US-China Trade War Escalates as Beijing Exercises Rare Earth Control

Strategic Insights -

The US-China trade war has reached a boiling point, with Beijing asserting its dominance over the global rare earth supply chain, leaving America vulnerable to economic pressure. The move, which includes the addition of five new elements to existing export controls, has Washington reeling, with President Trump vowing to take action. However, the stakes are high, with China's grip on the supply chain threatening to disrupt critical industries, including defence and artificial intelligence.

Key Takeaways:

  • China now accounts for 70% of rare earths mining, 90% of separation, and 93% of magnet manufacturing, making it the dominant player in the global supply chain.
  • The US has only one operating rare earth mine, the Mountain Pass Mine in California, which is owned by MP Materials, with a 5% stake held by Gina Rinehart's Hancock Prospecting.
  • The Chinese Commerce Ministry issued new rules for the exports of rare earth elements on October 9, adding five new elements to the existing seven REEs subject to restrictive export controls.
  • Foreign companies will now need to obtain a licence from the Chinese Commerce Ministry before shipping products that contain more than 0.1% of Chinese-origin rare earth elements by value.
  • The new rules threaten to hand China control over the supply of AI chips made in the US, with defence manufacturers also set to be hit hard.
  • Exporters of Chinese technologies used in rare earth mining, refining, or processing will be subject to stricter controls and require licences from the Commerce Ministry.

Statistics:

  • 2.7%: The S&P500 fell on Friday in its worst day since April, when Trump first unveiled his sweeping reciprocal tariffs.
  • 70%: China now accounts for 70% of rare earths mining.
  • 90%: China accounts for 90% of rare earths separation.
  • 93%: China accounts for 93% of magnet manufacturing.
  • 5%: Gina Rinehart's Hancock Prospecting holds a stake in MP Materials, the owner of the Mountain Pass Mine.
  • 12: The total number of rare earth elements now subject to restrictive export controls in China.
  • 0.1%: The value threshold for foreign companies to obtain a licence from the Chinese Commerce Ministry before shipping products containing Chinese-origin rare earth elements.

Sources:

  • Centre for Strategic and International Studies in Washington
  • Commerce Ministry, China
  • White House
  • APEC summit
  • MP Materials
  • Hancock Prospecting
  • Gina Rinehart