China warns USA trade war will cut it off rare earths supply

FILE Chinese Vice President Xi Jinping takes part in a ceremony at the Great Hall of the People in Beijing

Rare-earth materials - which consist of 17 elements on the periodic table - are one of the most important Chinese exports to the U.S., as they are found in products such as batteries, smartphones, electric cars, and fighter jets.

Beijing is "seriously considering" restricting exports to the United States of rare earths, 17 chemical elements used in high-tech consumer electronics and military equipment, the editor in chief of China's Global Times said yesterday. China's control of rare earth mining has implications for the US military.

China accounted for 80% of rare earth imports between 2014 and 2017 by the United States, which has excluded them from recent tariffs along with some other critical Chinese minerals.

The world got the first subtle warning of China's intention to use rare-earth minerals in the trade war when Chinese president Xi Jinping visited a rare earth plant last week.

"We remind the U.S. not to underestimate China's ability to defend its rights to development and to remember not to blame anyone for not warning them", People's Daily, a Communist Party publication, stated Wednesday.

China has a dominant position as a rare earth producer.

China has dropped its most obvious hint yet that it might restrict exports of rare earths to the United States as a strategy in the trade war, a move that could cripple the American tech, defense, and manufacturing industries according to a report on ZimTechreview.

It also appeared in People's Daily columns in 1962 before China went to war with India over a disputed Himalayan border region as well as before the brief Sino-Vietnamese War in 1979.

The report said China's advantages were already slipping away in 2010 due to normal market behaviour, including increases in non-Chinese production and processing capacity, and innovations that have contributed to reducing demand for some rare earth elements.

The U.S. Defense Department has briefed Congress on a report on rare earth minerals as it looks to reduce American reliance on China, a Pentagon spokesman told Reuters on Wednesday, amid mounting concern in Washington about Beijing's role as a supplier.

America's rare earth mineral dependence is a long-standing issue.

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.

"China could shut down almost 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 USA industry publication.

State-run Chinese media also strongly implied on Wednesday that there could be a crackdown on rare earth sales to the U.S. However, concentrated and economic deposits are scarce, and production is dominated by a handful of countries. It blocked exports to Japan after a maritime dispute in 2010, although the consequent spike in prices saw a flurry of activity to secure supplies elsewhere, which would be the risk again if Beijing follows through with its threat of retaliation. China is the biggest by far, accounting for nearly 70 per cent of global production and 40% of the world's reserves, USGS data show. After announcing it would increase tariffs on $60 billion worth of U.S. goods, China is exhausted as far as imports are concerned.

After President Trump blacklisted the Chinese telecom firm Huawei with an executive order two weeks ago, China signaled that it might target rare earth minerals.