The United States Congress prepared a report on the use of rare earth minerals in accordance with the Defense Products Act III. To reduce the US dependence on Chinese rare earth minerals, the Department work closely with President Trump, Congress and the industrial base. Want to know about trade war consequences, read on.
The so-called trade war consequences and increased tensions between the United States and China can be fraught with the latter using this dependence to put pressure on the United States to dominate this economical confrontation.
The two largest economies in the world began these trade wars in early 2018, after a series of statements by Donald Trump, who wanted to protect domestic producers and markets.
Regarding rare earth elements, China has not yet explicitly stated that it will limit their sales in the United States, but at the same time, Chinese media have said that this will happen.
Many experts believe that one should not underestimate China’s ability to limit the supply of these essential minerals, since they can go for it to gain a dominant position in this trade confrontation.
Rare earth elements are very popular raw materials for the production of many consumer goods. They represent a group of chemical elements, 80% of which are supplied to the USA from China, since it is the world’s largest producer of this elements.
Consumer electronics, military industry, electric vehicles, space technology and rocket engines, as well as other high-tech industries depend on rare earth metals.
The US Department of Defense accounts for about 1% of the demand for these minerals. This represents as much as about 9% of the global demand for rare earth materials, as Congress reported in the 2016 report of the US Government Accountability Office.
In connection with this state of affairs, the Pentagon has repeatedly stated its concern about America’s dependence on China for rare-earth minerals, as this could make the defense industry and the US defense capability vulnerable.
The Pentagon’s web site notes that the Defense Production program, Section III, gives the president broad powers to ensure the availability of domestic industrial resources.
Special economic levers that the president has to support the requirements of national defense and security. Whether the Pentagon offered any new variants of economic incentives as it is not yet clear.
In China, there are about 37% of the world’s rare earth metals, few of the world’s suppliers are able to compete in this market with China.
The only place in the United States where the GDK mines rare earth minerals is the Mountain Pass mine in California.
These trade war consequences may affect the profits and the value of shares of US technology companies, if China does decide to cut off the supply of rare earth materials, although it is not economically profitable for it.