(May 31) The trade war between China and the United States appears about to intensify soon, as China is taking steps to retaliated for such measures as the ban on doing business with its telecommunications giant Huawei.
A possible restriction on exporting rare earth metals to the US
One possible response would be restrictions on the export of rare earth metals. An example would be neodymium that is widely used in magnets and in headphones. Most economists and international trade observers claim that the US has no good alternative sources for neodymium.
China produces about 80 percent of the world’s rare earths, and an even higher proportion of the elements in their processed forms.
Racket Hu a researcher at Shanghai Metals Market said in a TV interview: “Currently, it’s still just a possibility that China may ban or do some kind of restrictions. But if it does happen, then we believe prices of rare earths will surge,” This happened before when China curbed exports of rare earths to Japan.
The rare earths are divided into heavy and light based on their atomic weight. The heavy rare earths are less common but are important for lasers, sonar, strengthening steel and other uses.
A recent article notes; "A blockade on the supply of rare earth magnets could have a devastating impact across swathes of the U.S. economy, according to Technology Metals Research LLC. China produces 95% of the world’s output." According to Bloomberg, China will impose the restrictions on rare earths export only if the trade war with the US worsens.
China is also setting up its own black list of "unreliable entities"
A recent article notes: "China will set up a mechanism listing foreign enterprises, organizations and individuals that don’t obey market rules, violate contracts and block, cut off supply for non-commercial reasons or severely damage the legitimate interests of Chinese companies, Ministry of Commerce spokesman Gao Feng said. "Necessary measures will be taken" against those on the list, he said, adding that specifics would be released soon."
Some companies that could be blacklisted
The Chinese state media report is so vague that a large range of US companies could be targeted. These include, Google (Alphabet), Qualcomm Inc.l and Intel Corp. They could also include firms from other countries such as Japan's Toshiba. SoftBank in Japan gave notice it will be building its 5G network using equipment from Nokia and Ericsson. Huawei had been the supplier for the 4G network.
James Yan, a Counterpoint Research analyst said that the blacklist threat put pressure on the US as the US ban on Chinese companies such as Huawei grows. Yan said: “China may pick a few ‘bad examples’ to punish, but it’s unlikely to hit everyone in the supply chain.”
The stock market has had a dismal month in May as shown on the appended video. Trump's trade war with China is no doubt one of the causes of this happening.
Previously published in the DIgital Journal
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