20/08/2026
The US and Japan have abandoned the system they've defended for 40 years. The reason is China.
The US has been saying the same thing for 40 years. The state shouldn't interfere in the economy.
It also blamed China for this. It said China produces with state support, sells at a loss, and engages in unfair competition.
This year, the US started applying that method together with Japan.
I'll show you why they were forced to do this.
First, let's look at what China did.
When China enters a sector, it sells the goods cheaper than anyone else. It doesn't make a profit; most of the time, it pays out of its own pocket, but because the state is behind it, it can sustain that price for years.
Western producers couldn't compete at that price and shut down one by one.
That's known up to this point.
The real mastery comes after that.
China often doesn't take the mine. It takes the processing.
It extracts only 8% of the world's copper but produces 47% of the refined copper. 90% of rare earth processing is in China. China is the world leader in processing for 19 out of 20 critical minerals.
Think of it this way.
Owning the field isn't enough. Whoever controls the mill controls the flour.
For years, no one was bothered by this picture. The goods were cheap and kept coming uninterrupted.
Then China did something.
There's a metal called antimony. It's used in bullet production, and the US is completely import-dependent for it.
China cut off exports. The amount going to the US dropped 97%, and the price tripled.
For gallium and germanium, which are critical for chip production, it completely halted shipments.
Then it introduced a new rule. If a product contains even a thousandth of a percent of China-sourced material, selling that product requires a permit.
After that, it temporarily suspended some of these measures during trade negotiations.
In other words, it showed it could shut things down, but also reopen them at will.
From that day on, everything changed.
Now look at Japan.
Japan discovered a mineral deposit in the Pacific in 2011. Around the country's easternmost island, there was a mud layer on the seabed rich in rare earths. Its density was confirmed in 2013 and published in 2018.
In just 2,500 square kilometers, there's more than 16 million tons of rare earths. The yttrium in it alone could meet the world's needs for 780 years.
Japan didn't extract it for 15 years.
The reason was simple.
It was much cheaper to buy from China.
This year, it started extracting.
The hard part is here.
That mud is 6 kilometers deep. Commercial production costs billions of dollars and takes more than 10 years.
And the most important thing is this.
The cost of goods extracted this way is about three times the cost of buying from China.
So who would buy it?
No company would buy the same good at that price. This only works if governments commit to buying at high prices.
In other words, there's no investment decision here. There's a state decision.
The US had already gone down this road.
It took about 10% of chip maker Intel. It became the largest shareholder in MP Materials, a rare earth company.
It's doing the very thing it criticized for years as unfair state support.
But there's another question here.
Who will process that mud?
China's power didn't come from the mine; it came from the mill. Even if Japan extracts 16 million tons of mud, if it sends it to China for processing, nothing changes.
That's why the project's goal isn't just extracting the mud. It's building the entire chainโfrom raw materials to magnetsโoutside of China.
There's one more problem.
China could impose restrictions again tomorrow. But commercial production from this project won't emerge for at least 10 years.
The threat operates on a monthly scale; the response is on a 10-year scale.
Now I'm getting to the most important point.
What stopped China wasn't its rivals. It was its own move.
The day China made that decision, everyone understood the same thing at the same time.
Today, what makes such an expensive alternative seem reasonable is China's own choice.
The moment you use a power, your opponents start looking for ways to go around it.
That's why the US and Japan abandoned their 40-year system.
To beat your rival, you often have to adopt their methods.
Charlie Munger has a saying.
Show me the incentive, and I'll show you the outcome.
China showed the incentive. This is the outcome
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