China uses extremely dangerous 'weapon' against the US
China has stopped exporting important rare earth metals to the US and stopped buying Boeing, potentially depriving its rivals of their "technological gunpowder".
According to RIA Novosti, in response to President Donald Trump's "tariff terrorism campaign", China has suspended rare earth exports. Observers say that by controlling more than 90% of this market, China has used an extremely dangerous geopolitical weapon. Every high-tech industry in the US is affected, from the aviation industry to the defense industry. Washington threatens to cut ties, but also makes it clear that it is ready to back down.
Patience is running out
China has been hit particularly hard in President Trump’s trade war. Tariffs imposed on Beijing peaked at 145%. After a series of retaliatory measures, Beijing launched a targeted attack: suspending exports of a range of rare earth metals.
In doing so, China is threatening to cut off the supply of essential components to key industries: aerospace, semiconductors, autos and defense. Shipments of these products have been blocked at many Chinese ports while the government finalizes a new regulatory system, according to The New York Times.
Tighten the “nuts”
China controls more than 90% of the global rare earth metals market.
“On paper, Beijing is not suspending exports but restricting them: companies now need to apply for special permits. But the system is clogged and deadlines are being delayed. Everyone is rushing to apply, but it can take up to 45 days. Some companies will run out of stock even sooner,” explains Evgeny Shatov, an expert at Capital Lab.
High dependency
Last year, China restricted exports of gallium, germanium, graphite and antimony.
The US Department of Defense immediately began looking for alternatives, especially in Canada. But even then, economists warned: “We cannot live without China.” Of the 47 rare earth metals the US imports, more than 50% come from China, with China being the largest or sole supplier for 25 of them.
"The US is trying to mitigate the risks by increasing production at mines in California and Texas and strengthening partnerships with Australia and Canada. However, it will not be possible to increase capacity quickly. The deficit could lead to a two- to four-fold increase in component prices, and the depletion of reserves threatens to disrupt production," said Pavel Sevostyanov, Associate Professor of Political Analysis and Social Psychological Processes at Russia's Plekhanov University of Economics.
The economist added that the situation from the post-COVID-19 pandemic will repeat itself but at a more severe level.
Poor defense
The US is currently negotiating with Russia, which also has rare earth metal reserves. There are also Brazil and India.
But the US Commerce Department's Critical Minerals Advisory Committee is concerned: "It's unclear who has what reserves and who doesn't. Things are very different here."
So heavy rare earth metals are used in magnets needed for electric motors. The New York Times notes, there is a risk of suspending car assembly at Detroit factories.
Moreover, not only the US will suffer, but also Europe and Japan.
However, according to the New York Times, while major Japanese companies buy rare earths more than a year in advance, Americans often limit their reserves to small amounts or do not buy rare earths at all because they are too expensive.
Failures in the production of drones, robots, rockets and spacecraft cannot be ruled out.
"UAVs and robots are seen as the future of the military, and with the current situation, critical resources in our supply chain are being cut off," said MP Materials, a US rare earth metals manufacturer.
“China has the ability to deprive its rivals of technological gunpowder: both in smartphones and missile guidance systems. The entire modern industry, from green technology to defense, is tied to these supplies. If Beijing “brakes”, the West will find itself in a dead end: there are virtually no alternatives, and creating them from scratch is very long, expensive and painful,” said Ruslan Pichugin, an independent expert on private equity.
Meanwhile, Beijing has announced it will stop buying Boeing passenger planes. Chinese companies have been ordered to stop supplying equipment and spare parts to the US.
Bloomberg stressed that the tariffs themselves would double the cost of planes and parts, making it pointless for China to buy Boeing.
The drastic retaliatory steps stunned Washington so much that the US Treasury even admitted the possibility of cutting off economic ties with China. But they immediately called for a compromise, ensuring that no one “wants” to maintain high tariffs on China.