Rare earths: The latest weapon in the US-China trade war

China has been accused of using its rare earth leverage for political and economic reasons in the past (Shutterstock)
Updated 29 May 2019

Rare earths: The latest weapon in the US-China trade war

  • China could shut down nearly every automobile, computer, smartphone and aircraft assembly line outside of China if they chose to embargo these materials
  • Rare earths “are abundant across the globe,” said OANDA’s Halley

BEIJING: They are used in everything from lightbulbs to guided missiles, but with China controlling 95 percent of the world’s supply of rare earth metals, they are also a potentially powerful weapon in Beijing’s trade war with Washington.
Here are some key questions and answers on the prized elements.
The bedrock of electrical manufacturing, rare earths are 17 elements that serve as key components in devices ranging from hi-tech smartphones and cameras to flat-screen televisions and computers.
China dominates the global supply chain — and Washington relies heavily on the Asian superpower to access the metals. So much so that the commodities have not been subject to the tariff increases imposed by Donald Trump’s administration on Chinese goods.
But Chinese state media is now suggesting that rare earth exports to the US could be cut in retaliation for American measures, sparking fear among manufacturers.
Simply put, rare earths give Beijing tremendous political and economic leverage in its spat with the United States.
The US this month threatened to cut supplies of US technology to Chinese telecom giant Huawei, citing security concerns and intensifying a trade spat that has seen both countries slap tit-for-tat tariffs on each other.
While Beijing has so far only issued cryptic warnings to suggest that rare earths could be its next weapon, “as a retaliatory trade measure, it’s a no-brainer on the surface,” according to OANDA senior market analyst Jeffrey Halley.
If Beijing chooses to make good on these threats, the impact on US manufacturers could be disastrous.
“China could shut down nearly every automobile, computer, smartphone and aircraft assembly line outside of China if they chose to embargo these materials,” James Kennedy, president of ThREE Consulting, wrote last week in National Defense, a US industry publication.
China has been accused of using its rare earth leverage for political and economic reasons in the past.
In 2014, the World Trade Organization ruled the country had violated global trade rules by restricting exports of the metals, claiming environmental damage from mining and the need to conserve supplies.
The US, European Union and Japan had appealed to the WTO, accusing Beijing of curbing exports to give domestic tech firms an edge over foreign rivals.
The WTO panel ruled that the quotas were “designed to achieve industrial policy goals rather than conservation.”
Four years earlier, Japanese industry sources said China temporarily cut off exports to Japan in 2010 when a territorial row flared between the Asian rivals, charges that Beijing denied.
Analysts say Beijing may not pull the trigger just yet, possibly because any restriction could spark a chase for alternative sources of rare earths.
Despite its dominance over supply, China is not the only country with sizeable reserves of the metals.
The United States Geological Survey estimated last year there were 120 million tons of deposits worldwide including 44 million in China and 22 million in both Brazil and Vietnam.
For much of the last century, the US dominated rare earths production.
But mining the metals creates huge amounts of toxic waste and in 2003 California’s Mountain Pass mine — then the sole US miner of rare earths — ceased production, following an environmental disaster a few years earlier.
China filled the void — helped in no small part by lax regulations and lower costs — and grew quickly to become the leading producer of the metals.
Rare earths “are abundant across the globe,” said OANDA’s Halley, but added that many countries are turned off by the heavy costs — financial and environmental — incurred in the production process.
“Much like everyone would like a new airport nearby, just not next door to them... the world has reaped what it has sown by handing the keys to China in this respect,” he said.


New virus cases in China fall for 2nd day, deaths top 2,000

In this picture taken on February 14, 2020, a Malaysia Airlines hostess (R) wearing a protective face mask checks the temperature of a Chinese passenger before she boards a flight to Beijing at the Kuala Lumpur International Airport in Kuala Lumpur. (AFP)
Updated 52 min 54 sec ago

New virus cases in China fall for 2nd day, deaths top 2,000

  • China may postpone its biggest political meeting of the year, the annual congress due to start in March, to avoid having people travel to Beijing while the virus is still spreading

BEIJING: New virus cases in China continued to fall Wednesday, with 1,749 new infections and 136 new deaths announced after China’s leader said disease prevention and control was at “a critical time.”
The much-criticized quarantine of a cruise ship in Japan to avoid spreading the virus ends later in the day. The 542 cases on the ship were the most in any place outside of China and medical experts have called the quarantine a failure.
The updated figures on the COVID-19 illness for mainland China bring the total for cases to 74,185 and deaths to 2,004. New cases have fallen to under 2,000 daily for the past two days.
Chinese President Xi Jinping spoke about the efforts to control the outbreak in a phone call with British Prime Minister Boris Johnson described in state media.
Separately, the UN secretary-general told The Associated Press that the virus outbreak “is not out of control but it is a very dangerous situation.” Antonio Guterres said in an interview in Lahore, Pakistan, that “the risks are enormous and we need to be prepared worldwide for that.”
China has locked down several cities in central Hubei province where the outbreak hit hardest, halting nearly all transportation and movement except for the quarantine efforts, medical care and delivery of food and basic necessities.
China also may postpone its biggest political meeting of the year, the annual congress due to start in March, to avoid having people travel to Beijing while the virus is still spreading. One of the automotive industry’s biggest events, China’s biannual auto show, was postponed, and many sports and entertainment events have been delayed or canceled.
Many countries set up border screenings and airlines canceled flights to and from China to prevent further spread of the disease, which has been detected in around two dozen countries and caused almost 1,000 confirmed cases outside mainland China. Five deaths have been reported outside the mainland, in Hong Kong, Taiwan, Japan, the Philippines and France.
The largest number of cases outside China is the 542 on the Diamond Princess at a port near Tokyo.
South Korea evacuated six South Koreans and a Japanese family member from the ship, and they began an additional 14-day quarantine Wednesday. More than 300 American passengers were evacuated earlier and are quarantined in the United States, including at least 14 who had tested positive for the virus.
On Tuesday, the US government said the more than 100 American passengers who stayed on the ship or were hospitalized in Japan would have to wait for another two weeks before they could return to the US
The US also upgraded its travel advisory for China to Level 4, telling its citizens not to travel to anywhere in the country and advising those currently in China to attempt to depart by commercial means.
“In the event that the situation further deteriorates, the ability of the US Embassy and Consulates to provide assistance to US nationals within China may be limited. The United States is not offering chartered evacuation flights from China,” the notice said.
“We strongly urge US citizens remaining in China to stay home as much as possible and limit contact with others, including large gatherings. Consider stocking up on food and other supplies to limit movement outside the home,” the notice said. The US previously flew out scores of its citizens on charter flights from Wuhan but does not have any further plans to do so, it said.
Despite, such warnings, the capital Beijing was showing signs of coming back to life this week, with road traffic at around a quarter of usual up from virtually nothing a week ago. While most restaurants, stores and office buildings remained closed, others had reopened. People entering were required to have their temperatures taken and register their contact information.