Critical Metals Become Trade War Weapons
And more about the human and environmental costs of renewable energy and digital technology—and how we can do better.
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Critical Metals Become Trade War Weapons
I’ve been writing for a long time about how China could use its dominance of critical metals as an economic weapon against the US, and now it seems Beijing is gearing up to do just that. As the trade war escalates, its very clear that both sides are acutely aware of the importance of those metals.
Of course, given how quickly Trump changes his mind , there’s not telling how things will look by the time you’re reading this. But here’s where we’re at as of April 9:
On the American side, despite Trump’s backpedalling today, he is keeping in place much of his wall of import tariffs; but from the start, he has quietly left open a window for one set of commodities: critical metals.
The executive order launching the worldwide collection of tariffs on April 2 includes an annex that carves out exemptions for a list of imports, regardless of which country they come from. It includes pretty much all the metals crucial to the Electro-Digital Age: rare earths, cobalt, lithium, copper, germanium, and others.
Those tariff exemptions are a clear admission of American vulnerability. Critical metals are essential not just for renewable energy, electric vehicles and digital gadgets, but also oil refining, AI and military technologies. The US needs foreign nations to supply most of these metals, and more than any other supplier, it needs China. “The US cannot afford to disrupt these flows without jeopardizing its own economic and technological ambitions,” writes researcher Patrick Schroder for the British think-tank Chatham House.
The goal of the exemptions seems to be to keep American high-tech companies going strong—even at the possible expense of other American companies. Globally, China dominates the extraction and processing of most critical metals, but the US is home to significant rare earth, copper and lithium mines. Their owners presumably would have welcomed some tariff protection from overseas rivals and the higher prices that come with them. This is particularly odd considering that just last month Trump issued a separate executive order aimed at boosting domestic mining. I have no explanation for this other than to point out the obvious: sometimes Trump does things that just don’t make sense.
But while Washington may want to leave critical metals out of the trade war, Beijing is signaling ever more strongly that it is prepared to bring them in.
China is not at all happy about being slapped with enormous tariffs on virtually all its other exports to the US. It fired back last week with its own tariffs on US products. Much less noticed, though, was that China also rolled rare earth metals onto the battlefield.
On April 4, two days after Trump’s first round of global tariffs, China imposed new export controls on seven rare earth metals—samarium, gadolinium, terbium, dysprosium, lutetium, scandium and yttrium. It also put controls on permanent magnets made from rare earths, which are crucial for almost all electric vehicles, drones, and robots. In other words, many of the industries that will define the future. China has an especially strong hand with rare earths and permanent magnets. It refines close to 90 per cent of the world’s total rare earth supply, and nearly all of the seven newly-controlled rare earths. China also manufactures around 90 percent of the world’s permanent magnets.
This is the third time in recent months that China has tightened rules on exports of critical metals. Those moves stop short of an actual ban. But they send a strong message. “China is loading the cannons,” Ryan Castilloux, head of the rare earth consulting outfit Adamas Intelligence, tells me. At a minimum they are likely to slow the flow of those metals and could significantly boost their prices—perhaps as much as five-fold. Who would that hurt? Oh, just some minor players that use Chinese rare earths, like Lockheed Martin, Tesla and Apple.
The new controls also require Chinese companies to document who exactly they are selling to. That gives Beijing the power to surgically cut off sales to specific companies—like American defense contractors—without seriously damaging China’s overall rare earths industry, as a full export ban would do. (In fact, in recent months Beijing has forbidden several American drone and defense companies from doing business with China at all.)
And of course if things really get nasty China could just stop selling rare earths to the US altogether. “That could be a potent short-term weapon,” says Castilloux. “It would create so much pain across so many sectors.” Seems like it would also be tantamount to a declaration of all-out economic warfare, I suggest. “Yes,” says Castilloux. “But couldn’t China interpret Trump’s moves as already doing that?”
Book News
Świetna wiadomość dla czytelników w Polsce! The Polish edition of Power Metal comes out on April 25. You can preorder it here. Polish author Andrzej Krajewski wrote an introduction, which according to Google Translate, points out that the renewable energy revolution, “like all previous revolutions that changed the world, will demand new victims ...It is therefore better to make the public opinion of Western countries, including Poland, aware of this, because few things harm the state more than voters making decisions based on an illusion completely divorced from reality.” Amen!
Closer to home, I’ll be speaking at the North Vancouver City Library on April 28. The event is sponsored by the good folks at the North Shore Writers’ Association, but is open to everyone. The following week I’ll be down the road at Seattle’s Town Hall on May 5.
More News Worth Knowing
💨 New Record! Renewables Generate 40% of World’s Electricity
🚲 Will Tariffs Crash the Bike Industry?
✊🏾 Indigenous People in Chile Demand More Control Over Lithium Mines