Could rare earths be China’s ace in the trade war?

The Heavenly Kingdom is threatening to cut off key materials used in tech and defense. Is it enough to make Trump blink?

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Chinese and US delegations meet at the G20 Summit in Argentina. (Dan Scavino / Wikimedia Commons)

‘Don’t say I didn’t warn you’

The signs that China will soon use its rare earth leverage are everywhere. When Xi Jinping paid a high-profile visit to a rare earth processing facility in May and praised its “strategic value,” it was understood in the international press as a veiled threat. Later that month, a piece in People’s Daily took the veil off.

Hoping for the best, preparing for the worst

Aside from building domestic capacity, there are a few other options for the United States in the event of a protracted rare earth siege:

  • Replacement: When China pulled the same maneuver on Japan in 2010, some Japanese companies resorted to subbing out materials or developing new synthetic ones. The problem is that many of these alternatives don’t perform as well or else the companies would already be using them. At the same time synthetic materials cost time and money to develop, so they’re not necessarily a good solution in a pinch. Other Japanese companies did exactly what Trump fears: They just picked up stakes and moved to China.
  • Alternative sourcing: Probably the best bet is to begin importing through the Lynas Corp, the world’s only other major non-Chinese player in the rare earth biz. It operates a major mine in Australia as well as several processing plants in Malaysia. Though it might not have the capacity meet all US rare earth needs, it might be enough to weather the storm when combined with government and private stockpiles.

The dragon plays chicken

There is also the possibility that this is a bluff—albeit a credible one. Even though China could easily eat the loss of some revenue from rare earth exports, there are plenty of reasons for it to not risk making this move.

Journalist, socialist, activist. Founder and co-chair of DivestSPD. Bylines at SPLC, The Baffler, GEN. Follow on Twitter: @justwardoctrine, @DivestSPD

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