US-China: new dispute over rare earths
A storm is brewing between Washington and Beijing again: China has tightened its restrictions on exports of rare earth metals and related technologies. Exports to third countries now require approval from Beijing. US President Donald Trump has responded by threatening to impose a 100 percent punitive tariff on Chinese goods as of 1 November. Is the world facing a new trade war between the two economic giants?
Patiently creating a geopolitical weapon
China pursued a clear strategy here, Yetkin Report comments:
“China controls 70 percent of the world's rare earth mining and 90 percent of refining and processing capacity. This is no coincidence, but the result of strategic patience and government foresight. While Western countries have closed their mines for environmental reasons, China has conquered the market by undercutting prices, accumulating knowledge and concentrating the entire supply chain around itself. Now the world is dependent on Beijing's refineries, export licences and pricing policies to continue the energy transition. This dependence is not just economic in nature, it is also a geopolitical weapon.”
Any confrontation would only be temporary
TVNET doubts that either country would deploy economic weapons on a large-scale over a long period:
“The fact that countries threaten to impose various trade restrictions doesn't mean that they are actually willing to do so. The US needs China, if only because of its rare earths production, for which there is no substitute. China, in turn, needs the US. ... It needs access to the US market to generate revenues. ... Both sides stand to lose, and they are well aware of that. This in turn leads us to the conclusion that there will be no large-scale use of economic weapons. And if there is, such a confrontation would most likely be temporary.”
Both sides sacrificing economic rationality
This new trade conflict makes no sense economically, says the Süddeutsche Zeitung:
“Tariffs never affect just your rival: they also effect your own economy. The mere announcement of new trade barriers causes investments to stall and supply chains to weaken. The global stock markets made this crystal clear on Monday. Experience from previous tariff rounds shows that in the end both sides lose, and with them a large part of world trade. But instead of breaking with this cycle, Washington and Beijing continue to react according to the logic of their domestic political interests. The upshot? Economic rationality is being sacrificed for a show of strength for which ultimately everyone, not just the US and China, will pay.”