US President Donald Trump seeks to narrow the trade deficit with other countries, and in this regard, he has been on a tariff imposition spree. However, things may turn unpleasant for the US as tariffs are likely to impact the global supply chains.
With US President Donald Trump on a tariff imposition spree, the trade activities world over are eyeing an uncertain situation. However, the interconnectedness of trade is a crucial factor that the US must be careful about. There are certain elements, including lithium and others that the US needs for vital defence, energy, and other applications. if Trump goes ahead with tariffs and other protectionist policies aimed at China, it would become hard for the US to procure these.
Who controls the supply of rare earth elements?
China currently refines more than 90% of the global supply of so-called “rare earth elements,” which include neodymium and dysprosium. While these are not actually rare, these 17 elements are difficult to mine and refine because they’re not easily found in the form of concentrated deposits. Additionally, elements like lithium are usually mentioned along with rare earth elements, because they are also critical for the tech sector.
What is the significance of rare earth elements?
These metals are extremely significant as the entire cellphone and computer industry depends upon these elements. Moreover, they are also used in wind turbines, electric cars, and other industries that the US has sought to develop. Notably, the US imports more than 80% of its rare earth elements, with most of those imports coming from China. In case of a trade war, cell phones and other tech companies making their products in China will be hugely impacted.
US-China tariff war escalates
Earlier in February, Trump imposed 10% tariffs on all Chinese imports to the US, and this should not be seen as isolation, as it came on top of existing tariffs on specific Chinese goods dating back to Trump’s first term. In its retaliatory measure, China imposed up to 15% tariffs on a range of US goods and more export controls on elements critical to the production of modern high-tech products.
Rare earth metals have been behind some recent geopolitical issues as the US and other nations try to access sources outside of China. The US is the world’s second-biggest producer of rare earth metals, with about 12% of the global total.
(With inputs from AP)
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