Beijing's latest export restrictions on the rare earths rattled markets and stirred anxiety in Washington and beyond. Just precisely as Chinese President Xi Jinping might meet with President Donald Trump, Beijing unveiled sweeping new limitations on access to the materials necessary to make computer chips, electric vehicles, and military platforms. The timing accents the manner Beijing is wielding control over the strategic materials as a bargaining chip in the furious Chinese-American trade war, the Wall Street Journal reported.
What are the rare earths? Why are they important?
Rare earths are a cohort of 17 elements that contribute a modest but pivotal role to current technologies. Far from being uncommon, they are, however, hard to mine and refine, with southern China possessing the richest deposits. The nation currently fulfils about 90 percent of the world's needs. Perhaps the most valuable among them is dysprosium, consumed in minuscule quantities yet irreplaceable in electric motors, wind turbines, missile systems, and semiconductor equipment. Industry professionals are known to liken it to a pinch of baking powder in a recipe—utilized sparsely, yet with no use thereof, nothing functions.
What Beijing recently released
The Chinese Commerce Ministry broadened earlier constraints with a single sweeping condition: any company, foreign or Chinese, will require Chinese approval to export materials containing more than 0.1 percent of the value of the rare-earth material. The new laws also broaden the range of proscribed minerals and unilaterally bar use of such minerals by foreign militaries. Beijing also introduced new shipping port taxes to the United States simultaneously as it inaugurated a new antitrust examination of Qualcomm, signalling the Chinese intent to retaliate against American economic pushback. The constraints are defined deliberately loosely to permit selective enforcement as bargaining power.
Who will be most affected
Most hurt will be the semiconductor, auto, and defence sectors. Consumer items such as PCs may be exempted from the prohibitions, yet intermediate items such as motors or components for artificial intelligence chips will be hurt. Automakers, still reeling from earlier Chinese licensing delays, will be hurt anew since both gasoline-powered as well as electric vehicles are so highly dependent on magnets made of rare earths. There also is anxiety among analysts that companies with both civilian as well as military activities, e.g., Boeing, will be cut off from supplies even for non-military applications.
Strategic trade advantage during negotiations
The curbs are timed ahead of thorny talks this month. Most observers interpret the restrictions as a bargaining strategy, yet Beijing might maintain at least some restrictions forever. Trump retorted with threats of 100 percent tariffs on Chinese imports from November 1 and hinted that he might avoid the scheduled meeting with Xi in South Korea. Although the U.S. still has leverage with control over leading-edge chips and military jets, China's control over rare-earth mining and processing puts it in a strong position to disrupt world-wide supply chains.
What alternatives exist
The United States and its allies have raced to establish self-sufficient chains of supplies for the materials, but it has gone slowly. There are mines in the United States, Australia, and some parts of Africa, but the capacity to process the materials overwhelmingly remains in China, after years of market consolidation. Even non-Chinese rare-earth plants are in some cases dependent on Chinese technologies, under the purview of Beijing's export controls now. The analysts predict that it could take years for the United States and Europe to be fully self-contained, with the industries remaining exposed to Beijing's coercion in the meanwhile.
Why this matters
The Chinese action is a step-up in the global economic war. With the threats to the supplies that are vital to clean power, defence, and artificial intelligence, Beijing is making clear it won't hesitate to use trade as a weapon. The restrictions make it harder for the U.S. to try to curb the Chinese technological advance while backing partners in Europe and Asia. The new regulations inject new unpredictability into supply chains already disrupted by tariffs and economic rivalries. The rare-earth jolt is as much about the minerals as about who controls the rules of the world economy.
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