US President-elect Donald Trump will return to the White House on January 20, and many experts predict that he will start a trade war with China. Rare earths are one of the resources expected to be caught in this war.
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| Rare earth mining at the Bayan Obo mine in Inner Mongolia, China. (Source: Xinhua) |
Estimates from the US Geological Survey and the International Energy Agency show that China currently controls about 70% of global rare earth production.
Rare earth elements play an important role in the production of high-tech equipment such as smartphones, semiconductors and electric vehicle (EV) batteries, F-35 fighter jets, drones, wind turbines, radar systems, nuclear reactors...
The vulnerability of the rare earth supply chain is becoming a growing concern for governments around the world .
China banned the export of gallium, germanium, and antimony to the United States in late 2024, after the Biden administration announced restrictions on the sale of chips and advanced machinery to the country.
The move is seen by many experts as symbolic because the world's largest economy has many other sources of gallium and germanium.
Still, the move marks an escalation in Beijing's use of rare earths as a tool for geopolitical gain. In October 2024, the world's second-largest economy declared rare earths state property.
China has important "weapons"
It is no coincidence that experts believe that Mr. Trump will start a trade war with China.
During the 2024 election campaign, the new White House chief pledged to impose a range of new trade restrictions on China — from a 10% tariff on goods because Beijing failed to curb fentanyl exports, to a 60% tariff for unfair trade practices.
In response to the above tariffs, Beijing may use a "strong card": Rare earths.
“Over the next 12 to 18 months, the global geopolitical landscape will be full of surprises that could significantly impact the outlook for the rare earth supply chain,” said Ryan Castilloux, a rare earths expert at Canada-based research and consulting firm Adamas Intelligence.
The US is particularly concerned about rare earths such as neodymium, praseodymium, dysprosium and terbium, which are used to make powerful neodymium magnets."
| "Rare earths are an important tool China is using in response to US actions in the trade war" - Mr. Rick Waters, CEO of Eurasia Group. |
According to this expert, rare earths and products such as rare earth magnets are considered a "weak point" for US manufacturers and the defense industry.
So far, the world's largest economy and its allies have not developed any alternative sources of supply other than China.
Washington can buy rare earths from countries such as Angola, Australia, Brazil, Canada and South Africa. But moving away from Beijing’s rare earths remains a challenging task.
Sharing the same view, Mr. Rick Waters, CEO of Eurasia Group, commented that rare earth is an important tool that China is using in response to US actions when the trade war occurs.
During President Donald Trump’s first term, the world’s two largest economies imposed retaliatory tariffs on each other. At the time, Beijing had less leverage because it exported more to Washington.
“So over the past four years, China has come up with another legal framework around rare earths that they can use as an important ‘weapon’ in the trade conflict,” said Mr. Waters.
Meanwhile, Mr. Neha Mukherjee, senior analyst of critical minerals at Benchmark Mineral Intelligence, said that the country of a billion people can maintain its dominance in this industry thanks to its economy, government subsidies and huge reserves. These factors make China's rare earth prices more favorable than other countries.
“The Asian country is focused on keeping rare earth prices stable to support its domestic electric vehicle industry,” Neha Mukherjee added.
Not only that, China's low prices - almost monopolistic and uncompetitive - have made operating rare earth mines attractive to investors.
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| Some rare earth samples. (Source: Scanpix) |
America is "inferior"
On the US side, Mr. Mike Walden, Senior Director of TechCet, a consulting firm specializing in the electronics supply chain, said that in order to ensure the supply of rare earths, in 2018 the US reopened the Mountain Pass mine in the Mojave Desert, California - first discovered by MP Materials in the 1870s.
Since then, the company has built a magnet manufacturing plant in Texas, and several other projects are under development across North America.
Such projects could help the US weather the storm if China cuts rare earth exports, Walden said.
But the bottom line, he pointed out, is whether the aforementioned facilities are enough to support all of America's needs? "The answer is no," said the TechCet senior director.
Analysts also say that even if there are mines that produce and exploit rare earths, some types still have to be sent to China for processing.
The world’s second-largest economy controls 90% of the processing of heavy rare earths — a less common group of minerals that are still crucial to the production of electric vehicles, wind turbines and fiber optic cables — so Washington has yet to completely distance itself from Beijing over rare earths.
Waiting for Trump's response
In just a few days, Mr. Trump will return to the White House and it is unclear how he will approach the rare earth industry.
During his first term as President, Trump issued an executive order declaring rare earths a national emergency because the US still depends on “foreign adversaries” to obtain these resources.
Many expect that the new US President will abolish environmental regulations that create barriers to the opening and operation of rare earth mines. This will help the world's largest economy feel more secure about the rare earth industry.
But regardless, the rare earths industry needs to prepare for a bumpy ride ahead. A further escalation in trade tensions between the world’s two largest economies would trigger a tit-for-tat trade war, and rare earths could be caught in the crossfire.
Source: https://baoquocte.vn/mot-diem-yeu-cua-my-lai-chinh-la-quan-bai-manh-voi-trung-quoc-ong-trump-tro-lai-co-loi-hai-hon-300345.html
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