Trade War Talk from Trump: Hype vs. Practical Realities

Highlights

• China controls 70% of global rare earth production and 90% of processing, creating significant supply chain vulnerabilities.
• Potential trade tensions and tariffs could disrupt global access to critical rare earth materials needed for advanced technologies.
• Limited alternatives exist outside China due to environmental and economic barriers in developing alternative rare earth production.

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Erin Hale, writing for Al Jazeera, (opens in a new tab) explores the risks to global rare earth supply chains amid heightened geopolitical tensions, particularly as U.S. President-elect Donald Trump considers new trade restrictions on China. The central premise is that China’s dominance over rare earth production and processing creates vulnerabilities for industries reliant on these materials, including electronics, defense, and renewable energy.

So, what are these contemplated risks?  The reporter reviews the standard talking points concerning the rare earth supply chain risks of the day for the West and America, given the tough talk emanating from Mar-a-Lago even before the incoming Trump takes office.

Obviously, China dominates this market. Currently, it controls 70% of global rare earth production and 90% of processing, leveraging its position for geopolitical advantage.

Could Trump’s tariffs lead to retaliation?  Trump’s proposed tariffs on Chinese goods could provoke export restrictions on rare earths from Beijing, driving up costs or creating supply shortages.

Importantly, even when rare earths are mined outside China, they are often sent to China for processing, leaving global supply chains reliant on a single country. Unfortunately, there are limited alternatives.

While projects in North America, Europe, and Australia are developing, they remain insufficient to replace China’s scale or cost-effectiveness in the near term or likely even the intermediate term.

The authors also remind the reader of the environmental and economic barriers to escaping this quandary. Rare earth mining and processing are environmentally intensive and costly, discouraging the rapid development of alternatives outside China.

What does this reporter not address? One is the U.S. and allied strategic plans for independence. While Hale mentions initiatives like the Inflation Reduction Act, the piece lacks a detailed analysis of how these efforts could reshape global supply chains or mitigate dependency.

The author avoids delving into the potential of emerging technologies to reduce rare earth demand or enable alternative processing methods, which is underexplored.

This would include mounting interest in recycling. While briefly mentioned, the role of rare earth recycling as a viable solution is skirted over.  Although experts inform Rare Earth Exchanges that current recycling technology would not be sufficient to break China’s monopolistic grip.

However, China does face various internal challenges. Rare Earth Exchanges has reported on the growing pressure from the Chinese government to tighten regulations and improve productivity in the rare earth complex and its companies.

Hale does not consider whether China’s environmental, economic, or political challenges might impact its dominance.

Summary

Erin Hale’s analysis underscores the mounting risks to global supply chains as geopolitical tensions rise between the U.S. and China, particularly in the context of rare earths. China’s near monopoly over production and processing places industries like defense, electronics, and renewable energy in a precarious position. The article highlights the challenges of diversifying supply chains, including economic, environmental, and technological hurdles, but downplays existing U.S. and allied efforts to reduce dependency. While providing a comprehensive view of the risks, the piece could delve deeper into potential solutions, creating a balanced perspective on the future of rare earth supply chains.