The White House confirmed on Monday the start of Project Vault, which would initially be funded by a $US10 billion ($A14 billion) loan from the US Export-Import Bank and nearly $US1.67 billion in private capital.
The minerals kept in the reserve would help to shield the manufacturers of cars, electronics and other goods from any supply chain disruptions.
During trade talks last year spurred by Trump's tariffs, the Chinese government restricted the exporting of rare earths that are needed for jet engines, radar systems, electric vehicles, laptops and phones.
China represents about 70 per cent of the world's rare earths mining and 90 per cent of global rare earths processing.
That gave it a chokehold on the sector that has caused the US to nurture alternative sources of the elements, creating a stockpile similar to the US reserve for petroleum.
The loan would be for a period of 15 years.
The US government has previously taken stakes in the rare earths miner MP Materials, as well as providing financial backing to the companies Vulcan Elements and USA Rare Earth.
Bloomberg News was the first to report the creation of the rare earths strategic reserve.
Trump is scheduled on Monday to meet with General Motors CEO Mary Barra and mining industry billionaire Robert Friedland.
with Reuters
