China Still Open To Using Rare Earths As Strategic Resource In Trade Dispute

China Rare Earth
Molten rare earth metal Lanthanum is poured into a mold at a smelting workshop near the town of Damao in China's Inner Mongolia Autonomous Region (Photo: Reuters / David Gray)

Chinese officials have hinted the country's intentions of possibly using its rare earth resources as a strategic ace in the hole against the United States in the ongoing trade war. The country's top economic agency did not outright rule out the possibility of "weaponizing" the country's rare earth exports, which currently accounts for 90 percent of the global supply.

According to China's National Development and Reform Commission, a study is now being conducted on the country's rare earth supply. The study involves the possible implementation of different measures to use rare earths as a "strategic resource."

The agency also mentioned that they will be taking steps to improve the industry and to implement intellectual property protections. This will include curbing illegal production and distribution of rare earths as well as steps to ensure its sustainable supply.

China's economic agency reiterated its warnings that it fully intends to take down anyone who wants to use its own resources to curb the country's development. Following its ambiguous warnings last month, which revealed China's intentions of personally overseeing the country's rare earth production, rare earth stocks have skyrocketed. 

Investors and major market players have speculated that China may be planning to weaponize its rare earth resources to force the United States into a deal.

This could be done by heavily restricting exports of the raw material to the United States and its allies, effectively crippling manufacturers and large tech companies. Rare earth materials are primarily used in the manufacturing of major consumer electronics, telecommunications equipment, computers, and military equipment.

If the United States continues to impose heavy tariffs on Chinese goods, China could effectively retaliate with export restrictions. So far, both the United States and China have imposed heavy levies against each other imports.

The United States further escalated the dispute with the inclusion of China's technology giant Huawei in its trade blacklist. This pushed the trade war into an all-out tech cold war between both nations.

China responded with threats of starting its own blacklist of "unreliable" foreign firms. Major tech firms from both sides suffered massive losses due to the trade blacklist as the supply chain continued to crumble.

China has not yet officially threatened to use its rare earths against the United States, but it now looks to be a viable option given the current state of the trade dispute.

The United States had admitted that it is heavily dependent on China's rare earth imports. The US Department of Commerce had even laid out new plans, which was revealed in a report published earlier in the month, to boost the country's own rare earth production in case China holds back its supply.

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