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china Tightens Grip on Rare Earths, Escalating US Trade Concerns
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beijing’s move to restrict exports of critical minerals, including gallium and germanium, alongside new controls on rare earth elements, is sending ripples through global markets and intensifying the economic competition with the United States. This action, announced on July 3, 2023, underscores China‘s dominance in the rare earth supply chain and its willingness to leverage this position. The controls are framed by China as a response to perceived trade restrictions imposed by Washington, but analysts see them as a strategic maneuver in a broader geopolitical contest.
The Strategic Importance of Rare Earths
Rare earth elements are a group of seventeen metallic elements crucial for manufacturing a wide range of high-tech products, from smartphones and electric vehicles to defense systems and wind turbines. China currently controls an estimated 70% of the world’s rare earth supply, and processes over 90% of these materials.This level of control gives China significant leverage over industries worldwide,
explains Simon Cox, China economics editor at world-today-news.com. The new export controls require companies to obtain licenses to ship these materials, raising concerns about potential disruptions and price increases.
Did You Know? …
China’s rare earth reserves, while substantial, are not the largest globally. Though,its lower labor costs and less stringent environmental regulations have allowed it to dominate processing.
Impact on Key Industries
The immediate impact of the controls is being felt in sectors heavily reliant on these materials. The electric vehicle (EV) industry, in particular, is vulnerable, as rare earth magnets are essential components in EV motors. the defense industry is also significantly affected, as rare earths are used in missile guidance systems, radar, and other critical technologies. The US Department of Defense has been actively seeking ways to diversify its supply chain for these materials for several years.
| Event | Date |
|---|---|
| Initial Export Controls Announced | july 3, 2023 |
| Gallium & Germanium Restrictions | July 3, 2023 |
| Rare earth Export Control Measures | July 3, 2023 |
| US DoD Supply Chain Diversification Efforts | Ongoing (since 2020) |
US Response and Diversification Efforts
The US government has expressed concerns over China’s actions, viewing them as a form of economic coercion. Washington is accelerating efforts to diversify its rare earth supply chain, including investing in domestic mining and processing capabilities. The Inflation Reduction Act, signed into law in August 2022, provides incentives for companies to develop domestic critical mineral resources. However, building a competitive rare earth supply chain outside of China will take years and significant investment.
Pro Tip: …
Keep an eye on developments in Australia, Canada, and the US as potential alternative sources of rare earth minerals.
The Uncomfortable Embrace
The situation highlights the complex and often uncomfortable economic interdependence between the US and china. while the US seeks to reduce its reliance on Chinese supply chains, it remains heavily dependent on China for many critical materials. This dynamic creates a delicate balancing act, as both countries attempt to navigate economic competition without triggering a full-blown trade war. The controls on rare earths are a clear signal that China is prepared to use its economic leverage to protect its interests.
“The US needs to accelerate its efforts to build a resilient and diversified supply chain for critical minerals,” stated a recent report by the Council on Foreign Relations.
The long-term implications of China’s actions remain uncertain. However, it is clear that the global landscape for rare earth elements is undergoing a significant shift, with profound consequences for industries and geopolitics alike.
The debate surrounding rare earth elements and supply chain security is not new. Concerns about China’s dominance have
