SUMMARY
- China’s powerful control over the rare earths market makes the U.S. vulnerable.
- U.S. Trade Representative Katherine Tai urges for diversified and reliable supply chains.
- Despite holding not a natural advantage, China's strategic policies corner the rare earths market.
The power China holds over the rare earths market has the U.S. on its toes, with U.S. Trade Representative Katherine Tai voicing concerns during a chat with CNBC. The spotlight isn’t merely on China's vast overseas investments but its unprecedented authority to control the market's supply and demand.
Rare earth metals, essential for advanced tech like electric cars, are predominantly processed in China. This stronghold gives China massive influence on global pricing. Just a decade ago, China hiked up the prices, enabling U.S. mines to restart, only to shut them down when prices were slashed. Before the 1980s, the U.S. led this market, but cheaper labor and lenient environmental norms abroad moved the industry out of America, with China swiftly grabbing the reins.
Katherine Tai emphasized that China’s market lead isn’t because they have a surplus of rare earths, but due to their strategic industry and trade policies. With a planned economic roadmap that extends years in advance, China has taken significant strides, with its electric car industry as a prime example.
U.S. dependence on Chinese manufacturing became glaringly evident during Trump's tenure, further intensified by the 2020 pandemic which jolted global supply chains. The current U.S. administration, aware of the nation's vulnerabilities, is pumping billions into domestic technology development. Tai’s vision is clear – diversified, reliable, and more abundant supply chain options.
Addressing the rare earths scenario, Tai highlighted China's monopoly. With China being the sole buyer of Australia's lithium, which though not a rare earth metal, is vital for electric car batteries, it amplifies China's market clout. The intertwined global economic interests make it challenging to reduce dependency on China, despite U.S. and European officials advocating for it.
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