The trade war is quickly becoming a rare earth war–at least in the rhetoric of Chinese state media.
The often belligerently nationalist Global Times, controlled by the Chinese Communist Party, called on China to cut-back on rare-earth licenses and “tighten management’ of foreign-invested companies as first steps to “weapons the minerals.”
The paper also called on the Chinese government to intensify a “crackdown on the smuggling of rare earths to the US.”
From the Global Times:
The crackdown on rare-earth smuggling makes it possible for China to weaponize the minerals in an escalation of the trade war. Now China needs to tighten management of rare-earth enterprises, especially foreign-invested companies, to make smuggling absolutely impossible.
Rare-earth minerals are important strategic resources but China had never thought of using the minerals as leverage to hit the US. The trade war is prompting China to rethink its rare-earth strategy and make quick adjustments. Once merely an economic sector, rare earths have become a counter weapon for China to hit back at the US. There is a lot of work to be done, and cracking down on smuggling is only the first step in weaponizing the sector.
Now may be the time for China to cut the number of rare-earth mining licenses, increase rare-earth imports, and build strategic reserves of the minerals
China is busy upgrading its rare-earth sector. If there is a rare-earth war against the US, we have absolute confidence that China will win and deal a knockout blow to the US economy.
Rare earth elements are required to make a vast variety of tech and defense products, including smartphones, guided missiles, nuclear rods, and smart cars. China controls the vast majority of rare earth production and the U.S. imports nearly all of the rare earths used in U.S. manufacturing from China.
China’s control of rare earth mining has implications for the U.S. military. According to a 2016 Government Accountability Office study, certain rare earth materials are “essential to the production, sustainment, and operation of U.S. military equipment.” Critical military uses include rare earths employed in antimissile defense systems, precision-guided weapons, lasers, communications systems, night vision equipment, satellites, and military aircraft.
“Reliable access to the necessary material…is a bedrock requirement for the [Department of Defense],” the GAO wrote.
China has a near-global monopoly of rare earth production and exports but the elements are actually abundant around the global. The U.S. was, in fact, once the largest supplier of rare earths. But the extraction of rare earths is cumbersome, costly, and poses risks to the environment. China vast capacity for production means it can flood the market with supply to depress global prices, the threat of which has depressed investor willingness to invest in production outside of China.
The Trump administration has been urged to support domestic production, including by creating a national rare earth laboratory akin to the Department of Energy’s famous Los Alamos National Laboratory. The goal would be to guarantee that manufacturers wouldn’t lose access to the rare-earth minerals if China decided to restrict their import.