[Source/Observer Network, Liu Chenghui] On April 2, the Trump administration announced "reciprocal tariffs" on Chinese goods. Just two days later, China introduced a series of measures to counterattack precisely. In addition to increasing tariffs, the export control of seven categories of heavy rare earth-related items has also drawn significant attention from foreign media.
"These control measures are expected to have a wide impact on American companies," several Western media outlets expressed concern. Given China's dominant position in the rare earth supply sector, these countermeasures not only affect the defense technology field, causing anxiety among American aerospace enterprises, but will also impact America's offshore wind turbine plans. A Hong Kong media outlet described that China's precise counterattack and control of rare earth exports hit the heart of America's military industry. Mel Sanderson, CEO of American Rare Earth Minerals, said bluntly that this list was made after strategic consideration, targeting every vital part of the American economy.
"The Chinese list includes finished products like permanent magnets, which are difficult to replace."
According to the "Law of the People's Republic of China on Export Control" and other relevant laws and regulations, on April 4, the Ministry of Commerce and the General Administration of Customs jointly issued an announcement implementing export control measures for samarium, gadolinium, terbium, dysprosium, lutetium, scandium, yttrium, and seven other types of medium and heavy rare earth-related items, which took effect immediately upon publication.
The spokesperson for the Ministry of Commerce emphasized that the Chinese government is legally implementing export controls on these items to better safeguard national security and interests and fulfill international obligations such as non-proliferation. These items have both military and civilian applications, and their export control is an international practice.
Bloomberg reported on April 4 that these rare earth elements are widely used in advanced technologies such as optical lasers, radar equipment, high-performance magnets for wind turbines, jet engine coatings, and communications. They have also become a focal point for Trump.
Rare earth minerals (data image) Visual China
According to estimates by the U.S. Geological Survey, China is the main supplier of rare earth globally, accounting for about 70% of global production. The U.S. Geological Survey also stated that from 2020 to 2023, 70% of the United States' rare earth compounds and metal imports came from China.
"The European offshore wind power industry may be affected by China's retaliatory actions against the United States." Oliver Metcalfe, an analyst at Bloomberg New Energy Finance, said that these restrictions could cause serious supply chain problems for European offshore wind turbines and the United States' upcoming offshore wind turbine deployments. The United States' offshore wind power components, especially engines, heavily rely on Europe.
Bloomberg New Energy Finance estimated that the amount of rare earth used per unit of offshore wind turbine capacity is nearly four times that of land-based wind turbines.
The Wall Street Journal also reported on April 4 that China virtually dominates the rare earth industry, being the leading producer, refiner, and manufacturer of rare earth magnets globally. Rare earth magnets are crucial for a range of military and civilian technologies, not only essential for advanced defense equipment such as missile defense systems, attack submarines, and F-35 fighters, but also for the electric vehicle industry.
Although the U.S. government has invested in efforts to break China's dominance in this field, such as building new rare earth processing plants, progress has been slow. The U.S. and its allies still heavily depend on China's rare earth resources.
It is worth noting that to reduce dependence on China's rare earth supply, the Trump administration has tried many ways, such as attempting to sign mineral agreements with Ukraine to secure more rare earth resources for the United States.
However, earlier reports by The Wall Street Journal stated that China dominates the rare earth processing sector. Even if Trump could get American companies to mine more rare earth resources, he might still need to send most of them to China for processing.
In the U.S., over 1,000 weapon systems using gallium, germanium, and antimony have 87% of their supply chain dependent on Chinese suppliers. Diagram by U.S. Govini
Reuters reported on April 4 that rare earth is a group of 17 elements widely used in defense, electric vehicles, energy, and electronics industries. China produces about 90% of the refined rare earth globally, while the United States has only one rare earth mine, relying heavily on China for its supply. Companies like Lockheed Martin, Tesla, and Apple all use China's rare earth in their supply chains.
Now that China has implemented new export controls on rare earth elements, it is one of the comprehensive countermeasures against Trump's tariff policies, squeezing the mineral supply used for manufacturing weapons, electronics, and a variety of consumer goods.
Analysts said that China has launched a strong counterattack, including not only mined minerals but also finished products like permanent magnets, which are difficult to replace. Although export controls do not equate to a complete ban on exports, China can control shipments by limiting the number of export licenses issued.
Mel Sanderson, director of American Rare Earth Minerals and co-chair of the Critical Minerals Institute Trade Group, believed: "China's list was made after strategic consideration. What they picked are things vital to the American economy."
"China's precise counterattack hits the heart of America's military industry."
Ryan Castilloux, founder of consulting firm Adamas Intelligence, said that this move by China will lead to a scramble for limited alternative supply sources, mainly from Japan and South Korea.
