This was no ordinary photo op.
Chinese President Xi Jinping visited a rare earth metal factory in the city of Ganzhou last week, sending a not-so-subliminal message to the United States amid the ongoing trade war. Flanking Xi was Vice Premier Liu, who is currently heading trade talks with the United States.
“Rare earth is not only an important strategic resource, but also a non-renewable resource,” Xi announced in prepared remarks.
Hailed as an “ace in Beijing’s hand” and “China’s nuclear option,” rare earth metals comprise of 17 rare elements (such as Cerium and Europium) that are crucial to the manufacturing of items such as batteries, smartphones, lasers, electric cars, and medical instruments.
Xi’s visit to the rare earth metal factory raises the specter that Beijing may seek to weaponize the exportation of these crucial metals in response to the Trump administration’s recent round of tariff hikes (as well as the blacklisting of tech giant Huawei).
Depending on the year (and the study), China accounts for 71–95% of all rare earth metal production, giving China potential leverage in ongoing trade discussions.
After Xi’s factory trip, shares in Apple fell, as the American tech giant is reliant on Chinese exports of these materials.
Could withholding rare earth metals merely be a bluff from Beijing?
It’s possible, but China has weaponized rare earth metals before.
In 2010, a Chinese captain rammed his boat into a Japanese patrol boat in the disputed waters around the Diaoyudao/Senkaku Islands. The Chinese captain was promptly arrested, and a few days later, charges were officially brought.
China’s previous foray into weaponizing these rare materials was a mixed bag.
Japan, dependent on these metals and apparently spooked by the potential disruption to its supply chains, released the Chinese citizen.
However, Japan (and the United States) did take China to court, and the W.T.O. sided with Japan.
Furthermore, some experts are convinced that the 2010 export ban had little effect. As James Vincent of The Verge notes, “Chinese smugglers continued to export rare earths off the books; manufacturers in Japan found ways to use less of the materials; and production in other parts of the world ramped up to compensate.”
The sting of such a ban now would most likely be short-lived. As Forbes’ Garth Friesen concludes, “(i)f China does move forward with any form of supply restriction, the result would be disruptive, but not debilitating.”
Rare earth metals are actually more common that most people think. The reason China dominates global production isn’t because of a particularly unique deposit of these metals, but rather Beijing seems to be the only actor willing to pay the environmental price of extracting these metals.
The threat to withhold rare earth metals is the latest negotiating chip in the largest trade war in economic history.
With a history of weaponizing exports, and with President Xi warning of a new “Long March,” perhaps the United States should take that threat seriously.