News & Politics

China Looking at Rare-Earth Export Curbs to Strangle U.S. Defense Industries

(AP Photo/Rick Bowmer)

China is responsible for about 80 percent of rare-earth minerals exported to the U.S. and with enmity between the two countries growing, it becomes critical to find a way to get around that potential bottleneck in supplies.

Rare-earth minerals are critical in the construction of everything from smartphones to fighter jets. China knows that and is examining ways they can limit exports to the U.S. as a means to pressure Washington.

Donald Trump signed an executive order last year that expands U.S. production of rare-earth minerals and the federal government has taken other steps to boost domestic production.

Bloomberg:

China’s Foreign Ministry didn’t immediately respond to a request for comment on a public holiday, while calls to the Ministry of Industry and Information Technology went unanswered. The government last month issued draft guidelines for the sector, with proposals including firms abiding by export regulations and the possibility that the nation restrict or suspend exploration and processing of rare earths to preserve natural resources and protect the environment.

China’s desire to “protect the environment” is admirable but hardly the point. They’d strip-mine half the country if they felt it was in the national interest. More serious is the proposal that would force foreign companies to abide by the byzantine regulations on exports that the Chinese Communist government put in place but rarely enforces.

The specter of export curbs arose in 2019 amid a deepening trade war. China accounts for 80% of rare-earth imports into the U.S., and Beijing had prepared a plan to restrict shipments as a way to target Washington. While those restrictions never eventuated, it pushed the American government to seek out ways to cut their reliance on a single source of supply.

Trump’s executive order was good but far short of what is needed. Rare-earth minerals are close to the surface in only a few places on earth. They’ve become prohibitively expensive to dig up and process. The government awarded Lynas Rare Earths Ltd., the biggest producer outside China, a contract to boost processing capabilities.

But replacing rare-earth minerals in a short time probably won’t be possible.

Trump’s administration had taken a wide range of actions to thwart China’s efforts to dominate numerous high-tech industries, with President Joe Biden still yet to change many of those policies. Biden, in his first conversation as president with Chinese leader Xi Jinping, spoke of his concern about Beijing’s “coercive and unfair economic practices” as well as human rights abuses in the Xinjiang region.

China has us over a barrel and they know it.

With no short-term solution, the U.S. is now scouring the globe for new sources of supply. Russia has the world’s 4th-largest reserves of rare-earth minerals but its industry is very undeveloped. It produces only 2% of global output. Trading Moscow for Beijing in reliance on them for critical metals would not be ideal, but it may be our only option.