China's Rare Earths Monopoly: A Key Factor in the US-China Trade War

Strategic Insights -

Beijing's near-total control over the production and processing of rare earths has become a crucial factor in the ongoing trade war with the US. China's grip on these critical minerals has allowed it to wield significant power in the conflict, forcing the US to seek a temporary reprieve from tariffs and restrictions on rare earth exports. The western world's dependence on Chinese rare earths is far greater than its reliance on Russian energy, making it a significant point of concern for European leaders.

Key Takeaways:

  • China controls approximately 60-70% of the world's rare earths and 90% of their processing and refining, giving it a near-monopoly on the market.
  • The US recently extended the 90-day truce in its trade war with China, allowing Beijing to maintain more favorable tariff rates with the US than Switzerland or India.
  • China's rare earths are essential inputs for western industry and the US military, with the F-35 fighter plane relying on several rare earths sourced from China, including samarium and yttrium.
  • The EU's Critical Raw Materials Act aims to reduce dependence on China, but the EU has no operational rare earth mines and only two major processing plants, making it challenging to overcome environmental objections to processing.
  • The western world's dependence on Chinese rare earths is a major concern, with one European politician stating that it would be akin to Russia shutting down the green economy.
  • The Trump administration has acknowledged the problem, with one official stating that the west has been aware of it for decades but has been stymied by environmental concerns and a reluctance to sanction state intervention in the market.

Statistics:

  • China mines around 60-70% of the world's rare earths.
  • China controls around 90% of the world's rare earth processing and refining.
  • Approximately 60% of the world's rare earth magnets are sourced from Chinese rare earths.
  • The F-35 fighter plane relies on several rare earths sourced from China, including samarium and yttrium.
  • The EU's Critical Raw Materials Act aims to reduce dependence on China by 2025.

Sources:

  • "The Middle East has oil. China has rare earths." - Deng Xiaoping, 1987
  • "We've sat around admiring this problem for decades." - Anonymous Trump administration official
  • "The name of the game is to get as close as possible to zero [dependence] on China, but we are not there yet." - EU official
  • "We're getting, for the United States ... a lot of the mineral rights ... as part of it." - Donald Trump, recent statement on a peace deal between Rwanda and the Democratic Republic of Congo.