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Flexibility and Failure: Lessons From the WWII Rubber Crisis 

Excerpt from Macy’s autumn 1942 advertisement. Many Macy’s employees had enlisted, and the materials involved in making the character balloons were a valuable war commodity.

Flexibility and Failure: Lessons From the WWII Rubber Crisis 

On the parallels between China’s mineral leverage and the historic rubber crisis.

By

Farrell Gregory is a nonresident fellow at the Foundation for American Innovation. He also edits the Oxford Emerging Threats Journal and serves as a research assistant at the Yorktown Institute.

China spent the last 30 years making itself an indispensable exporter of strategic raw materials. Today, China is the primary producer for 26 of 50 minerals identified as critical to the United States.1 That is leverage that it can wield against America — in trade, military relations, and industrial competition. China seems newly willing to use that leverage during tariff negotiations with President Trump. Beginning in April, China used export licensing to choke American industry, especially automakers. This export licensing regime allows China to wield rare earths used for essential magnets, specialized alloys, and many of our most advanced weapon platforms for diplomatic leverage. After coming to an agreement with President Trump, China loosened its controls. But it kept its temporary licensing regime in place. At any time, they can cut off our supply.

Lessons Learned

This isn’t our first time facing a threat like this. Japan’s South Asian blitz in 1942 cut America’s natural rubber supply by more than 90 percent. Without rubber, we wouldn’t have been able to make tank treads, tires, or other necessary military equipment.2 In short, we lacked the raw materials necessary to fight. It was only thanks to the successes of America’s synthetic rubber program that we avoided defeat.

Rubber was just one resource. Today, we need to shift our supply chains for dozens of critical raw materials. Just as our leaders did during World War II, we now need to embrace strategic flexibility and try out a range of solutions: substitution, alternative sourcing, and innovation. America’s multitude of responses to its wartime rubber shortage provides relevant lessons for the present.

Strategic Readjustment

The story of the Pacific theater during the second World War was one of resources: the United States and Japan both employed strategic resource disruptions to degrade enemy military capacity. Japan’s rubber leverage could have brought our warfighting machine to a halt. Instead, using a combination of different tactics, we found new ways to meet our industrial needs.

As America entered World War II, it held a stockpile of one million tons of natural rubber. Having lost nearly all of our supply to Japan, and consuming 600,000 tons a year, we needed to readjust our provision and consumption, quickly.3 The U.S. government and its allies pursued several different tracks to solve the rubber crisis: conserving, finding alternative supplies, and producing synthetic rubber.

Prior to World War II, America’s rubber reliance on South Asian plantations was a known issue. Not anticipating Japan’s ambition and capabilities, the U.S. government initially worried about Britain’s ability to control the global rubber trade from its colonies. This concern prompted prominent industrialists to pursue alternative sources of rubber in South America and Africa. In 1928, Henry Ford purchased 2.5 million acres in Brazil to supply his automobile factories with tire rubber. But Ford’s efforts failed to meet the challenges of industrializing remote jungle and contending against pervasive leaf blight.

Harvey Firestone, a tire-making industrialist, pursued rubber in Liberia. After negotiating a revenue-control and land-leasing deal with the Liberian government in 1926, he began developing one million acres to produce rubber.4 But all together, Firestone’s Liberian operations only produced two percent of America’s total rubber consumption.

After Pearl Harbor, the U.S. government suddenly became very interested in the operations of these alternative foreign rubber supplies. Early in the war, they secured the rights to all of Firestone’s rubber production.5 Similarly, the United States set a guaranteed price to purchase rubber from more than two dozen countries in the Western Hemisphere.6 However, none of these sources could fill the enormous gap left by the unavailability of South Asian rubber.

In addition to searching for alternative producers, we tried reducing demand for natural rubber. President Franklin D. Roosevelt’s Rubber Reserve Commission, created in 1940, was responsible for stockpiling rubber, collecting scrap, and preventing waste. Fears of rubber shortages fueled both a national speed limit and gasoline rationing.7 Even the Macy’s Thanksgiving Day parade in New York was paused, with the rubber balloons donated to the military.8 More an act of symbolism and wartime solidarity than anything else, curbing rubber consumption wasn’t a feasible solution, either.

Ultimately, innovation solved our rubber supply problem. A public-private partnership to develop synthetic rubber allowed the United States to meet its wartime demand and reshape future rubber production. Discovered in the mid-nineteenth century, synthetic rubber was always a less attractive alternative to cheap, abundant natural rubber. After the outbreak of war, the U.S. government partnered with Standard Oil of New Jersey, a leader in synthetic rubber chemistry, to share technology and produce it at scale. America’s Reconstruction Finance Corporation funded the construction of 51 factories and signed offtake agreements for the synthetic rubber produced.9 The program was a success: America went from annual prewar production of 231 tons to a monthly output of 70,000 tons of synthetic rubber within four years.10 While synthetic rubber was not a perfect substitute for natural rubber, it enabled American industry to triumph over Japan and Germany.

