US Seeks Greenland Rare Earths Amid China Dominance and Tax Debates
TL;DR
- US national security interests in Greenland are driven by China's dominant processing capabilities for rare earth minerals, essential for defense technologies, necessitating diversification beyond domestic geological reserves.
- Acquiring Greenland's rare earth deposits is a long-term strategy, as developing the nascent mining industry requires significant infrastructure investment and an 18-29 year timeline from discovery to extraction.
- Greenland's mining sector faces significant hurdles including a lack of transportation and energy infrastructure, community opposition to projects, and policy volatility regarding the mining of associated minerals like uranium.
- A proposed California wealth tax on unrealized gains faces strong opposition from billionaires who may leave the state, potentially rendering the tax ineffective despite its intent to address inequality.
- A "borrowing tax" is proposed as a more viable alternative to a wealth tax, taxing billionaires when they borrow against assets to fund their lifestyle, potentially generating $20 billion annually.
- Geopolitical positioning and increasing Chinese influence in Greenland are near-term drivers for US interest, outweighing the immediate mineral extraction potential due to long project development timelines.
Deep Dive
President Trump's renewed interest in acquiring Greenland signals a strategic pivot towards securing critical mineral resources, particularly rare earths, essential for U.S. national and economic security, driven by China's dominance in processing capabilities. This pursuit, however, faces significant hurdles in Greenland's underdeveloped infrastructure, complex mining regulations, and potential community opposition, suggesting that a forceful acquisition strategy is unlikely to succeed and could damage diplomatic relations.
The U.S. faces a critical vulnerability in its reliance on China for rare earth minerals, which are indispensable for defense technologies, including permanent magnets used in missiles, lasers, and aircraft. Greenland possesses two of the world's largest rare earth deposits, notably rich in the heavy rare earths where China controls 99% of global processing. While the U.S. has some rare earth reserves, it lacks substantial heavy rare earth deposits and the necessary processing infrastructure, making Greenland an attractive, albeit challenging, prospect for resource acquisition. The mining process in Greenland is complicated by a lack of transportation and energy infrastructure, potential local opposition to mining projects that have previously halted development, and fluctuating policies regarding the mining of uranium, which is often found alongside rare earths. Unlike the relatively straightforward extraction of oil in Venezuela, developing Greenland's nascent mining industry is a long-term endeavor, with average timelines from deposit identification to extraction stretching to 18 years globally and 29 years in the U.S.
The geopolitical positioning of Greenland, coupled with its resource potential, presents a dual strategic imperative for the U.S. While the immediate acquisition of minerals is not a short-term solution due to long project development timelines, the island's strategic location is increasingly important amidst rising geopolitical tensions, particularly in the Indo-Pacific. China's growing influence in Greenland, including past attempts to gain significant ownership in infrastructure projects, underscores the urgency of securing this territory as a strategic asset. A collaborative and diplomatic approach with Greenland, which is eager to develop its mining sector in a mutually beneficial manner, is more likely to yield positive outcomes than aggressive acquisition tactics.
Separately, California's proposed one-time 5% tax on unrealized gains for billionaires, while intended to address rising inequality, faces significant practical and political challenges. The tax, which would target assets like stocks and artwork from January 1st, 2026, has drawn sharp criticism from prominent billionaires who argue it could trigger an exodus of wealth and talent from the state and would not significantly impact the state's budget. Supporters, however, view it as a necessary measure to combat extreme wealth concentration, which historically leads to social unrest. A more viable alternative proposed is a "borrowing tax," which would tax billionaires when they borrow against their assets to fund their lifestyle, a strategy currently not subject to taxation. This approach is estimated to generate substantial revenue and appears to have broader acceptance among some billionaires, offering a more realistic path to addressing wealth inequality than the proposed wealth tax, which is unlikely to be implemented as planned.
Action Items
- Audit Greenland mining jurisdiction: Identify 3-5 infrastructure gaps (transport, energy) and 2-3 policy risks (uranium ban, social license) impacting resource extraction timelines.
- Analyze California billionaire tax viability: Calculate potential revenue loss from asset exodus and lobbying efforts versus projected tax generation (ref: unrealized gains, borrowing tax).
- Draft borrowing tax proposal: Define 2-3 mechanisms for taxing asset-backed loans to generate revenue and address wealth inequality (ref: income tax parallel).
- Measure critical mineral supply chain vulnerability: Quantify US reliance on China for 3-5 key rare earth elements and processing capabilities.
Key Quotes
"President Trump's focus on Greenland is actually aligned with his broader approach to foreign policy. What we saw starting January last year was actually a realignment of our foreign policy very closely tied to critical minerals. In a way, it feels a bit like we're playing a real-life game of Settlers of Catan."
Gracelyn Baskaran explains that President Trump's interest in Greenland is part of a larger foreign policy shift prioritizing critical minerals. Baskaran uses the analogy of "Settlers of Catan" to illustrate how this focus on minerals is influencing various international policy discussions. This highlights a strategic reorientation towards securing essential resources.
"So we need rare earths, and number one thing we can think about is we need them for every form of defense technology because they go into the permanent magnets that are used in our missiles, lasers, tanks, fighter jets, submarines."
Gracelyn Baskaran details the critical importance of rare earth minerals, explaining their essential role in defense technology. Baskaran specifies that these minerals are integral to the permanent magnets used in a wide array of military equipment, underscoring their strategic value for national security. This clarifies why securing access to these resources is a priority.
"Globally, mining uses close to a fifth of the world's energy. And so in a place like Greenland, or the lowest population density in the world, we're going to have to build a lot of energy infrastructure."
