Beijing has warned Washington that it could take countermeasures in their escalating trade spat and impact U.S. supply chains.China is preparing to limit the supply of rare earth metals crucial to many industries in the United States as their trade dispute intensifies, a commentary published in the People’s Daily newspaper warned on Thursday.
The threat came as the two countries slapped business tariffs on each other worth billions of dollars and U.S. President Donald Trump blacklisted Chinese technological giant Huawei for intellectual property theft.
Rare-earth metals are used in a variety of defense, energy, and industrial applications. The U.S. depends on China for 80 percent of its supplies. China holds a strong monopoly on the global production and supply of rare earth metals.
What Are Rare-Earth Metals?
Rare-earth metals are the fifteen elements ranging from atomic number 57 to 71 on the periodic table of elements. They are known industrially as lanthanides. Another important rare earth mineral is Yttrium, which is not from the rare-earth metal series but has similar physical and chemical properties.
Rare earth metals are not actually rare as the name would suggest but can be found in a variety of places around the world. However, concentrated amounts of the sought-after metals are only found in a small number of countries, like Australia, China, India, Russia, Malaysia, and the United States.
The minerals that bear rare-earth metals are generally complex. The extraction process is both expensive and time-intensive. Usually, these metals are found in carbonate igneous rocks and some magmatic bodies, among other places.
What Are Rare-Earth Metals Used For?
Rare earth metals have a diverse range of applications in the modern world.
- The rare-earth metals dysprosium, gadolinium, and terbium are critical components in glass manufacturing, which is used in most smart devices made globally. These elements are used to polish, provide color, and special optical properties to the glass.
- Neodymium, praseodymium, and dysprosium are among the rare-earth metals used by Apple to manufacture iPhones and iPads.
- Metals such as cerium and lanthanum are used in petroleum refining.
- Neodymium is used to produce automotive batteries.
- Other rare-earth metals are crucial to the manufacturing of magnets, industrial chemicals, batteries, washing machines, vacuum cleaners, and other electronic items of everyday use.
Rare earth metals have military applications too. They’re used to build fighter jets, missiles, combat vehicles, weapons communications systems, and lasers. According to a 2016 Congressional report, the Pentagon accounts for one percent of the total U.S. consumption of rare earths.
Does China Control the Global Supply Chain of Rare-Earth Metals?
China is currently involved in more than 90 percent of the global production and supply of rare-earth metals, according to the U.S. Geological Survey. It has been leading worldwide production of the metals for decades, partly because most rare earth metals mined outside the country still end up in China to make use of processing facilities.
The high-end and closely guarded processing service for rare-earth metals encourages foreign electronic and automotive giants to set up manufacturing plants in China under technology-sharing agreements. It also makes it difficult for foreign competitors to enter the global supply chain of rare earths.
In 2010, China placed certain restrictions on the supply of rare-earth metals by imposing quotas, licenses, and taxes on their production. Beijing claimed that environmental considerations and domestic pressure led to the decision, but the disruption in supply led to companies exploring rare-earth metal extraction outside China. However, almost a decade after the incident, China maintains a stranglehold on the precious industry.
What Happens if China Restricts Supplies of Rare-Earth Metals?
The potential impact of a disruption in the supply of rare-earth metals to industries in the U.S. could be devastating and would wreak maximum havoc on the manufacturers, according to a Yahoo Finance report.
Although rare-earth metals make up only a small amount of the $420 billion trade deficit that the United States has with the Chinese, the precious metals are critical to the making of smart devices, electric vehicles, and advanced precision weapons.
However, a recent analysis of the current situation published by Barrons suggests that alternative sourcing and better management of supply chains in the rare-earth industry could help U.S. companies ward off a potential crisis.
The strategic importance of rare-earth metals in the political economy of the 21st century has brought them to the front of trade conflicts. Critical to the manufacturing of evolving technologies, clean energy solutions, and military components, rare also serve as a tool for geoeconomic statecraft. Whether China will make use of this tactic remains to be seen.
Usman Kabir covered science, space, and technology for Globely News. As a kid, he would make models of the solar system and take part in water rocket competitions. His childhood obsession has led him to a degree in Space Science. Usman likes to spend his free time watching reruns of "Curb Your Enthusiasm" and "Seinfeld."