China escalates US tariff war by halting rare earth mineral exports
The U.S.-China tariff battle is heating up again, with China stopping exports of rare earth minerals and magnets. This will badly hit the manufacture of the iPhone and other Apple products outside of China.
Apple Watch environmental statements
The war of wills between President Donald Trump and the Chinese government over tariffs was seemingly put on pause after Trump granted a set of exceptions for select tech and semiconductor produce. However, China is continuing to bite back against the U.S., without raising tariffs further.
China has placed a series of rare earth minerals and magnets on an export control list since April 4, reports Reuters. The move stops the export of the materials out of the country and into others, where they would be used to produce parts and components for various products.
The list of seven rare earth minerals and other materials are used in a variety of major industries, including energy, automotive, defense, and tech products.
Exporters are now required to apply to China's Ministry of Commerce for licenses before they can shift the minerals out of the country and elsewhere.
The process to gain the license is lengthy and not transparent, leaving exporters without any way to truly know how long it will take. Current estimates to secure a license through the process range between six weeks and a few months.
Globally problematic
The decision to require export licenses for the minerals and magnets will eventually be extremely painful for supply chains around the world.
China produces around 90% of rare earth minerals used globally. This gives it a massive amount of control over the materials, and the ability to use it as a cudgel to attack other countries with, such as the U.S.
While it's not got a monopoly on the materials, China's position as the main source leaves manufacturers with few other alternative sources. This will eventually lead to many manufacturers fighting to secure scarce resources for manufacturing outside of China, which will naturally raise in price, unless China loosens its restrictions.
For the moment, manufacturers need to rely on whatever stockpile of minerals they have on hand to stay in business. Depending on the manufacturer and its size of stockpile, they may have at worst a few weeks of supplies.
Once those stockpiles dry up, the manufacturers face halting production lines, which can impact other companies throughout the supply chains.
Evidently, when China said it would use other levers to fight the U.S. instead of increasing import tariffs further, mineral restrictions was one path to take. By the looks of things, it seems like an especially efficient and damaging option for China to take.
It's not clear what Apple's stockpiles of rare earths and other embargoed materials look like.
Another problem for Apple
As a tech product manufacturer, Apple relies on the supply of many rare earth minerals to its supply chain partners.
For example, the use of Neodymium, Praseodymium, Dysprosium, and Terbium are used for their magnetic properties to improve performance. With magnets used throughout the Apple ecosystem, from the Taptic engine to MagSafe, to accessory attachment points on an iPad, usage is inescapable.
While many components and products are produced inside China itself, and therefore not directly subject to the export restrictions, some components are made outside of the country.
Even though Apple does make iPhones in India as part of its efforts to distribute its manufacturing outside of China, components used in assembly will require the blocked rare earth materials. China's controls will definitely impact Apple's supply chain in other countries.
Apple has been working to recycle materials for use in its products, including using 100% certified recycled rare earth elements. In 2023, it had declared that all of its magnets will only use recycled rare earth elements by 2025, along with the use of recycled cobalt in all of its battery designs.
Read on AppleInsider
Comments
Which basically means China is the only game in town until mid century other than re-cycling and I'm not sure where that would take place and how much effort it would be to re-extract the metals from old gear.
It's not like you can drill a hole in the ground and start pumping out rare earth minerals ready for use in manufacturing.
This TechSpot article touches a little on these issues:
https://www.techspot.com/news/107534-china-halts-exports-rare-earth-exports-sparking-fears.html
China is one of the richest countries in the world in natural resources and not just in rare earth minerals or iron ore (for steel).
The rare earth mining element issue isn't China's only card in this trade war. They also hold about $770 billion in US Treasury bonds. That's a more dire concern for the US government. If China (or other countries) decide to dump Treasuries, there's a very real risk of serious economic downturn.
We already saw a little of this last week when the bond market went a little bonkers and Trump removed his foot off the tariff pedal for a couple of days (as he put it "queasy"). China has several other arrows in their quiver; they can damage the USA (and the rest of the world) in other ways. They do have to be careful otherwise they might incite other countries to retail against them as well.
China shutting off rare earth mineral exports is a red flag. They aren't playing around.
My guess is that weaponizing Treasury bonds would be one of China's late stage tactics in this trade war. But for sure they know that the US government knows that they have that card to play.
One thing we can count on is that China will not fold. They might give up a hand here or there but again they are playing for the big stakes whether it takes them 20, 50, 100, 500 years, it matters little to China. US companies are at the mercy of the quarterly earnings report and American politicians to frequent elections. The White House knows they have a narrow window before lawmakers' attention pivot back toward re-election activities. Chinese President Xi Jinping doesn't have to think about re-elections.
It's important to remember that China's Treasury bond position is not the only weapon in its arsenal. They will likely use a variety of methods rather than a quid pro quo back-and-forth tariff escalation. They've already said they are done with increasing tariffs. But dumping U.S. bonds will hurt the USA more than it will hurt China in the long-term. Both sides know that.
Also important is that China isn't the only one holding US debt. There's always the distinct possibility of other debt holding nations working together (possibly covertly) to release Treasuries to nudge the USA back into line. Is the dollar still a safe haven currency in April 2025?
If China wanted to force a financial crisis to send the US into a depression and utterly break Trump and the Republican Party in general, this year might be the time to do it. Maybe wait until the debt ceiling is up for a vote and tensions are running high anyway.
Trump truly is the "enemy within." He has done more damage to the United States than all other KGB assets combined.
Rare earth processing is not done much on the US because, while the ore is easy to extract, processing it requires technology that isn't easy to find in the US. It's also very environmentally unfriendly unless you want processing to cost a lot more.
China has only imposed the threat of restrictions (through licencing) because of US policy actions. You can't blame them for using what they have to push back.
The question is, are recycled rare earths and magnets exempt from China's export restrictions? If not, it won't matter where they're sourced from once they're brought into the assembly line in Chinese factories.
By the way, Canada and Australia aren’t gonna come to America’s rescue. Mr. bankrupt has seen to that, and if they do sell anything to us, there will be no more discounts. Mr. bankrupt is also seen to that too. So much winning….
China can do this all day long for the rest of the Donald’s tenure. Will be interesting to see if Trump has his own Ace, of which there’ll be very few now.
It will take 3-and-a-half MAGA Presidents’ terms to fully realise his vision. Don’t think most Americans will accept the hardship past the short term and this year.
Trying to undo half a century of integration in days does not work it has to been done slowly in many cases simply getting the capability to manufacture could take a decade. Trump doesn’t care all he cares about is that this is popular with his supporters, when you have no products to buy later this year when stockpiles are depleted and all the tariffs properly kick in and a food shortage in the fall due to farm subsidies being slashed and farmers literally not planting due to the uncertainty are you still going to support this insanity?