A bipartisan group of lawmakers has proposed creating a new agency with US$2.5 billion to spur production of rare earths and the other critical minerals, while the Trump administration has already taken aggressive actions to break China’s grip on the market for these materials that are crucial to hi-tech products, including mobile phones, electric vehicles, jet fighters and missiles.

It is too early to tell how the bill, if passed, could align with the White House’s policy but whatever the approach, the US is in a crunch to drastically reduce its reliance on China, after Beijing used its dominance of the critical minerals market to gain leverage in the trade war with Washington.

US President Donald Trump and Chinese President Xi Jinping agreed to a one-year truce in October, by which Beijing would continue to export critical minerals while the US would ease its export controls of US technology on China.

The Pentagon has shelled out nearly US$5 billion over the past year to help ensure its access to the materials after the trade war laid bare just how beholden the US is to China, which processes more than 90 per cent of the world’s critical minerals.

To break Beijing’s chokehold, the US government is taking equity stakes in a handful of critical mineral companies and in some cases guaranteeing the price of some commodities using an approach that seems more likely to come out of China’s playbook instead of a Republican administration.

08:58

What are rare earths, and why is China’s dominance facing global pushback

What are rare earths, and why is China’s dominance facing global pushback

The bill that New Hampshire Senator Jeanne Shaheen, a Democrat, and Republican Indiana Senator Todd Young introduced on Thursday would favour a more market-based approach.