Trump's strategic use of tariffs faces a challenge as China limits essential mineral exports
Let's talk tough, shall we? Here's the skinny on China's move to squeeze the U.S. in the ongoing trade war—they're threatening to block exports of essential minerals, sending shivers down the spines of America's industry bigwigs.
Chinese President Xi Jinping got some serious weapons up his sleeve beyond tariffs, and the Mother of all weapons could be cutting the U.S. off from critical minerals, experts warn.
The U.S. is about to feel the squeeze as China puts a halt on exports of rare earth minerals, key components in weapons systems, electric vehicles, and consumer electronics. This direct retaliation against President Trump's steep 145% tariffs has the potential to stir up a global storm, not just a U.S.-centric one since China slashes exports to all foreign buyers, not just the U.S.
Shipments of magnets from China have ground to a bloody halt, according to the New York Times. Beijing is tightening export controls, slotting a direct hit on U.S. manufacturing and defense supply chains. However, it's not all doom and gloom: National Economic Council Director Kevin Hassett acknowledged the growing alarm, telling reporters, "Rare earths are a part of lots of the economy. The rare earth limits are being studied very carefully, and they're concerning..."
After Trump's tariff announcement, China hit back with their own 125% tariff on U.S. goods and imposed new export restrictions on seven rare earth materials. Exporters are now holding back shipments as they navigate a potentially lengthy and bureaucratic licensing process. Overseas deliveries of magnets—vital for assembling cars, robotics, and defense systems—came to a halt on April 4 as the new rules took effect.
China owns over half of the world's supply of these critical minerals and processes even more, up to 90%. For years, the U.S. and the rest of the world have enabled China's dominance in mineral mining and processing, drawn by its lower costs, lax environmental rules, cheap labor, and heavy government subsidies. But China's dominance also gives it enormous leverage: the power to deliver a crippling blow to global industry in the technological age.
"This is a wake-up call now where we don't have a choice anymore," said Pini Althaus, a mining executive and managing partner at Cove Capital.
The world beyond China is already entering a tungsten supply crisis. The mineral—essential for solar panels, electric vehicles, and defense systems—is 80% sourced from China, which imposed export controls in February.
Josh Ballard, CEO of USA Rare Earths, predicted the defense industry would feel the effects first: "That has to be shipped here and done here in the U.S."
Expect a beating—particularly for auto manufacturers and tech companies. Products like iPhones, which come into the U.S. fully assembled, won't feel the effects as quickly, despite containing dozens of chemical elements.
Trump's trying to counter China's grip on the critical minerals market through a range of efforts, from a push to buy Greenland, to mineral talks with Ukraine, to executive action streamlining the U.S. mining process. Small nations in Central Asia and Africa are taking notice, and they're seeking favor with Washington by showcasing the mineral resources they can bring to the table.
In essence, this is a trade war with consequences that could cripple the American economy and defense sector. Time to batten down the hatches, mate!
- The potential shutdown of exports of critical minerals from China could significantly impact the U.S. economy, particularly the manufacturing and defense supply chains, due to China's dominance in the production and supply of these minerals.
- As a result, important sectors such as the defense industry and tech companies, including auto manufacturers and iPhone producers, may face substantial challenges and disruptions.
- Given China's grip on the market for critical minerals, it's crucial for the U.S. to explore alternative sources and strengthen its own domestic mining industry to lessen its dependence on exports from China, ensuring a more robust and resilient economy.
