How firms should react to rivalry between America and China in critical minerals

The intensifying strategic competition between America and China is reshaping global trade, industrial policy and supply chains in ways that businesses can no longer ignore. Hany Besada explains how multinational firms must rewrite their strategies and re-route their supply chains to reflect the risks to international business.

Tariffs, export controls and investment restrictions are increasingly intersecting with competition over critical minerals, such as lithium, cobalt, rare earth elements and graphite, that underpin advanced manufacturing, clean energy technologies and defence systems. For firms operating across global markets, especially those with exposure to emerging economies, these dynamics are not simply geopolitical abstractions; they are transforming the risk landscape of international business.

From the perspective of the global south, the rivalry presents both risks and opportunities. Many developing countries host the natural resources essential to the energy transition and digital economy, while also serving as production hubs and consumer markets. As geopolitical fragmentation intensifies, multinational corporations must adapt their strategies to manage supply disruptions, regulatory uncertainty and shifting investment flows while exploring new forms of south-south and triangular co-operation.

Critical minerals and the reconfiguration of supply chains

Critical minerals have become central to the strategic competition between major powers because they are foundational inputs into high-technology manufacturing and energy-transition industries. Rare earth elements are essential for electronics, electric vehicles (EVs), wind turbines and defence technologies, while minerals such as lithium, cobalt and nickel are vital for battery production.

China currently dominates several stages of these supply chains. It processes around 90 per cent of rare earth elements globally and controls significant shares of battery material refining, including more than half of global lithium processing. This concentration has heightened concerns in America and its allies regarding supply chain resilience and national security. As a result, policies such as the U.S. Inflation Reduction Act and the European Union’s Critical Raw Materials Act aim to diversify sourcing and promote domestic or allied production.

For international firms, these policy shifts are accelerating the restructuring of supply chains. Companies are increasingly diversifying procurement strategies, investing in alternative processing capacity and exploring partnerships in resource-rich developing economies. But these adjustments come with higher costs, regulatory complexity and political risk.

Corporate strategy in an era of geopolitical fragmentation

Geopolitical tensions are now shaping corporate decision-making in ways not seen since the end of the Cold War. Multinational corporations must simultaneously navigate economic opportunities in China, regulatory scrutiny in Western markets and growing expectations for supply chain transparency and resilience. One strategic response has been the gradual diversification of production networks. Rather than fully decoupling from China, many firms are adopting “China-plus-one” strategies maintaining operations in China while expanding manufacturing in Southeast Asia, India or Mexico to reduce exposure to geopolitical shocks. This approach reflects the reality that China remains deeply embedded in global manufacturing ecosystems.

Another dimension involves the localisation of critical supply chains. Governments are increasingly tying industrial policy incentives to domestic production or allied sourcing. EV subsidies in America are linked to battery materials sourced from countries with free-trade agreements with America, encouraging firms to rethink supplier networks. For multinational corporations, compliance with such regulatory frameworks has become a key factor shaping investment decisions.

The global south as a strategic arena

For resource-rich countries across Africa, Latin America and parts of Asia, the growing demand for critical minerals has elevated their strategic importance in the global economy. The Democratic Republic of Congo accounts for around 70 per cent of global cobalt production, while Chile and Argentina hold some of the world’s largest lithium reserves. This shifting landscape creates opportunities for developing economies to capture greater value from resource extraction through local processing, manufacturing and industrial policy initiatives.

Governments are increasingly seeking to move beyond the export of raw materials toward domestic value addition, including battery manufacturing and mineral beneficiation. However, these ambitions require significant investment, infrastructure development and technological capacity. Partnerships with multinational corporations remain crucial. At the same time, competition among major powers for access to these resources is intensifying, potentially giving host countries greater bargaining power in negotiations with investors.

Investment risk and supply chain resilience

For global firms, the intersection of geopolitics and resource competition introduces new categories of risk including regulatory changes, export restrictions, sanctions and political instability in resource-producing regions. Companies must also contend with environmental, social and governance (ESG) expectations related to mining practices and supply chain transparency. The growing emphasis on “friend-shoring” and supply chain security also raises questions about long-term cost structures. Diversifying supply chains away from established hubs may reduce geopolitical vulnerability but often increases operational costs. Firms must therefore balance resilience against efficiency in their global production networks. Investment strategies increasingly involve multi-country sourcing arrangements, joint ventures with local firms and long-term off-take agreements with mining companies. These mechanisms help secure access to key materials while distributing risk across multiple jurisdictions.

The role of south–south and triangular co-operation

Beyond traditional north-south investment relationships, new forms of south–south and triangular co-operation are emerging within critical mineral value chains. Countries such as China, India and Brazil are expanding investment in mining and infrastructure projects across Africa and Latin America, while also supporting industrial development initiatives. These partnerships can provide developing economies with financing, technology transfer and market access. At the same time, they introduce new competitive dynamics for Western firms seeking access to strategic resources.

For multinational corporations, engaging with this evolving co-operation frameworks may become increasingly important. Firms that develop partnerships with local governments, regional institutions and emerging market investors may gain strategic advantages in accessing resources and navigating complex regulatory environments.

Navigating the next phase of globalisation

The current phase of globalisation is likely to be characterised less by seamless integration and more by strategic competition and regionalisation. Trade flows will continue but they will increasingly be shaped by geopolitical alliances, industrial policy and security considerations. For business leaders, the key challenge lies in adapting corporate strategies to this evolving environment. Supply chain resilience, geopolitical risk management and engagement with emerging markets will become central components of long-term competitiveness. The global south will play a pivotal role in this transition. As demand for critical minerals accelerates alongside the global energy transition, resource-rich developing economies are poised to become critical nodes in the new geography of global production. For firms that successfully navigate these dynamics, the opportunities remain substantial. But doing so will require a more sophisticated understanding of how geopolitics, resource governance and industrial policy intersect in the twenty-first-century global economy.