Future of US-China Relations and Rare Earths

While the media is often fixated on Federal Reserve Chairman Jay Powell, there’s a significant aspect being overlooked: the advancements initiated by the Trump administration in reshaping the relationship with China. This shift has implications for national security, particularly regarding sensitive communications from Beijing.

Under Biden’s leadership, there’s a perception that interactions with China are becoming erratic. Reports about spy balloons traversing US military sites without interruption raise concerns about oversight. The dismantling of Trump’s “China Initiative,” aimed at countering espionage and intellectual property theft, has also drawn criticism, especially in light of a perceived failure to enforce secondary sanctions that could impact Russia’s actions in Ukraine.

Some speculate that the Biden administration may be apprehensive about potential revelations from China regarding the Biden family’s business dealings. It’s possible they’re aware of the Chinese Communist Party’s stronghold over critical national security interests. This includes vital rare earth elements essential for various industries, including defense, electronics, and even everyday products like smartphones and MRI machines.

Fast forward to trade tensions, where President Trump aimed to penalize China for unfair trade practices. In retaliation, China has targeted critical rare earth exports, demonstrating their leverage over the supply chain. Past strategies have shown China using this power, such as the 2010 embargo against Japan during a fishing dispute, emphasizing the urgency for the US to regain its position.

The US has ample rare earth resources, yet many are in small concentrations that make mining economically unfeasible. China dominates global production, controlling a large percentage of both rare and heavy rare earth elements by undercutting competitors’ prices and driving them out of business. Moreover, China has significantly enhanced its refining capabilities.

Processing rare earths can inflict serious environmental damage; China has prioritized strategic goals over ecological concerns. This has led to pollution of water sources and harm to local populations. Reports suggest that public protests in China have gone largely unnoticed, overshadowed by strict censorship around environmental issues caused by mining practices.

Despite the costs, China’s hold over rare earth production has paid off during trade conflicts, prompting a reconsideration of aggressive tariff strategies by Trump. Nevertheless, new initiatives are being proposed to address the imbalance.

One significant development is a deal where the Department of Defense plans to invest in a mining company, MP Materials, in exchange for a stake in its operations. The aim is to boost domestic production and secure a long-term approach to sourcing rare earths. Historical context reveals that MP Materials was once the world’s leading producer, and reviving its operations could mitigate China’s influence.

Other companies are also working to reestablish US rare earth production, with one recently launching the first new mine in 70 years, claiming it could supply significant quantities of critical elements. However, these new ventures are still reliant on China for processing, which needs to be resolved for true independence.

Several projects are underway focused on developing environmentally sound processing facilities, although current production levels remain low compared to China’s output. A recent agreement between Apple and MP Materials for significant future orders could offer a boost to US production capabilities.

In conclusion, for the US to reduce its dependence on China regarding rare earths, it will need to replicate their processing technologies while simultaneously considering strategic stockpiling options, much like with oil. The groundwork has been established, but the real challenge lies ahead.