Should the U.S. push China too hard in the trade war, the Chinese side is now hinting at the ultimate tariff on rare earth minerals. How devastating could it be on the U.S. economy?
Will China Restrict Rare Earth Metals Next?
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If the US China trade war turns ugly What other cards do China have to play. The Chinese government seems to have hinted at one potent possibility. On Wednesday the People's Daily an official newspaper published an article on rare earth minerals warning some in the US government to not underestimate China's ability to protect its right to grow economically rare earth minerals are a type of natural resource which are essential to key products like phones electric vehicles even advanced weapons. China absolutely dominates for now. The industry accounting for some 70 percent of global production and nearly 90 percent of processing which U.S. industries rely heavily on. So what are the chances that China actually plays this card. And what impact could it have on the U.S. economy. Joining me in the studio is Professor Jiang gong at the University of International Business and economics. And from Washington Douglas Smith former assistant secretary at the US Department of Homeland Security. Gentlemen welcome to the point now to have a better understanding about China's current dominance let's say of rare earths. Let's take a look at some figures here. For instance according to the US government data Chinese mines account for about 70 percent of global output. We're looking at that green line there and the remaining 30 percent come from Myanmar. Australia and the United States plus a few other countries. And last year China programs processed 90 percent of the rate of all is into usable oxides. So Professor gong let me go to you. Why China. Is it only because that rare earth minerals are found in China.
Yes we hold a lot of this kind of materials compared to other countries around the world. I think there's a report from the American Journal of Energy Society saying that 90 percent of deposits of these materials are located in China. And in addition to this the processing and the mining of these materials are quite labor intensive and also quite polluting actually. So for many years these operations have been existing in China in the provinces in Mongolia and other parts of the country. So you know there's a historical reason why we have a very large operation. And also you also want to point out that the downstream production of this material that's in this should have a process in these materials into magnetics that are being widely used in many different industries for different applications and also to a large extent located here in China as a metaphor. I the whole lot of the natural market instead of employing into gem province.
OK let's let let's make it extra clear as we have a few extra audience members today maybe. So you're saying basically the reason why China has a dominance in the global supply of rare earths is not because it is only found in China. But but but more because China is willing to exploit. Is that what you're saying.
John I think that's very much true. I think visible in terms of the the total model for materials available on the ground. China still holds a very large proportion of it. But the other countries also have that and especially I think United States also have some.
Yeah. Okay let's talk a little bit about the United States I understand that the only rare earth mine in the US is is in mountain pass and it has to send its awe to China for processing. So Douglas what can you tell us about that.
What more can you tell us about that. You know it's an exemplary Mountain Pass has had a bit of a storied history. In fact it was about 10 years ago or so it was actually shot a little bit longer than that. And then once again reopened the challenges actually they have they can be self-sufficient. And I'd say it's just off that one mine alone. But your your guest in the studio makes an excellent point that the challenge here is the taking those minerals once they're pulled out of the ground and then refining them down to what you need is an insanely dirty process. And that is why it has been exported overseas the countries that are willing to undertake this incredibly dirty process you know the mining in California is for an many many years tried to work with the U.S. government to try to change regulations put in safety measures so that they could actually process on site. So it actually could be an interesting side effect if China was to push this aggressively in the short term. Would there be a hit. Yeah I think it would be. But what could be interesting is it could actually create a self-sufficiency in the United States that has never been here before. Yeah I seriously doubt that the current immigration advocates thought that the real.