China's Potential Response Strategy in Trump's Trade War: Leveraging Rare Earths as a Powerful Tactic
In a turn of events, the recent meta-metals export restrictions by China, while overshadowed by the ongoing tariff skirmish between the US and China, have gained significant attention. On the 4th of April, Beijing imposed limitations on exports of seven lesser-known but vital metals, crucial in sectors such as electronics, automotive, and defense. China's dominance in these metals, known as rare earths, has escalated significantly - they now account for a staggering 70% of global extraction and 90% of processing.
This dominant position gives China an upper hand in negotiations with the US, more so than smartphone factories. In response, President Donald Trump has shown keen interest in the reserves of Greenland and Ukraine, and issued an executive order on April 24 to expedite exploration and extraction in deep-sea areas, including international waters.
The implications of China’s dominance in rare earth metals are far-reaching. It threatens U.S. military readiness, as over 78% of Pentagon weapons systems rely on these metals. Seven critical elements - samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium - are vital for advanced defense technologies, including laser-guided weapons, radar systems, and nuclear reactor components.
China’s control over refining capacity allows it to dictate global prices and availability. This can lead to economic leverage, supply chain uncertainty, and potential technological stagnation in the US, as China may cede leadership in green energy and quantum computing sectors to China.
To counter these threats, the US is expected to pursue strategies such as supply chain diversification, stockpiling, domestic processing investment, and trade negotiations. The aim is to decouple from Chinese supply chains while accelerating domestic capacity - a long-term process due to China’s technological and infrastructural advantages.
- The April 24 executive order by President Trump aimed to accelerate exploration and extraction of rare earth metals in international waters, signifying a significant shift in the US's strategy to counter China's dominance in the global market.
- The tariff skirmish between the US and China, while impactful, pales in comparison to the concern over China's 90% control of rare earth metals processing, a control that allows China to exert economic leverage and potentially hinder technological advancement in smartphone manufacturing.
- The US, facing potential economic stagnation due to China's 70% control of rare earth metals extraction, has proposed measures such as sports diversification, stockpiling, and domestic processing investment, with a long-term goal of decoupling from Chinese supply chains and increasing American self-reliance in this crucial resource.
