China’s rare earth materials are potent weapon in US trade war
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China has announced export controls on the heavy rare earth materials that are vital for motors and magnets as part of the trade war with the US. This is a potent control point and more effective than the US tariff scheme, says a leading industry executive.
However this is also an opportunity for European companies such as Solvay that are not subject to the export controls to supply into the US.
“When China announced export controls on heavy rare earths and NdFeB magnets, they were sending a signal to the US Government. Banning these metals and magnets are a hammer on the U.S. economy,” said Joshua Ballard, CEO of USA Rare Earth, which is aiming to mine and process these materials in the US.
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“The suspension of exports, or just natural delays as mechanisms are put in place, will begin to have an effect fairly quickly and create havoc among many industries. We cannot recover quickly enough for it to not have a major impact on our economy and the products we can buy. What is unclear is whether or not end products manufactured in China that use NdFeB magnets, or rare earth metals, such as cell phones or computers, are affected,” he said.
The US on Friday made such products exempt from its import tariffs from China, which are currently 104%. However this is expected to be a temporary move as more detailed semiconductor and electronics tariffs are set to be announced later today.
“China does not need to increase tariffs to pushback in this trade war,” says Ballard. “These mechanisms become a potent control point over the US economy that are as effective, if not more so, than U.S. tariffs on Chinese goods. China has some real leverage here. Each and every buyer in the U.S. now has to ask permission to important rare earth metals or magnets from China. China can turn those exports off or on at will, and will likely focus on those industries that will cause the most pain to the U.S., and thereby the Trump Administration.”
Last week Solvay started production of rare earth minerals for permanent magnets in France.
The line at the La Rochelle plant is the largest plant outside China that is capable of separating all rare earth materials. This aims to satisfy 30% of European demand by 2030, sourcing and recycling rare earths and recycled materials from a wide range of suppliers and mining partners, as mandated by the EU’s Critical Raw Materials Act.
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