While the US’ domestic market holds enormous sway over the success of China’s key exports sector, increasing tensions may lead Beijing to consider deploying a devastating, rare earths-based response to US tariffs. Cold War error, trade war threat
It wasn’t always this way. At one point, the US was the largest global producer of rare earths, but a regulatory misstep made the mining and refining of these elements economically unviable. When Washington decided in 1980 to class rare earth mining under the same restrictions that applied to mining thorium, a byproduct of processing many key rare earths, the US industry started its protracted, two-decade collapse.
During the US’ withdrawal from the sector, China began moving into the rare earths space, acquiring US technology, filing patents, and embarking on a massive mining programme.
The result is Beijing’s near-total dominance of a space that has only grown more important with the widespread consumer adoption of high-tech devices. According to Reuters
, China “supplied 80% of the rare earths imported by the US from 2014 to 2017”.
Data from the US Geological Survey show China accounting for 81% of global rare earth production in 2017. Military dependence
While US-bound consumer products containing rare earths represent a significant Chinese weapon in the escalating trade war, US military dependence on these minerals is perhaps Washington’s largest vulnerability.
Chinese-supplied rare earths are used in the most leading-edge weapons from the US’ major military contractors, with Lockheed Martin, Raytheon and BAE Systems all employing these minerals in long-range missiles key to US air superiority, and even, by extension, to US hegemony.
These elements are also used in a vast array of more mundane systems such as jet engines, night vision devices, lasers, satellites, and anti-aircraft systems.
China’s control of the rare earths sector could prove more than equal to the US’ hold over China’s massive export market if Beijing chooses to deploy its ‘nuclear option’. Signs of a US response
“Rare earths” is something of a misnomer; these elements can be found in deposits around the world. The only thing that is truly ‘rare’ is the ability to reliably extract and process these elements from the surrounding strata.
Although China is home to 81% of global rare earth production, it only hosts 37% of the world’s reserves. Following Beijing’s 2010 decision to ban all rare earth exports to Japan, causing a price spike and impacting US consumers indirectly via Japanese exports, Washington decided to take certain measures to decrease its vulnerability in this area.