Two industry insiders said that China's export restrictions on certain rare earths have caused concerns among some American aerospace manufacturers because these rare earths for avionics can only be purchased from China.
Raytheon Technologies and Honeywell International declined to comment. Boeing and General Electric did not respond to requests for comment.
Although the U.S. government has stockpiled some rare earths, it cannot provide long-term supplies to domestic defense companies.
David Merriman, president of Project Blue, said that restricting heavy rare earths is particularly important because China exercises stricter control over these elements.
"Currently, there is only one mining project focusing on heavy rare earth elements besides China, Myanmar, and Laos."
He added that China is deeply involved in supply chains from Myanmar and Laos.
Merriman also mentioned that the Serra Verde mine in Brazil is transporting ore to China for processing.
Nathan Picarsic, co-founder of geopolitical advisory firm Horizon Advisory, said: "China is willing to escalate the confrontation. This is likely the first shot in repeated negotiation games with the U.S."
"What we truly worry about is whether this trade conflict will further escalate." Wade Senti, president of Advanced Magnet Lab in Florida, said.
Yang Gunter, an analyst at Mercator China Research Center, said that China's countermeasures may stimulate Western countries like the U.S. to strive to establish alternative supply chains, but progress toward this goal has been slow.
Mark Smith, CEO of U.S. rare earth mining company NeoCorp, frankly admitted: "This takes time."
After China announced its countermeasures, NeoCorp's stock fell by 8.1%. MP Materials, which owns the only rare earth mine in the U.S. and partly relies on China for processing, saw its stock fall by 10.1%.
F-35 fighter jet, U.S. Defense News
Hong Kong Ta Kung Pao reported on April 5 that China's precise counterattack on rare earth exports "hit the heart of America's military industry." Liu Ying, researcher at the Chongyang Institute for Financial Studies of Renmin University of China, told Ta Kung Pao that this round of countermeasures targeting rare earths can limit its impact to related fields, including military products and some high-tech areas, "achieving our precise counterattack and striking at the heart of the U.S."
Military expert Song Zhongping told Ta Kung Pao that medium and heavy rare earths are distinguished by the atomic number of the rare earth elements. Those with larger atomic numbers are called heavy rare earths, while those with smaller atomic numbers are called light rare earths. Light rare earths have wide applications, but medium and heavy rare earths are extensively used in military fields such as missiles, radars, and permanent magnets, and are more expensive and harder to extract.
"Take rare earth as an example; China's sanctions on the U.S. aim directly at its weak points," Song Zhongping said. Implementing export controls on medium and heavy rare earths makes the U.S. realize that if it imposes so-called trade sanctions and increases tariffs on China, China also has sufficient means to retaliate.
Song Zhongping also pointed out that Trump's imposition of tariffs on China lacks rationality. In the current U.S.-China trade, the large trade deficit that the U.S. has formed with China is entirely the responsibility of the U.S., not China. The U.S. does not want to sell more technologically advanced products to China and blames the trade deficit on China, which is unreasonable.
"Counting on countries to bow to the U.S. has never been realistic from the beginning."
In addition to implementing export controls on seven types of medium and heavy rare earth-related items, China's series of countermeasures also include: imposing a 34% additional tariff on all imports originating from the U.S. based on the current applicable tariff rate; listing 16 U.S. entities, including Skydio, on the export control monitoring list; adding 11 entities, including Skycdio, to the Unreliable Entity List; suspending import qualifications of six U.S. companies' products; and filing a lawsuit at the WTO regarding the U.S.'s "reciprocal tariff" measures on Chinese products.
Jörg Krämer, chief economist at Commerzbank, described: "Previously, China's tariff actions against the U.S. were mostly defensive, but today's tough counterattack by China marks the end of this attitude."
"Counting on countries to submit to the U.S. under its strong stance without making any response has never been realistic from the beginning. Now it depends on how the U.S. will respond to this move by China." Cyrus de la Rubia, chief economist at Hamburg Commercial Bank.
Regarding China's countermeasures, Samy Chaar, chief economist at Geneva Long-Term Bank, said: "It is too early to make a final assessment now. There are two possible paths ahead: one is that Trump is open to reaching an agreement... The other path is that he has no intention of reaching an agreement and hopes to maintain tariffs for a longer period, which will disrupt the entire mechanism."
Jan von Gerich, chief market strategist at Nordea Investment, said: "China's reaction seems stronger than expected, but we must see the details. If Trump responds to China's retaliation, the market may be hit again."
Original source: https://www.toutiao.com/article/7489843666907922978/
Disclaimer: The article represents the author's own views. Please express your opinion by clicking the "Top/Downvote" button below.