliation—China’s new rare earth restrictions
• [20:06] – Strategic logic behind China’s export policies
• [22:37] – What the U.S. actually needs for supply chain security
• [27:42] – Why advanced magnets are such a choke point
• [29:51] – Human capital deficits in the U.S. and industrial knowledge gap
• [32:58] – The four U.S. options moving forward and Abraham’s preferred path
• [33:06] – Why EVs anchor U.S. industrial strategy
• [38:37] – Lightning round: Abraham’s digital nomad company Outpost and the realities of remote work

Tone and Style

• Jacob Goldstein guides the discussion with a balance of curiosity, urgency, and skepticism.
• David Abraham provides deeply informed, occasionally sobering analysis but remains pragmatic, combining hard industry facts with anecdotes from his personal experience in Japan and China.

Conclusion

The episode gives a clear-eyed look at the rare earths challenge: American policies must move beyond simple nationalism or cost-cutting and toward strategic investment in entire supply chains—anchored by high-demand, future-facing sectors like electric vehicles. Both the physical capacity and the lost knowledge base need rebuilding to ensure resilience, and there’s no quick fix. As Abraham says, “If we don’t get the systems right, we’re going to be in a situation where one country can truly dictate because they’re focused on the material supply” (12:04). The conversation ends with a personal dimension, reflecting on what gives meaning in both work and global life.