China has laid a rare earths trap for the west

6 comments

1. Beijing’s grip on critical inputs for western industry gives China a uniquely powerful hand in any trade war with the US. A Chinese threat to block the export of rare earths is a much more powerful card than a European threat to block the export of Gucci handbags.

   Even some of the weapons systems that the US would rely upon in the event of a war with China rely on Chinese rare earths. The F-35 fighter plane is dependent on several rare earths sourced from the country — including samarium, which is crucial for heat-resistant magnets, and yttrium, which is vital for targeting systems.

2. There’s reason why US slapped tariffs/threats of tariffs even on its own vassals but not on China.

3. The standard rare earth bullshit.

   Rare earth refining is concentrated in China because the environmental impacts of the waste that it produces are significant. Most western countries aren’t interested in refining because of the significant pollution that it introduces into local environment.

   Rare earth ores generally aren’t geographically limited to China, with significant deposits in Australia, Brazil, Canada, etc. Access to them isn’t a limiting factor if trade barriers are erected (in the long term, acute impact over a period of <6 months will be significant).

   Similarly, the refining methods are generally pretty well described, and the ability to scale production exists in the west. Knowledge and scalability also isn’t a significant bottleneck.

   The limiting factor is economic. China has a competitive advantage in their production due to its existing advanced chemical industry, and lack of (or ability of producers to ignore) ecological protections.

   If the political will to produce rare earth materials existed in the west, the west would produce it.

4. Did China lay a trap, or did the West commission China to build a glass house because it was cheaper than the alternative? Something tells me it’s the latter.

5. [removed]

6. The Chinese have tried to weaponize their rare earth supply chain but it has produced unfavorable results every single time. In 2010, Japan imported 82% of its rare earth materials from China. This dependence was reduced to 58% in 2019, with the target of less than 50% in 2025. Right now, the US imports 80% of its rare earths from China, but in 5 years it will be less and in 10 years dramatically less because the US is opening its mines back up. Up until 1985, the US was the largest producer of rare earths. Those have since closed down due to the convenience of getting them from China but all of that is changing rapidly. Legislation is being passed that will restrict Chinese rare earths from government and military production. What Chinese have not realized is that weaponizing their dominance in certain sectors makes people want to stop dealing with Chinese anymore in those sectors. In the solar cell example, Chinese were using their access to cheap and readily mined coal without any regard for the environment to drive down costs on those cells and then dumping the market, putting many producers globally out of business. What producers started doing in response is making low carbon solar cells to make them easier to make and with the help of governments (US and EU) passing laws requiring lower carbon cells, as well as tariffs on Chinese cells, which the WTO agreed with. The Chinese seem to be under the mistaken impression that there are no consequences to this sort of behavior. Decoupling is happening and US investment in China is tapering off. You can add security concerns and the desire to be in a stronger position in relation to China when they attack their neighbors, engage in massive scale human rights abuses and collude with others engaged in war crimes to the list of other reasons. Finally, the US is currently building stockpiles of rare earths to fill in until the mines come back online.

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