China drops heavy hint it is about to pull the trigger on its most powerful weapon in the trade war

Beijing appears ready to weaponize those exports in its trade war with Washington.
China's top economic planning commission and state media suggested this week that the country could restrict rare-earth exports to the US.
Restricting Chinese rare earths to the US could cripple the American tech, defense, and manufacturing industries.
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China dropped its most obvious hint yet that it will restrict exports of rare earths to the US as a strategy in the trade war, a move that could cripple the American tech, defense, and manufacturing industries.

Rare-earth materials which consist of 17 elements on the periodic table are one of the most important Chinese exports to the US as they are found in products from batteries to smartphones, electric cars, and fighter jets. The minerals are used in tiny amounts but can be crucial to the manufacturing process.

China is the world's largest supplier of rare-earth materials accounting for 90% of global production and the US relies on China for 80% of its rare-earth imports, according to Bloomberg .

There had been speculation that Beijing would weaponize rare earths in its ongoing trade war with Washington since last week, when Chinese President Xi Jinping and his top economic adviser, Vice Premier Liu He, made a highly-publicized visit to a rare earth factory in eastern China.

xi jinping rare earth factory visit Xinhua/Xie Huanchi via Getty

Beijing officials further fueled the flames this week by mentioning rare earths again in a series of state media articles and comments on social media.

The National Development and Reform Commission (NDRC), which oversees the country's economic policy, said in a Q&A published in the state-run People's Daily on Wednesday: "Do you suggest that rare earths will become a part of China's countermeasures against the US's unwarranted pressure?"

"What I can tell you is that if someone wants to use our rare earths to manufacture products and use them to curb China's development, then the people of the revolutionary soviet base and all the Chinese people will not be happy," it continued.

"There are no winners in the trade war," the NDRC added.

Trump Xi dinner Reuters/Kevin Lamarque

Hu Xijin, the editor-in-chief of the nationalistic, state-owned Global Times tabloid, also tweeted on Tuesday night: "Based on what I know, China is seriously considering restricting rare earth exports to the US. China may also take other countermeasures in the future."

The Global Times suggested last week that Xi's visit to the rare-earth factory "has been widely viewed as a form of leverage for China in the trade war with the US."

Stocks in Chinese rare-earth companies have skyrocketed ever since Xi's visit.

rare earth U.S. Department of Agriculture / Peggy Greb

The US and China have levied billions of dollars' worth of tariffs on each others' goods since March 2018.

Washington raised tariffs to 25% from 10% on $200 billion worth of Chinese goods on May 10, and Beijing said three days later that it would raise tariffs on $60 billion of American goods from June 1. Hours after that, the US drew up a list of prospective tariffs on another $300 billion worth of goods.

The US did not include Chinese imports of rare-earth materials in either list of tariff targets, illustrating its reliance on China for them.

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China drops heavy hint it is about to pull the trigger on its most powerful weapon in the trade war

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