Why rare earth minerals matter in the U.S.-China trade war
President Trump and Chinese Vice Premier Liu He talk to reporters in the Oval Office. Photo: Chip Somodevilla/Getty Images
Rare earth minerals and elements are necessary components of tech and defense tools, including smartphones, LED lights, wind turbines and nuclear rods. And their critical role in modern manufacturing has turned them into the latest lightning rod in the trade war between China and the U.S.
Driving the news: After President Trump blacklisted Chinese tech company Huawei and threatened to target other Chinese tech firms by disallowing American companies to do business with them, China signaled it could target rare earth minerals.
- Chinese President Xi Jinping recently visited a key rare earth minerals area of China, analysts say as a symbolic show of force of what the U.S. has to lose if Trump pushes forward with blacklisting.
- Though the U.S. does have rare earth minerals, the process of mining and refining them is difficult and environmentally dangerous (sometimes releasing radioactivity), so very few domestic facilities exist.
Why it matters: Pushing beyond tariffs and into outright restrictions on trade and international cooperation would take the trade war to a new and more damaging level for individual companies and the stock market.
The big picture: Critics have argued the trade war has been a blessing for China because it has re-focused its business and political leaders on parts of the economy where it is reliant on the U.S. A roadblock on rare earths could prove a similar jolt for American businesses that have long depended on China for essential materials to make their products.
- This month, a bill was proposed in the Senate that could help spur mining of U.S. rare earth elements and other similar minerals.
- Enter Blue Line and Lynas Corp, 2 companies hoping to make rare earth mining in America great again by building a plant in Hondo, Texas.
Yes, but: While Trump has been looking to bolster U.S. economic independence, moving away from China will not be easy. As with many industries, China has built an intricate supply chain and has a number of competitive advantages in rare earth mining and export.
- One big reason Lynas is likely looking to move to the U.S. is its fight with the Malaysian government over environmental conditions and an attempt to force the company to pay for clean-up of a radioactive substance produced in the rare earth mining process.
- Trump's latest $16 billion farm aid package to farmers show he is willing to spend government money to compensate for trade war casualties, but his ability to further crimp American environmental protection standards may be limited.