[By Guancha Observer Network, Liu Chenghui] To better safeguard national security and interests, China's control over rare earth exports has precisely countered Trump's tariffs, causing quite a few Western industry insiders to cry out in pain.
The Financial Times reported on April 21 that China's control measures have sparked concerns among the European and Japanese auto industries about supply shortages and production halts. Due to extremely limited reserves of related rare earth elements and magnets, many companies are scrambling to stockpile goods and seek alternative supplies. The report also mentioned that although countries like Japan have been trying to find ways to reduce their reliance on Chinese rare earth elements, establishing new supply chains faces numerous insurmountable challenges.
The report warned that some traders and executives cautioned that China's recent export controls on rare earth minerals could lead to car production halts. If China completely cuts off exports, critical magnet stocks would be depleted within months.
Government officials, traders, and automotive executives said that given estimated inventories can only last three to six months, companies will race to stockpile more materials and seek alternative supplies to avoid significant disruptions.
Jan Giese, a metal trader at Frankfurt-based Tradium Company, warned that customers were caught off guard. Most automakers and their suppliers' magnet inventories are only sufficient for two to three months. Giese said, "If we don't see magnets shipped to the EU or Japan within that time frame or close to it, I believe there will be real problems in the automotive supply chain."
Paris Motor Show 2024 Visual China
The Financial Times noted that China's latest controls focus on medium and heavy rare earth elements, which are used to produce high-performance heat-resistant magnets, such as dysprosium, terbium, and samarium. These elements are crucial for military fighter jets, missiles, drones, as well as rotors, motors, and transmissions for electric and hybrid vehicles.
Although rare earth metals are relatively common in the Earth's crust, extracting them at low cost and in an environmentally friendly way is difficult. China holds almost a monopoly in processing heavy rare earth elements. According to data from the International Energy Agency, approximately 90% of refined rare earth elements came from China in 2023.
An automotive executive said that restrictions on key minerals will have a "significant" impact on Tesla and all other automakers, rating the severity of the impact of export controls between 1 and 10 as "7 or 8".
"This is a countermeasure by China; they can say, 'Alright, we won't increase tariffs directly, but we will hurt you, America, and stimulate companies to pressure your own government to change tariff policies,'" he said.
On April 2, the Trump administration announced "reciprocal tariffs" on Chinese goods. Just two days later, China introduced a series of precise countermeasures, including increasing tariffs and implementing export controls on seven categories of medium and heavy rare earth-related items, such as samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium. In December last year, China announced strict controls on exports of gallium, germanium, antimony, ultra-hard materials, graphite, and other dual-use items to the United States.
China emphasized that this government regulation aims to better protect national security and interests and fulfill international obligations such as non-proliferation. These items have both civilian and military applications, and implementing export controls on them is a common practice internationally.
Industry experts predict that as China further tightens export controls, US defense companies may soon face skyrocketing costs.
Cory Combs, deputy director of Beijing-based consultancy Trivium China, said that light rare earth elements, such as neodymium and praseodymium, which are widely used in magnets, have not yet become targets of regulation. Once trade conflicts escalate, these could become China's potential "important deterrent cards."
To break free from dependence on China's heavy rare earth elements, countries like Japan are pinning their hopes on Lynas Corporation in Australia, which plans to expand its factory in Malaysia by mid-2025 to produce dysprosium and terbium.
Japanese government officials admitted that existing national heavy rare earth reserves can provide an additional two to three months of buffer, but the fundamental solution lies in whether alternative supply chains can be established in time.
Analysts emphasized that China remains the only country in the world with the capability to separate heavy rare earth elements.
Earlier, CNN published an article analyzing that rare earth elements are one of China's most powerful weapons in this round of trade wars. The current situation is that China has played this "powerful card," while Trump had virtually no countermeasures. The report stated that the impact of China's rare earth export controls is rapidly becoming apparent.
The New York Times mentioned in an article published on April 16 that as early as when China imposed a rare earth embargo on Japan in 2010, the United States realized the "risks" brought by dependence on Chinese rare earth supplies.
However, over the past 15 years, the United States has made slow progress in policy formulation and industrial development. Coupled with environmental regulations and other issues limiting domestic rare earth mining, companies have been unwilling to invest in the rare earth industry due to costs and market factors. As a result, the United States still heavily relies on China in terms of rare earth processing and magnet production to this day.
This article is an exclusive contribution from the Guancha Observer Network and cannot be reprinted without permission.
Original source: https://www.toutiao.com/article/7495566855172571663/
Disclaimer: This article represents the author's personal views. Please express your opinions by clicking the [Like/Dislike] buttons below.