Introduction to the US-China Trade War
The US trade war with China has one major sticking point: rare earths. China tightened restrictions on its rare earths exports, prompting U.S. President Donald Trump to threaten economic retaliation and suggest he would cancel a meeting with Chinese President Xi Jinping during an upcoming visit to Asia.
Background of the Rare Earth Dispute
The rare earth dispute predates the current government; China has spent years establishing almost complete control over the country’s minerals as part of its broader industrial policy. China’s restrictions are also seen as a response to Trump’s "reciprocal tariffs" on Chinese goods announced in April. After agreeing to a trade truce in Geneva, U.S. officials had expected China to ease export restrictions on these minerals.
What are Rare Earths?
Rare earths include 17 metallic elements in the periodic table, consisting of scandium, yttrium, and the lanthanides. The name “rare earths” is somewhat misleading because the materials are found throughout the Earth’s crust. They are more common than gold, but are difficult and expensive to extract and process, and are also harmful to the environment.
Uses of Rare Earths
Rare earths are ubiquitous in everyday technologies, from smartphones to wind turbines to LED lights and flat-screen televisions. They are crucial for batteries in electric vehicles as well as for MRI scanners and cancer treatments. Rare earths are also vital for the US military, used in F-35 fighter jets, submarines, lasers, satellites, Tomahawk missiles, and more.
China’s Control over Rare Earths
According to the International Energy Agency, 61 percent of the rare earth metals mined come from China, and 92% of the total output in the processing stage. There are two types of rare earths that are categorized by their atomic weight: heavy and light. Heavy rare earths are rarer, and the United States does not have the ability to separate rare earths after extraction.
Impact of China’s Restrictions
China is using rare earths as key leverage in the trade war, and its latest restrictions come as Xi and Trump are scheduled to meet at the APEC summit in South Korea. The export controls could have a major impact because the US is heavily dependent on China for rare earths. Between 2020 and 2023, 70% of US imports of rare earth compounds and metals came from China.
Escalation of the Trade War
Beijing’s latest restrictions are being seen as a dramatic escalation in Trump’s trade war between the world’s two biggest economic powers. "Depending on what China says about the hostile ‘order’ they just issued, I, as President of the United States of America, will be forced to financially counter their move," Trump said. China added five rare earth elements to its existing control list that requires export licenses, bringing the total amount of restricted rare earths to 12.
