Hey Taylor – I was reading about the trade issues with the US and China and saw something about rare earth minerals. I assumed most of the trade war stuff was about electronics and energy rights, but are minerals actually a sticking point? – Greta
Hey Greta – Believe it or not, minerals are a huge piece in this trade puzzle. Especially for any county that wants to do more manufacturing at home. In a lot of ways, the rare earth minerals are the most crucial of China’s exports.
–1. They’re in almost everything high-tech. From phones to car batteries, it’s pretty much all made from rare earths. Minerals like neodymium and dysprosium are essential for making powerful magnets used in electric motors and generators, and europium and yttrium help light up LED screens. Basically, if it plugs in, glows, or moves without gas, it relies on one of the 17 rare earth minerals. If it were just about cell phone sales, we might be less concerned, but our military instruments are just as dependent on these elements. For every fighter jet we want, we need a few pounds of refined minerals. And, chances are, we’re getting those minerals from one of our biggest trading partners and adversaries.
–2. One country dominates. China currently produces and processes over 80% of the world’s rare earth supply. That’s a lot of global dependency on one source. Obviously, this gives China a powerful bargaining chip in global trade talks. If tensions rise or trade wars break out, rare earth exports can quickly become a political weapon. There’s also a precedent for it—in 2010, China cut off rare earth exports to Japan during a territorial dispute. Prices spiked, and the whole world started panicking about how it would all play out. Since then, the US and other countries have been trying to find alternative sources and build up their own supply chains. There’s been some progress, but there’s a reason they’re called “rare” earth minerals.
–3. Our modern gold rush. With the world shifting toward green energy and digital everything, demand for rare earths is skyrocketing. That means more mining projects are popping up all over the world. Countries are striking trade deals, investing in mining companies, and creating rare earth stockpiles for fear of when trade wars run too hot. There’s also a push to make the mineral trade game more fair and less environmentally destructive, since some mining practices have a pretty bad track record. Meanwhile, trade is very contentious, and China really does have the leverage on this one; it’s hard to say how much negotiating we can do.
Minerals might sound like something you find in any old rock, but the rare stuff is hard to come by and ultra important. As the world gets more connected—and more competitive—the scramble for rare earths is only going to get hotter. Thanks for the question!
Taylor Kovar, CFP®
CHIEF EXECUTIVE OFFICER
