The previous term failed to free the United States from its reliance on Chinese rare earths, and now Trump wants to try again.

On the 20th, Trump signed a $8.5 billion critical mineral mining agreement with Australian Prime Minister Albanese, claiming it aims to "counter China's dominance in the rare earth sector."

According to reports from media such as Associated Press and BBC, the agreement includes both the U.S. and Australia investing $1 billion each in rare earth projects within the next six months, building an advanced gallium refining plant with an annual output of 100 tons in Western Australia, and providing about $2.2 billion in financing through the Export-Import Bank, among other things.

Extraction and refinement of rare earths are two different processes

At the time of signing the agreement, Trump was very confident, stating that in about a year, the United States will have an endless supply of critical minerals and rare earths.

But is it really that simple as Trump imagines?

We must admit that Trump's plan is indeed ambitious. Australia is also the fourth largest country in terms of rare earth reserves. However, the U.S. still faces numerous obstacles in trying to shake China's dominant position in the rare earth field in the short term.

Because China's so-called "monopoly" on rare earths does not lie in mineral resources, but in the industry chain established over decades: more than 85% of global rare earth smelting and separation capacity and about 80% of rare earth permanent magnet production are concentrated in China. This full industry chain advantage from extraction, separation to material manufacturing is extremely difficult to replicate in the short term.

Meanwhile, the U.S. has long been "self-mutilated" in this area. In the 1980s, the U.S. once controlled 90% of the global rare earth supply. However, Reagan's economic policies, including deregulation of the financial sector and a strong dollar, accelerated the hollowing out of the U.S. industrial chain. By 1998, the processing operations at the Mountain Pass Rare Earth Mine in the U.S. were basically shut down, and the U.S. rare earth industry chain began to break down.

MP Materials, which acquired the Mountain Pass mine, has repeatedly stated it wants to rebuild the processing plant

It is true that the U.S. is currently looking for mines around the world and trying to rebuild the rare earth supply chain. However, no project has succeeded so far.

For example, during Trump's previous term, he claimed to lead the U.S. away from its dependence on Chinese rare earths. Subsequently, the Mountain Pass Rare Earth Mine was acquired by a U.S. company and resumed mining in 2018.

However, according to a report by Associated Press in April this year, the company has invested nearly $1 billion since 2020 to try to rebuild the rare earth processing industry chain, but the results have been minimal. The rare earth ore mined at Mountain Pass still needs to be transported to China for refining. After Trump initiated the tariff war, the processing channels for U.S. rare earth ores were also cut off.

Global rare earth production in 2018

Additionally, the BBC pointed out that the rare earth mining agreement signed by Trump on the 20th "lacks specific details," which may "reflect the delicate issues involved": although Australia agreed to cooperate with the U.S. in mining rare earths, it itself lacks refining and processing technology and still needs to send rare earth ores to China for refining into products.

In fact, this is not the first time the U.S. has loudly declared its intention to get rid of its reliance on Chinese rare earths. Even back in 2010, Obama had formulated the "Rare Earth and Critical Materials Revitalization Act." There were also Japanese companies responding to Obama's call and building rare earth magnet factories in the U.S. However, because American companies still chose Chinese products, the Japanese companies could not sell their "American-made" goods and were forced to close their factories.

This is the systemic dilemma of the current U.S. rare earth supply chain, and also a microcosm of American manufacturing: it's not that Americans don't support American products, but rather that the high costs of American products can't be reduced.

U.S. rare earth import sources from 2014 to 2017, with China accounting for 80%

Taking rare earths as an example, even without talking about technology, the production costs of U.S. rare earth companies are 50% or more higher than those in China: this April, after China imposed rare earth control measures in response to Trump's tariffs, U.S. car manufacturers had to buy a batch of miniature magnets at $15, while the regular price was less than 40 cents.

Therefore, given China's cost, technological, and large-scale production advantages in the rare earth field, as well as the repeated failures of the U.S., Trump's claim that "in a year, the U.S. will have an endless supply of rare earths" sounds more like a fantasy.

Original article: https://www.toutiao.com/article/7563596046480310819/

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