History Rhymes

The story of the synthetic rubber program provides insights into the potential and shortcomings of industrial policy, centralized leadership, and state capacity. But alone, it is an incomplete picture. Understanding the American government’s various efforts – successes and failures – is the key. These policies provide a framework: quickly implement a range of solutions, some of which will inevitably fail. But for each mineral, the United States just needs one policy that succeeds.

Given the scale of our reliance on China, there’s no one-size-fits-all policy. But a strategy that helps secure one mineral could work for several others. That’s the difficulty for policymakers: attempt a range of strategies, each of which could incentivize secure mineral production.

For instance, the domestic production of certain small-volume metals and minerals will require offtake agreements to support development and avoid Chinese price manipulation. Dramatic swings in critical mineral prices have stalled American reshoring efforts. A lithium refinery in South Carolina paused construction and a cobalt mine in Idaho halted production in response to the recent price shocks for their respective commodities.11 Offtake agreements, especially if the materials are directed to the National Defense Stockpile, could provide the necessary stability for these industrial sites to thrive.

Other higher-volume minerals desperately need permitting reform. American mines take an average of 20.8 years to develop – one of the longest timelines in the world.12 If it becomes cost-prohibitive to sign offtake agreements for certain goods, especially base metals, then the best way for the government to advance mineral self-sufficiency would be to slash wait times. China can pull many levers to disrupt our mineral production, but we can fix this one.

For resources that cannot be found domestically, the U.S. government will need to support strategic investment and access negotiations abroad. That will necessitate reforming our existing developmental finance tools to better aid American firms when conducting strategic deals abroad.

In each of these cases, the difficulty is devising a workable program – but once such a program is constructed, it can be extended to many of the necessary commodities. The Department of Defense’s recent investment in MP Materials utilizes several of these mechanisms to boost domestic rare earth production. Alongside more than $1 billion in public-government loans to construct new processing facilities, the DoD is taking a $400 million equity stake in MP. It also establishes a price floor for MP’s output of nearly double the market price for certain rare earths.13 Depending on the success of the partnership, it could provide a roadmap for future critical mineral programs.

This will be a process of trial and error. No matter how well we design these programs, there will be missteps. But the story of America’s rubber reliance demonstrates that failed programs are forgivable if the larger effort leads to victory in war.

Compared to our wartime rubber shortage, the critical mineral challenge is even more dire. China presents a fundamentally different threat to our power in the Indo-Pacific. Rather than relying on different outputs throughout Southern Asia, China made itself a nexus for raw material production and processing. Similarly, filling our needs for dozens of minerals is a far more complex situation than what we faced in WWII. Just as wartime leaders utilized several options to solve one reliance issue, modern policymakers should move fast, pursue multiple options, and embrace the possibility of failure

America’s critical mineral crisis will be resolved in one of two ways: either we eliminate our reliance on China for most minerals, or we fail to do so for any of them.

  1. Joseph Majkut, et al., “Building Larger and More Diverse Supply Chains for Energy Minerals,” Center for Strategic and International Studies, May 4, 2023. ↩︎
  2. Sam W. Yankee, “Of Crystals and Rubber: Lessons from the Resource War in the Pacific,” Proceedings 150, no.6 (June 2024). ↩︎
  3. “The United States Synthetic Rubber Program: National Historic Chemical Landmark,” American Chemical Society. ↩︎
  4. William Rosenau, et al., “Firestone in Liberia.” Corporations and Counterinsurgency, 1st ed., (Santa Monica, CA: RAND Corporation, 2009), 18. ↩︎
  5. Alexander J. Field, “The U.S. Rubber Famine during World War II,” Santa Clara University, Leavey School of Business, December 14, 2023, 15. ↩︎
  6. Ibid. ↩︎
  7. Aruna Balasubramanian, “The U.S. Synthetic Rubber Program and the Fall of Singapore,” Yale University Press, February 9, 2024. ↩︎
  8. “Macy’s Thanksgiving Day Parade Balloons,” CNN, November 19, 2023 ↩︎
  9. Brady Helwig and Ben Noon, “The U.S. Synthetic Rubber Program: An Industrial Policy Triumph during World War II,” American Affairs Journal 9, no. 1 (Spring 2025). ↩︎
  10. “The United States Synthetic Rubber Program: National Historic Chemical Landmark,” American Chemical Society. ↩︎
  11. Farrell Gregory, “To Solve Its Domestic Mineral Paradox, America May Need Price Floors,” MINING.COM, October  7, 2024. ↩︎
  12. Mohsen Bonakdarpour, et al., “Mine Development Times: The U.S. in Perspective,” S&P Global Market Intelligence, June 2024, 6. ↩︎
  13. Alice Wu, “Unpacking the Department of Defense and MP Materials Critical Minerals Partnership,” Federation of American Scientists, July 15, 2025. ↩︎