China Halts Critical Exports as Trade War Intensifies

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ENB Pub Note: Interesting article on China’s elimination of exports to the United States in Critical Minerals. This will actually backfire on the Chinese economy. It is the short-term spin-up of the processing of critical minerals that is the issue, and we will be tracking that update. As the world decouples from Chinese manufacturing capabilities, there are several key scenarios. The EU and the UK become more dependent on China, but the individual countries around the globe sign independent trade agreements with the United States, and the EU loses its key reason for existing. A trade group. 

• Share of Imports (2018–2021):
  • Yttrium: 94% of U.S. imports came from China.
  • Rare earth elements: ~74%.
  • Antimony: ~63%.
  • Gallium and germanium: ~54% each.
  • Graphite: ~42%.
  • Other minerals like bismuth and arsenic also have high reliance, often exceeding 25%.
• Total Volume: Precise tonnages are tougher to pin down universally, as USGS and trade data focus on percentages or specific minerals. For context, the U.S. imported over half of its consumption for 51 nonfuel minerals in 2022, with China being the leading supplier for many. For rare earths alone, China accounted for ~90% of global production, and the U.S. imported most of its supply from there.
• Economic Value: Trade values fluctuate, but critical minerals globally were worth $378 billion in 2022. The U.S. share isn’t isolated in data, but China’s dominance (60% production, 85% processing) suggests billions in U.S. imports annually.

And Credit: @anaslhajji on X

New York Times:

China has suspended exports of a wide range of critical minerals and magnets, threatening to choke off supplies of components central to automakers, aerospace manufacturers, semiconductor companies and military contractors around the world.

Shipments of the magnets, essential for assembling everything from cars and drones to robots and missiles, have been halted at many Chinese ports while the Chinese government drafts a new regulatory system. Once in place, the new system could permanently prevent supplies from reaching certain companies, including American military contractors.

The official crackdown is part of China’s retaliation for President Trump’s sharp increase in tariffs that started on April 2.

On April 4, the Chinese government ordered restrictions on the export of six heavy rare earth metals, which are refined entirely in China, as well as rare earth magnets, 90 percent of which are produced in China. The metals, and special magnets made with them, can now be shipped out of China only with special export licenses

But China has barely started setting up a system for issuing the licenses. That has caused consternation among industry executives that the process could drag on and that current supplies of minerals and products outside of China could run low.

If factories in Detroit and elsewhere run out of powerful rare earth magnets, that could prevent them from assembling cars and other products with electric motors that require these magnets. Companies vary widely in the size of their emergency stockpiles for such contingencies, so the timing of production disruptions is hard to predict.

The so-called heavy rare earth metals covered by the export suspension are used in magnets essential for many kinds of electric motors. These motors are crucial components of electric cars, drones, robots, missiles and spacecraft. Gasoline-powered cars also use electric motors with rare earth magnets for critical tasks like steering.

The metals also go into the chemicals for manufacturing jet engines, lasers, car headlights and certain spark plugs. And these rare metals are vital ingredients in capacitors, which are electrical components of the computer chips that power artificial intelligence servers and smartphones.

Michael Silver, the chairman and chief executive of American Elements, a chemicals supplier based in Los Angeles, said his company had been told it would take 45 days before export licenses could be issued and exports of rare earth metals and magnets would resume. Mr. Silver said that his company had increased its inventory last winter in anticipation of a trade war between the United States and China, and could meet its existing contracts while waiting for the licenses.

Daniel Pickard, the chairman of the critical minerals advisory committee for the Office of the United States Trade Representative and Department of Commerce, expressed concern about the availability of rare earths.

“Does the export control or ban potentially have severe effects in the U.S.? Yes,” he said. Mr. Pickard, leader of the international trade and national security practice at the Buchanan Ingersoll & Rooney law firm, said a swift resolution of the rare earths issue was necessary because a sustained disruption of exports could hurt China’s reputation as a reliable supplier.

In a potential complication, China’s Ministry of Commerce, which issued the new export restrictions jointly with the General Administration of Customs, has barred Chinese companies from having any dealings with an ever-lengthening list of American companies, particularly military contractors.

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