China has signaled that it could use rare earth, an essential ingredient for various electronic goods, as a means of retaliation in response to the U.S. pressure on all fronts. Attention is focusing on the impact of the U.S.-China trade war on the supply and demand of rare earth, such as China's push to build a new limited earth separation and extraction plant in preparation for China's ban on exports.
Rare earth materials are essential to the production of high-tech products such as mobile phones, semiconductors, and hybrid cars as they have their unique properties of delivering heat well while being stable. Last year, China enjoyed a near monopoly position by mining 120,000 tons of rare earths, or 72 percent of the world's output. The U.S. is the third-largest producer of rare earths, with 15,000 tons (9 percent) mined, but most imports them considering the cost of separating and extracting rare earths from ordinary minerals, and relies on China for about two-thirds of all rare earth imports. In light of this, the U.S. Trade Representative did not include rare Chinese soil under the 25 percent tariff.
In preparation for possible retaliation by China, the U.S. is working with Australia, the world's second-largest producer of rare earths, to prepare for China's weaponization of rare earths. The Wall Street Journal said Tuesday that U.S. chemical company Blu-line and Australian mining company Linus will form a joint venture to build a new rare earth separation and extraction plant in Honda, Texas. The WSJ said the plant would be the largest supplier of rare earths in the world except China. However, Bloomberg Intelligence predicted that a reduction in rare earth imports from China would inevitably cost the U.S. time and money to increase production, although it could fill the shortfall.
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