May 22, 2019

Xi's latest leverage: U.S. imports of Chinese rare-earth elements

Soil containing various rare earths in Lianyungang, China. Photo: STR/AFP/Getty Images

Five days after Trump moved to cut off American components to Chinese telecoms giant Huawei, President Xi Jinping responded with a subtle threat to strangle America’s supplies of rare earths — the natural elements used in everything from computers to satellites.

The big picture: Xi’s threat demonstrates how the rivalry between a rising China and a ruling U.S. spreads from trade to technology to supply chains, touching every aspect of bilateral relations. The conflict risks massive spillover costs to the global economy.

Details: Rare earths are the 17 elements that separate the 21st century from the 20th, and China supplies 80% of them. Although the U.S. government has called them "essential" to the military, America has only 1 rare earths mine, which is partially Chinese-owned and sends its output to China for processing.

Between the lines: Trump may have hoped his Huawei order would force Beijing’s hand, but Xi can’t tolerate a hit to such a prominent firm.

  • On Monday, Xi toured a Chinese company specializing in rare earths. Notably by his side: Liu He, Beijing’s chief trade negotiator.
  • If China throttles supplies to America (or its manufacturing chains), production could halt for gadgets from iPhones to F-35s.

Flashback: After Japan detained a Chinese captain who sailed into disputed territory in 2010, Beijing hit Tokyo with conventional diplomatic and economic sticks. Japan refused to release him, but then China squeezed its exports of rare earths and Tokyo folded just two days later.

What to watch: If Trump completes his attack on Huawei, Xi could retaliate against U.S. tech titans that rely on rare earths, such as Tesla and Apple.

Graham Allison is the former director of Harvard Kennedy School’s Belfer Center for Science and International Affairs.

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