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Edited by^W.n
Trump has done an excellent counter-training to the international community to see the consequences of not warning China.
After being used by China with a rare earth card neck, the first reaction of the Trump administration is not to think of honestly and honestly negotiating with China, but to start a consistent speech hype, directly saying that China's move is "unacceptable", as if only the United States can govern China's long arm, and China is "violating the rules".
Early warning in the game.
In 2019, the trade friction between China and the United States entered a critical phase, with the two sides playing in the economic and trade field escalating.In the meantime, the Trump administration continued to impose tariffs on Chinese imported US goods, and repeatedly violated previous consensus during negotiations, resulting in the dialogue process repeatedly hindered.
In this context, China issued a clear warning to the U.S. through its official channels in August that if the U.S. continues to take a tough stance at the negotiating table and is reluctant to defend itself, China will take countermeasures “more than expected”.This warning is not based on China’s key position in the global industrial chain, especially its unique advantage in the strategic resource area of rare earth.
As the core raw material for manufacturing high-tech products such as chips, new energy vehicles, and aerospace equipment, rare earths' strategic value is self-evident. China is the world's largest producer and supplier of rare earths, accounting for more than 80% of global rare earth production for a long time, and has absolute advantages in rare earth smelting and separation technology. More than 90% of the world's rare earth processing capacity is concentrated in China.
At the time, the U.S. high-tech industry was highly dependent on China's rare earth, according to the U.S. Geological Survey Bureau's 2019 data, about 80% of the rare earth consumed by the U.S. annually needs to be imported from China, which is used in the field of defense and military industry, and is almost entirely dependent on China's supply chain.
China's warning is essentially a clear declaration of its right to speak on its core resources and a warning to the United States 'unilateralism.
However, the Trump administration did not pay attention to this signal. In their view, China's warning is more like a "bluff of bargaining chips," continuing its previous contempt for China's counterattack measures.
Trump has repeatedly stated in public that "China does not dare to really take tough action." His team also generally believes that the United States can use pressure to get China to compromise on rare earth supply, and even plans to join forces with other countries to "get rid of dependence on China's rare earths," but has not introduced any substantive short-term response plan. This disregard for China's warnings laid the foundation for the subsequent difficulties faced by the American industry.
Rare land restrictions come into force
In the second half of 2019, as the United States continued to escalate trade frictions and negotiations failed to make progress, China began to adjust its rare earth export policy.
By strengthening the environmental review of rare earth mining and production links and standardizing the industry order, the total amount of rare earth exports has been indirectly reduced. On the other hand, stricter export controls have been implemented on the supply of rare earths involving some high-tech and military industrial enterprises in the United States. This series of measures quickly affected related industries in the United States and became a key step in China's counterattack.
The first to feel the pressure were the U.S. automobile manufacturing and electronics industries. At that time, car companies such as General Motors and Tesla in the United States were accelerating the research and development of new energy vehicles, and core components such as motors and batteries of new energy vehicles required large amounts of rare earth elements.
According to the data of the American Automobile Manufacturers Association, from October 2019, several U.S. automakers due to a shortage of rare-earth supply, were forced to adjust production plans, and some new energy vehicle production lines even occurred for a short time, resulting in the U.S. new energy vehicle production decreased by 12%.
In the field of electronics, Apple, Intel and other companies are also facing similar problems, the stock of rare earth permanent magnetic materials needed to manufacture chips, Intel at the time openly said that if the supply of rare earth continues to be tense, the delivery cycle of some of its chip products will be extended by 3-6 months.
The United States Department of Defense's 2019 Key Mineral Strategy Report clearly states that rare earth is "an important resource for ensuring national security", and the U.S. military's F-35 fighter jets, Zeus Shield destroyers, precision missiles and other equipment rely on rare earth materials to improve performance.
For example, in F-35 fighter engine turbines and radar systems, the use of rare-earth elements accounts for more than 20%.
As China's rare earth supply control strengthened, the rare earth inventories of U.S. military companies gradually bottomed out. Lockheed Martin had to urgently seek alternative suppliers at that time. However, due to limited rare earth production capacity in other countries and insufficient smelting technology, it was difficult to meet demand in the short term, resulting in a delay in the delivery of F-35 fighter jets. In the fourth quarter of 2019, the delivery volume was 8 fewer than planned.
