China’s threats to ban rare earth exports to the United States is looking increasingly likely as trade tensions in between the two economic superpowers continue to escalate.
China is ready to use rare earths to strike back in a trade war with the United States, Chinese papers signaled on Wednesday in highly worded commentaries on a move that would intensify tensions between the dueling giants.
The U.S. should not underestimate China’s capacity to assert its leverage in the trade war, People’s Daily, a flagship newspaper of the Communist Party, said in a lengthy editorial on Wednesday. It wouldn’t be a surprise if China were to use rare earths as a weapon as retaliation in the trade war, the paper said.
“Will rare earths become a counter weapon for China to hit back against the pressure the United States has put on for no reason at all? The answer is no mystery,” it explained. “We advise the U.S. side not to underestimate the Chinese side’s ability to safeguard its development rights and interests. Don’t say we didn’t warn you!”
Rare earth manufacturers rally
China’s rare earth companies have surged in recent weeks on the idea that these materials could be an ace in the hole in the ongoing trade dispute. President Xi Jinping visited a plant just last week, accompanied by his chief trade negotiator with the U.S., raising speculation that the tactical products might be weaponized in China’s dispute with U.S., which has continuously escalated since President Trump lit a fire under China just weeks ago, raising tariffs on imported goods to 25%.
China is the foremost source of these valuable resources for businesses around the globe. Unwanted ripple effects for other trading partners are a likely disincentive from doing so, but still, limitations on exports could be devastating for some U.S. companies.
Rare earths are produced in other parts of the world, but for a range of reasons, including ample natural supply in China, production quotas enforced by the Chinese government, supply chain relationships and other elements, it has ended up with a virtual monopoly on rare earth production.
Who loses if exports are prohibited?
Rare earth metals have helped consumer electronics such as computer systems and smart devices become lighter, smaller, and more efficient.
Tech giant Apple, for instance, relies on these metals for its cameras, cell phones, and speakers and says the elements are hard to recuperate in the recycling procedure because they appear in such small amounts in the original products.
Other American tech stock market giants such as Tesla, Qualcomm, NVIDIA, and Advanced Micro Devices could also be at risk if China follows through with its threats.