China drops heavy hint it is about to pull the trigger on its most powerful weapon in the trade war
- The US heavily relies on China for rare-earth materials, which are 17 elements widely used in products like batteries, smartphones, electric cars, and fighter jets.
- Beijing appears ready to weaponise those exports in its trade war with Washington.
- China's top economic planning commission and state media suggested this week that the country might restrict rare-earth exports to the US.
- Restricting Chinese rare earths to the US could cripple the American tech, defence, and manufacturing industries.
- For more, go to Business Insider SA.
China has dropped its most obvious hint yet that it might restrict exports of rare earths to the US as a strategy in the trade war, a move that could cripple the American tech, defense, and manufacturing industries.
Rare-earth materials - which consist of 17 elements on the periodic table - are one of the most important Chinese exports to the US, as they are found in products such as batteries, smartphones, electric cars, and fighter jets. The minerals are used in tiny amounts but can be crucial to the manufacturing process.
China is the world's largest supplier of rare-earth materials - accounting for 90% of global production - and the US relies on China for 80% of its rare-earth imports, according to Bloomberg.
There had been speculation that Beijing would weaponise rare earths in its trade war with Washington since last week, when Chinese President Xi Jinping and his top economic adviser, Vice Premier Liu He, made a highly publicised visit to a rare-earth factory in eastern China.
Beijing officials further fuelled the flames this week by mentioning rare earths again in a series of state media articles and comments on social media.
The National Development and Reform Commission, which oversees the country's economic policy, said in a Q&A published in the state-run People's Daily on Wednesday: "Do you suggest that rare earths will become a part of China's countermeasures against the US's unwarranted pressure?"
"What I can tell you is that if someone wants to use our rare earths to manufacture products and use them to curb China's development, then the people of the revolutionary soviet base and all the Chinese people will not be happy," it continued.
"There are no winners in the trade war," the NDRC added.
Hu Xijin, the editor-in-chief of the nationalistic, state-owned Global Times tabloid, also tweeted on Tuesday night: "Based on what I know, China is seriously considering restricting rare earth exports to the US. China may also take other countermeasures in the future."
The Global Times suggested last week that Xi's visit to the rare-earth factory "has been widely viewed as a form of leverage for China in the trade war with the US."
Stocks in Chinese rare-earth companies have skyrocketed ever since Xi's visit.
The US and China have levied billions of dollars' worth of tariffs on each other's goods since March 2018.
Washington raised tariffs to 25% from 10% on $200 billion (R2.9 trillion) worth of Chinese goods on May 10, and Beijing said three days later that it would raise tariffs on $60 billion (R885 billion) worth of American goods starting June 1. Hours after that, the US drew up a list of prospective tariffs on another $300 billion (R4.4 trillion) worth of goods.
The US did not include rare-earth materials in either list of tariff targets, illustrating its reliance on China for them.
Global stocks fell Wednesday as traders braced for further escalation in the trade war. But Ryan Castilloux, the managing director of the rare-earths consultancy Adamas Intelligence, tweeted on Wednesday that there was "still a low probability" that China would withhold rare earths to the US, "as it would quickly (and painfully) escalate tit-for-tat."
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