The “double standard” of the United States
Faced with the pressure from rare earth supply, the Trump administration's first reaction was not to face up to the rationality of China's warnings and take the initiative to return to the negotiating table for consultations. Instead, it started a consistent pattern of rhetoric and hype.
Trump bluntly stated on many public occasions that China's behavior of restricting the United States through rare earths was "unacceptable" and "violated international trade rules", and even accused China of "taking advantage of resource advantages for economic coercion". Its cabinet members also echoed it. The U.S. Secretary of Commerce claimed that "China's practices have undermined the stability of the global industrial chain" and asked China to "immediately stop such measures."
In fact, for a long time, the United States has frequently imposed “long-arm jurisdiction” on other countries to suppress competitors through tariff sanctions and technological blockades, and in 2018-2019 alone, the United States has introduced more than 100 trade restrictions against several countries, including China.
When China takes legal and compliant counterattack measures, the United States defines it as a "violation of rules." This logical contradiction makes the United States 'accusation unconvincing.
At that time, the Report of the United Nations Conference on Trade and Development pointed out that all countries have the right to formulate reasonable export control policies according to their own resource conditions and national security needs. China's rare earth policy is in line with international law and practice, and the US accusation "lacks legal basis".
At the same time, the Trump administration had to face real difficulties and begin to seek solutions. On the one hand, it urgently launched the "Rare Earth Supply Chain Independence Plan", planning to invest US$120 million to support the U.S. rare earth mining and processing industry. At the same time, it negotiated and cooperated with countries with rare earth resources such as Australia and Mongolia, and tried to establish a supply chain that is "not dependent on China."
But the reality is that the domestic rare earth mining industry in the United States has been stagnant for many years, and it will take at least 5-8 years to rebuild mines and smelting plants, and the environmental approval process is complicated; Although Australia and Mongolia have rare earth resources, their smelting technology is backward and cannot meet the needs of the United States in the short term.
On the other hand, the Trump administration privately communicated with China through third-party channels, hoping that China would "relax rare earth export restrictions". However, because the United States did not show sincerity in trade negotiations, the communication did not make substantial progress.
The Warning Significance of "Negative Textbooks"
The Trump administration's experience of falling into the rare earth dilemma by ignoring China's warnings is generally regarded by the international community as "a negative example of not paying attention to opponents 'warnings and abusing unilateralism." Many international organizations and media have analyzed this one after another and pointed out that this incident has provided an important warning for countries in the international game.
A report released by the International Monetary Fund (IMF) at the time believed that the Trump administration's mistake was to "underestimate China's key position in the global industrial chain and at the same time overestimate its own ability to resist risks." Its disregard of China's warnings was essentially a "misjudgment under unilateralist thinking," which ultimately led to a heavy price for U.S. industry.
The Economist magazine commented that this event showed that in the era of globalization, the economic interdependence of countries continues to increase, and any country that tries to unilaterally pressure and ignore the rational appeals of its opponents will eventually reflect itself, and the experience of the Trump administration "rings the alarm bell for other countries."
For other countries, this incident has also made them realize more clearly that China's warning is not a "bluff" but a clear position based on its own strength and principles. Since then, more and more countries have paid more attention to respecting China's core interests and avoided adopting unilateral confrontational attitudes when conducting economic and trade cooperation with China.
At the same time, many countries have begun to re-examine their own supply chain security, reduce their resource dependence on a single country, and promote the diversified development of supply chains. This trend has gradually emerged in the subsequent global economic development.
USGS 2019 Rare Earth Resources Report:
https://pubs.usgs.gov/periodicals/mcs2019/mcs2019-rare-earths.pdfU.S. Department of Defense’s 2019 Key Minerals Strategy Report
https://www.defense.gov/Portals/1/Documents/pubs/DoD-Critical-Minerals-Strategy-2019.pdfUnited Nations Conference on Trade and Development 2019 International Trade Policy Analysis Report:
https://unctad.org/system/files/official-document/ditc2019d1_en.pdfInternational Monetary Fund's 2019 Global Economic Outlook Supplementary Report:
https://www.imf.org/en/Publications/WEO/Issues/2019/10/01/world-economic-outlook-october-2019