In 2017, a US investigation into Chinese trade policies was opened. This investigation resulted in tariffs being imposed on billions of dollars’ worth of Chinese products last year, an action that garnered a comparable retaliation from Beijing. After months of rising tensions, both countries agreed to halt new trade tariffs in December to allow for negotiations. Despite an initially positive outlook, the tension has risen even higher with the US having more than doubled tariffs on 200 billion dollars’ worth of Chinese products. Beijing responded in kind just three days later with tariff hikes on 60 billion dollars’ worth of US goods.
The tariffs imposed on Chinese goods should, in theory, make US-made products cheaper than imported ones, and encourage consumers to buy American.
What exactly are the tariffs in place?
Last year, the US imposed three rounds of tariffs on upwards of 250 billion dollars’ worth of Chinese goods. They cover a wide range of industrial and consumer items. Beijing retaliated with tariffs on 10 billion dollars of US goods and accused the US of starting "the largest trade war in economic history". China has targeted products including chemicals, coal and medical equipment with duties that range from 5% to 25%. They have also targeted products made in US districts with strong support for the Republicans, and goods that can be purchased elsewhere, such as soybeans.
Rare Earth Metals and Why They’re Important in the Trade War:
Rare earth metals are a group of 17 elements commonly used in production in many industries, including renewable energy technology, oil processing, and electronics. Despite the title of "rare", they are abundant in the Earth's crust, according to the US Geological Survey. However, due to difficult extraction and potential environmental consequences of processing these metals, there are relatively few places in the world that mine or produce them. One country makes up more than 70% of the world’s global output for rare earth metals: China.
This past week, the editor of Chinese state-run Global Times tweeted, "China is seriously considering restricting rare earth exports to the US.” This would not be the first instance of China restricting its rare earth metal exports. As recently as 2010, they did it against Japan, over a territorial dispute. The US is somewhat reliant on importing rare earth metals from China, as other countries simply do not produce or process the quantities needed by the US. About 80% of the US’ rare earth metal imports come from China. Domestic mining doesn’t appear to be a viable option either as the one rare earth mine operating in the United States sends its ore to China for processing - and is already facing a 25% import tariff. Creating Enough domestic mines and processing facilities will take many years and will not help in the short term. The restriction of exports to the United States, if enforced, could have a major impact on major US industries (worth trillions of dollars) that rely on rare earth metals.