Xi Jinping, China’s president, may have deliberately revealed how he plans to strike back at the US in the trade war by taking a trip to a magnet factory in eastern China on May 20, 2019.
Xi visited the JL MAG Rare-Earth factory in Ganzhou, where he learned about the “production process and operation” of the company, which specializes in magnetic rare-earth elements, “as well as the development of the rare-earth industry,” the state-run Xinhua news agency reported.
He was accompanied by Vice Premier Liu He, the country’s top economic adviser, who has been leading trade negotiations with his US counterparts, Trade Representative Robert Lighthizer and Treasury Secretary Steven Mnuchin.
Xi’s highly publicized attention on the country’s rare earths suggests he could use the products to cripple the US tech and military industries and make the Trump administration back down in the yearlong trade war.
Rare-earth materials consist of 17 elements on the periodic table that can be found in products critical to the US’s manufacturing, tech, and defense industries — from batteries and flame retardants to smartphones, electric cars, and fighter jets, according to Reuters and the Financial Times. They are used in tiny amounts but can be crucial to the manufacturing process.
Tesla CEO Elon Musk by one of his company’s cars. Rare-earth materials can be found in Teslas.
(Tesla)
“It’s signalling they know it’s not only important to US high-tech industries — electric vehicles, wind — but also defence. That’s the message they’re trying to get out,” Ryan Castilloux, the managing director of Adamas Intelligence, a rare-earths consultancy, told the Financial Times.
What rare earths mean to China and the US
China is the world’s largest supplier of rare-earth materials, accounting for 90% of global production, and the US relies on it for 80% of its rare-earth imports, the South China Morning Post and Bloomberg reported.
China’s state-affiliated Global Times tabloid described Xi’s Monday visit as the leader’s “huge support to the critical industry that has been widely viewed as a form of leverage for China in the trade war with the US, but one that also faces issues that need to be addressed.”
Six of the 17 rare-earth materials, clockwise from top center: praseodymium, cerium, lanthanum, neodymium, samarium, and gadolinium.
(U.S. Department of Agriculture photo by Peggy Greb)
The Trump administration did not include Chinese imports of rare-earth materials in its latest lists of tariff targets, showing its reliance on China for them.
The US raised tariffs to 25% from 10% on 0 billion worth of Chinese goods on May 10, 2019. Days later, it drew up a list of prospective tariffs on another 0 billion worth of goods.
China also said earlier this month that it would raise tariffs on billion worth of American goods starting June 1, 2019, resulting in duties of 5% to 25%.
There is also “growing speculation” that China could ban rare-earths exports to retaliate against the US, the South China Morning Post reported.
Shares of companies working with rare-earth elements skyrocketed after Xi’s visit.
China has weaponized its rare-earths exports in the past. In 2010, Beijing cut off the exports to Japan amid a maritime dispute that saw a Chinese boat captain captured by Japanese authorities.
The export ban was so powerful that Japan immediately released the captain in what The New York Times described at the time as “a concession that appeared to mark a humiliating retreat in a Pacific test of wills.”
In 2011, the House Committee on Foreign Affairs voiced concerns over China’s ability to use rare-earth exports in its foreign policy, in a hearing titled: “China’s monopoly on rare earths: Implications for US foreign and security policy.”
This article originally appeared on Business Insider. Follow @BusinessInsider on Twitter.
