In our May 24th Tariff Update, we speculated whether China would attempt to get the upper hand in the trade war by leveraging their dominance in rare earths. While this was pure speculation on our part, we now see wide spread news coverageregarding recent veiled threats from an official, from the Chinese economic planning agency aimed at the U.S. technology sector.. The Global Times (a Chinese tabloid) also reported Tuesday that China is "seriously considering" limiting rare earth exports to the United States.
What brought about this new focus on rare earths? Supposedly, after the Trump Administration blacklisted Chinese tech company Huawei, and threatened similar actions with other Chinese tech companies, China started talking about playing their rare earth trump card. As a reminder, China is the global leader of rare earths, accounting for 90 per cent of the world's rare earths production of minerals that are vital to the manufacture of lighting components, smartphones, electric cars and military weapons. China's dominance in this area is due in part, to their access to cheap labor and nearly non-existent environmental regulations. If China does 'weaponize' rare earths, it will be similar to them owning Park Place and Boardwalk in a game of Monopoly. You can still win, but depending more on a lucky roll of the dice.
Recently, a bill was introduced in the Senate with the objective of providing federal funding to spur development of rare earth mining/refining technologies. There are 2 companies, Blue Line and Lynas Corp. looking to start up mining operations in Texas. Overcoming opposition to the environmentally dangerous (at times radioactive) mining and refining activities though will be a major hurtle - and some may question the late timing of this bill.
Is the sky falling? No, but hopefully lighting manufacturers learned some valuable lessons from the rare earth shortagesthat rocked our industry during 2011-12. This supply crisis spurred the subsequent research into rare earth alternativesand renewed electronics recycling initiatives. But like a drowning man watching a YouTube video about how to work a life vest, let's hope we won't need to battle-test our rare earth shortage readiness plans any time soon...