Pick up just about any consumer electronics product at one of the big box retailers and you’ll quickly realize why the growing trade tensions between the U.S. and China are so significant—it seems just about every product is stamped with “MADE IN CHINA”. However, below the surface there is possibly a much more dangerous trade conflict brewing. According to media reports from China, Beijing appears to be gearing up its use of dominance in what are known as “rare earth metals” as a counter to its trade battle with Washington. The U.S. relies on China for about 80% of its rare earths, which are used in a host of applications from smartphones to electric vehicles to sophisticated military gear. Not just “used in”, but “essential to” – these rare earth metals have become an irreplaceable part of modern electronics. So what’s the problem? Many of the rare earth metals are only available from China, so when the Chinese government threatens to shut off rare earth metal exports, they are threatening the very existence of many of our most prized electronics. The following chart illustrates this dangerous dependence (source: Bloomberg)
Dangerous Dependence
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June 03, 2019