China To Closely Monitor Rare Earth Industry As Trade War Continues

Rare Earths
A bastnaesite mineral containing rare earth (Photo: Reuters / Yuriko Nakao)

As the trade war between China and the United States rages on, both countries are now launching new measures in an attempt to get the upper hand. China announced this week that it will not be taking a more personal role in the country's rare earth industry, given how it has now become a vital resource that could persuade the United States to a fairer trade deal.

Rare earth minerals are a group of 17 elements that are very difficult to find and process. China is currently the largest producer of rare earths. Between 2014 and 2017, China had supplied the United States with over 80 percent of its rare earth imports. These minerals are used in a wide range of applications that include military equipment, electronic components, and lasers.

China's National Development and Reform Commission announced at an expert symposium this week that it would be implementing key measures to better exploit the country's rare earth resources. These measures include different ways to improve the management of the market as well as strategies to enhance the current industrial structure.

The country recognizes that rare earths will become a key component in its continued economic growth given how it has become a strategic resource for global industries. China revealed its plans to drastically transform the industry by implementing added supervision that will include a crackdown on illegal trade, improvements in export controls, and a system to track down logistics of the minerals.

The Chinese Academy of International Trade and Economic Cooperation had stated that China is currently the world leader in rare earth separation and purification. Its technologies in the particular sector are unparalleled, but there is still a need to improve the industry as a whole. China's rare earth industry is plagued by various issues, which include prolific smuggling, illegal mining, and environmental concerns.

Global prices for rare earths are expected to climb further this year as the trade war between the United States and China continues. China is likely aware that it could leverage its supply of rare earths to dominate the current trade negotiations. Market analysts believe that China could essentially weaponize the resource to strong-arm the United States into retracting its recently imposed tariffs.

US President Donald Trump had made good on his word to impose added tariffs on billions of dollars worth of Chinese imports. China retaliated with its own threats of tariff hikes for US goods. Rare earths will likely give China the upper hand this time around as it could essentially restrict its import to the United States, starving the nation of the vital resource.

The US simply cannot survive without China's supply as it currently does not have any processing capacity. It would also take quite a lot of time for the country to produce its own supply, giving China a bargaining chip that could very well put the deal in its favor.

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