By Heather Somerville and Georgia Wells

An agreement with the Philippines to establish a high-tech industrial hub is the Trump administration's latest effort to lessen China's dominance over global supply chains.

The deal to build up American manufacturing across a stretch of the island of Luzon, signed Thursday, will offer U.S. companies access to essential inputs such as critical minerals that bypass Beijing's control.

The artificial-intelligence-powered manufacturing hub is planned for a 4,000-acre site given to the U.S. by Manila, said undersecretary of State for Economic Affairs Jacob Helberg. The U.S. will occupy the site rent-free and administer it as a special economic zone.

The hub will have diplomatic immunity, such as the protections afforded to an American embassy, and operate under U.S. common law -- the first arrangement of its kind anywhere in the world. The two-year lease is renewable for 99 years.

The arrangement is a bid to accelerate U.S. manufacturing in defense and other key industries while lessening China's chokehold on critical minerals and other key components for electronics, building on the Trump administration's agenda to bring more of the supply chain under American control.

"You can't build anything in Ohio if the minerals and the process materials are controlled by an adversary who can cut you off tomorrow," Helberg said in an interview.

The project also deepens the U.S.'s economic and political ties with a key ally in Southeast Asia facing pressure from China's regional military presence. China has stepped up its aggressive tactics against Philippine vessels in the South China Sea, among other maritime threats. The presidential communications office in Manila didn't respond to a request for comment.

The planned manufacturing hub is largely conceptual at this stage, and details, including which American companies will participate and just what they will build in the Philippines, are yet to be determined.

The news comes just a month before President Trump is set to meet with China's President Xi Jinping for talks to resolve a trade conflict that escalated last year when Beijing cut off exports of most rare-earths minerals. China controls around 90% of rare-earth processing and around 70% of lithium-ion battery production.

"The current geography of the global supply chain is completely unsustainable," Helberg said. "If you look at the whole supply chain stack, layer after layer, it is totally dominated by China."

A spokesman for the Chinese Embassy in Washington said China opposes any country setting up exclusive trade blocs to disrupt international trade order. "China has long played an important and constructive role in keeping the global industrial and supply chains safe and stable," said spokesman Liu Pengyu.

The Philippines has sources of nickel, copper, chromite and cobalt that will be both used by American companies operating there and exported back to the U.S. for manufacturing, Helberg said.

The Philippines is among the most mineral-rich countries, and the world's second-largest producer of nickel, said Gracelin Baskaran, director of the Critical Minerals Security Program at the Center for Strategic and International Studies. But these reserves don't translate into a reliable supply for U.S. manufacturers, she said, because the country exports raw materials and lacks the processed minerals to plug into tech supply chains.

The administration will ask companies to put forward proposals to compete for a spot in building out the hub, giving priority to bids that will help move critical minerals processing and manufacturing off Chinese suppliers. Investment will have to come from private-sector companies -- not the U.S. government.

Factories approved for operation in the hub will be highly automated, Helberg said, using autonomous systems to operate around the clock. The Philippines has a history of robust manufacturing, particularly in semiconductors, but that has stagnated in recent decades because of high energy and logistics costs. Companies will have to address in their proposals how they will contend with energy costs and workforce needs; they can send American workers overseas or hire locally, Helberg said.

The legal framework for the hub, ensuring diplomatic immunity, is to give companies the certainty that they are accountable under U.S. law in the case of civil disputes, Helberg said.

The agreement makes the Philippines the latest country to join Pax Silica, a coalition announced in December of more than a dozen U.S. partners that aims to secure supply chains and counter China's influence in AI. It also builds upon the Luzon Economic Corridor efforts, an initiative by the Philippines, U.S. and Japan to invest in transportation, clean energy, semiconductor supply chains and other critical industries. The corridor provides access to Subic Bay, a major commercial shipping port on Luzon.

Some U.S. manufacturing businesses seeking to decouple their supply chains from China have already established factories in the corridor, where they have found a lower cost of doing business and access to government and venture-capital funding from Southeast Asian partners.

Write to Heather Somerville at heather.somerville@wsj.com and Georgia Wells at georgia.wells@wsj.com

(END) Dow Jones Newswires

April 16, 2026 14:15 ET (18:15 GMT)

Copyright (c) 2026 Dow Jones & Company, Inc.