China hits back at US tariffs with export controls on key rare earths

China Places Export Restrictions on Rare Earth Elements in Response to US Tariffs

China has placed export restrictions on rare earth elements, a critical group of minerals used in the production of weapons, electronics, and consumer goods. This move is part of Beijing’s sweeping response to US President Donald Trump’s tariffs, which has led to a significant increase in tensions between the two economies.

What are Rare Earth Elements?

Rare earth elements are a group of 17 elements used across various industries, including defense, electric vehicles, energy, and electronics. China produces around 90% of the world’s rare earths, making it a dominant player in the global market. The United States has only one rare earths mine, and most of its supply comes from China.

Why is This a Concern for the West?

The export restrictions will create a scramble for access to the limited sources of alternative supply, primarily in Japan and South Korea. This is particularly concerning for US aerospace manufacturers, as some rare earths are sole-sourced from China for use in avionics. The US government has stockpiles of some rare earths, but they are not enough to supply its defense contractors in perpetuity.

What Does This Mean for US Companies?

Seven categories of medium and heavy rare earths, including samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium-related items, will be placed on an export control list as of April 4. Companies such as Lockheed Martin, Tesla, and Apple, which use Chinese rare earths in their supply chains, will be affected by this move.

How Will This Impact the Market?

The restrictions will galvanize efforts in the West to build alternative supply chains, but progress towards this goal has been slow. Companies such as NioCorp Developments, which has permits for a US$1.2 billion rare earths mine in Nebraska, will need to find alternative suppliers or invest in their own processing facilities.

Conclusion

China’s move to restrict rare earth exports is a significant escalation in the trade tensions between the two economies. The US government and companies will need to find alternative sources of supply to mitigate the impact of this restriction. While there are challenges ahead, it is clear that the West will need to prioritize the development of its own rare earths industry to avoid dependence on China.

FAQs

Q: What is the impact of China’s export restrictions on rare earth elements?
A: The restrictions will create a shortage of rare earths in the global market, particularly for the US aerospace industry.

Q: Why is China dominant in the rare earths market?
A: China produces around 90% of the world’s rare earths, making it a dominant player in the global market.

Q: What are the implications for US companies that use Chinese rare earths in their supply chains?
A: Companies such as Lockheed Martin, Tesla, and Apple will need to find alternative suppliers or invest in their own processing facilities to mitigate the impact of China’s restrictions.

Q: How can the West develop its own rare earths industry?
A: The West will need to invest in the development of its own rare earths mines, processing facilities, and recycling infrastructure to reduce dependence on China.