The U.S., Japan, Korea and the European Union will need new sources of rare earths in order to meet the needs of manufacturers that rely on them for applications in electronics, aerospace, medicine, medical equipment, automobiles and clean technology such as solar panels and wind turbines.
The one rare earth mine operating in the United States sends its ore to China for processing - and already faces a 25% import tariff imposed by China. China also accounts for 70% of the world's rare earths consumption.
After state media broached the idea last week, the possibility of China leveraging their dominance in the rare-earth markets was heightened by President Xi's visit to a rare-earth industrial center in Ganzhou, Jiangxi province. There are several large mining companies like BHP and Freeport-McMoRan that mine small amounts of rare earth elements. If it is to reduce exports of rare earths, it will lower this quota. It matters a great deal to individual companies but is minuscule in the global economy.
Rare earths are a group of 17 metals used in a wide range of high technology products, from cellphones to cancer treatment drugs to automobile emissions systems.
A key measure of Chinese manufacturing activity for May also came in below expectations, raising questions about the effectiveness of Beijing's stimulus steps and the health of the global economy.
The Chinese tabloid Global Times also said Tuesday that China can play the "rare earths card" and that it's "seriously considering" the move.
Investors have grown more anxious about deteriorating trade talks between the United States and China and have sought safety in government bonds.
Markets Right Now: Trump's Mexico tariffs sink stocks
An increasing number of migrants from Central America have been arriving to the United States border with Mexico in recent months. The president explained: "For decades, the United States has suffered the severe and risky consequences of illegal immigration ".
Washington says it will impose a 5% tariff on Mexican goods beginning June 10, which would then rise steadily to 25% until illegal immigration across the countries' border is stopped. Perhaps the Chinese government would contemplate banning iPhone sales in a huge trade conflagration, but at that point, access to rare earths would be the least of America's concerns. China controls most of the world's primary production capacity for rare earth elements (REEs), which are vital for the manufacture of nearly every form of electronic technology. Chinese oxides would still reach Americans. This caused prices for all rare earths, particularly neodymium, to soar. The shift to utilities and bonds quickened earlier in May after the USA and China broke off negotiations.
Moreover, companies operating in the market will find the most accurate quantitative and qualitative information about the growth variables of other Rare Earth Phosphorsmanufacturers that can help them develop future business strategies. But non-Chinese mines are not starting from scratch today.
"This is utilizing a trade policy tool to enforce policy outside of trade, and that sets a concerning precedent and leaves investors wondering how else tariffs could possibly be used", Kristina Hooper, chief global market strategist at Invesco, told the Wall Street Journal.
Trump is going all out here. The administration has periodically aired its concerns about vulnerabilities caused by a US dependence on Chinese rare earths.
"That is the issue and now what country is not vulnerable to tariffs or what political, diplomatic or national security issue won't now include the threat of tariffs to resolve". This week, the Pentagon started a process to fund US domestic rare-earth magnet production on national security grounds.
Mr Trump on Thursday claimed the tariffs have had little impact on USA taxpayers as China has been footing much of the bill, despite experts saying that USA consumers and importers bear the brunt of tariffs on Chinese imports. The Trump administration is ready for a Chinese escalation. Cerium, the most abundant, is more common in the Earth's crust than copper.