Rare Earths May Become Rarer if China Applies Retaliatory Leverage

Rare earth elements and products could be the next battlefield in the trade war between the U.S. and China, Reuters reports, following a visit by President Xi Jinping to a manufacturing facility. As outlined in Panjiva’s research of May 20 the government has already committed to raising tariffs on U.S. exports in retaliation of higher U.S. tariffs, though from a scale perspective these are just 30% of the U.S. increase. The Chinese government may therefore look for other avenues for retaliation.

China accounted for 58.2% of the $144.6 million of rare earth compounds imported by the U.S. in the 12 months to Mar. 31, Panjiva data shows, with Japan representing much of the remainder. It also dominates completed products, particularly magnets used in wind turbines and automotive applications where China accounted for 72.1% of $167.3 million of shipments.

There’s already been a modest downturn in U.S. imports of rare earth compounds from China, with an 8.8% year over year decline in 1Q compared to a 24.6% rise in the past 12 months. Imports of magnets are still increasing with a 9.6% improvement in the first quarter compared to a 35.4% jump in the past 12 months.