Gracelyn Baskaran points out the significant energy demands of mining operations. Baskaran highlights that in a sparsely populated area like Greenland, substantial investment in energy infrastructure would be necessary to support mining activities. This illustrates a key logistical challenge for resource extraction in such locations.
"It's much more complicated than oil in Venezuela, is the short answer. And the reason is this: Venezuela, we've been taking oil out of the ground for a very long time. There are American mining companies that know and mine and extract oil in Venezuela. In Greenland, you're talking about a very nascent industry."
Gracelyn Baskaran contrasts the situation in Greenland with Venezuela, explaining the difference in industry maturity. Baskaran notes that oil extraction in Venezuela is a long-established industry with existing expertise, whereas mining in Greenland is a nascent sector. This distinction is crucial for understanding the timeline and complexity of resource development.
"The real problem, the big problem, is inequality. And I know we've beaten this horse to death, but that's because it's a pretty gigantic horse."
Ed Elson argues that economic inequality is the primary issue facing America, not cultural or political divisiveness. Elson uses the metaphor of a "gigantic horse" to emphasize the scale and persistent nature of inequality. This frames the subsequent discussion on wealth taxes as a response to this fundamental problem.
"The trouble, however, is that almost every other billionaire says it's not okay. Larry Page, Peter Thiel, Pal Malucky, all the big power brokers in Silicon Valley, they have all sounded off about what an unacceptable proposal this is."
Ed Elson observes the strong opposition to California's proposed wealth tax from prominent figures in the tech industry. Elson lists several influential billionaires who have publicly criticized the proposal, indicating significant resistance. This highlights the political and economic power dynamics at play in the debate.
"So here's a solution that we would propose: make borrowing a taxable event. Let them keep their assets, but if they ever want to use those assets to fund their lifestyle, they have to pay a tax, just like the rest of us."
Ed Elson proposes an alternative to a wealth tax: a borrowing tax. Elson explains that this tax would apply when individuals borrow against their assets, treating it as a taxable event similar to income. This approach aims to capture value when assets are leveraged for personal use, addressing the issue of untaxed asset appreciation.
Resources
External Resources
Books
- "Settlers of Catan" - Mentioned as an analogy for foreign policy realignments tied to critical minerals.
Articles & Papers
- "The Case for a Wealth Tax" (Source not specified) - Mentioned as a proposal to fight inequality.
People
- Ed Elson - Host of Profity Markets.
- Gracelyn Baskaran - Director of the Critical Minerals Security Program at the Center for Strategic and International Studies.
- Lendin - Advisor to the Mining Minister of Greenland.
- Josh Brown - Guest for a future conversation.
- Clem Miller - Producer of Profity Markets.
- Allison Weiss - Producer of Profity Markets.
- Joel Patterson - Editor of Profity Markets.
- Benjamin Spencer - Engineer for Profity Markets.
- Dan Challon - Research team member for Profity Markets.
- Isabella Kinsel - Research team member for Profity Markets.
- Christo Donahue - Research team member for Profity Markets.
- Mia Silverio - Research team member for Profity Markets.
- Jenssen Huang - Billionaire who stated a wealth tax is okay.
- Larry Page - Billionaire who opposes a wealth tax.
- Peter Thiel - Billionaire who opposes a wealth tax.
- Pal Malucky - Billionaire who opposes a wealth tax.
- Bill Ackman - Billionaire who opposes a wealth tax but finds a borrowing tax acceptable.
- Mark Cuban - Billionaire who finds a borrowing tax acceptable.
- Abigail Disney - Heiress who finds a borrowing tax acceptable.
- David Sachs - Billionaire who criticized a wealth tax.
- Chamath Palihapitiya - Billionaire who criticized a wealth tax.
Organizations & Institutions
- American Express - Mentioned for its corporate program, including cards and accounts payable solutions.
- Thumbtack - Mentioned as a platform to hire home professionals.
- Reese's - Mentioned in a broadcast system test.
- Profity Markets - Podcast discussing markets and economic topics.
- S&P 500 - Market index mentioned in relation to market vitals.
- Dow - Market index mentioned in relation to market vitals.
- Nasdaq - Market index mentioned in relation to market vitals.
- Blackstone - Major investor in single-family homes, mentioned in relation to market impact.
- Lockheed Martin - Defense company mentioned in relation to share buybacks and dividends.
- Center for Strategic and International Studies (CSIS) - Institution where Gracelyn Baskaran directs the Critical Minerals Security Program.
- European Union (EU) - Mentioned for backing a strategic project for graphite exploration in Greenland.
- Profity Media - Production company for Profity Markets.
Websites & Online Resources
- Thumbtack (App) - Mentioned for hiring home professionals, seeing price estimates, and reading reviews.
- Hulu - Streaming platform mentioned for the series "Will Trent".
Other Resources
- Critical Minerals - Discussed as a key component of national economic and energy security, with China holding a dominant position.
- Rare Earths - A group of 17 minerals essential for defense technology, with China dominating processing capabilities.
- Heavy Rare Earths - A subset of rare earths with higher atomic weight, where China has 99% of processing capabilities.
- Greenland - Territory discussed in relation to its critical mineral deposits, geopolitical significance, and potential acquisition by the US.
- Venezuela - Country mentioned for its natural resources and as a comparison to Greenland regarding resource extraction.
- California Wealth Tax - A proposed one-time 5% tax on unrealized gains for billionaires, facing backlash from Silicon Valley.
- Inequality - Identified as a major problem in America, with wealth concentration among the top households.
- Borrowing Tax - Proposed alternative to a wealth tax, making borrowing against assets a taxable event.