China threatens to limit rare earths exports in warning over trade war

China on Wednesday issued a blunt warning to the US over the trade war between the world’s two largest economies, saying it could limit exports of rare earths to the US — and adding “Don’t say we didn’t warn you!”

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President Xi Jinping’s visit to a rare earths plant last week had sparked speculation that China would use its dominant position as an exporter of rare earths to the States as leverage in President Trump’s escalating trade war.

Rare earths are a group of 17 chemical elements used in everything from high-tech consumer electronics to military equipment.

The prospect that their value could soar as a result of the trade war caused sharp increases in the share prices of producers, including the company visited by Xi.

While China has so far not explicitly said it would restrict rare earths sales to the US, Chinese media has strongly implied this will happen.

In a commentary headlined “United States, don’t underestimate China’s ability to strike back,” the official People’s Daily noted the US’ “uncomfortable” dependence on rare earths from China.

“Will rare earths become a counter weapon for China to hit back against the pressure the United States has put on for no reason at all? The answer is no mystery,” it said.

“Undoubtedly, the US side wants to use the products made by China’s exported rare earths to counter and suppress China’s development. The Chinese people will never accept this!” the ruling Communist Party newspaper added.

“We advise the U.S. side not to underestimate the Chinese side’s ability to safeguard its development rights and interests. Don’t say we didn’t warn you!”

The expression “don’t say we didn’t warn you” is generally only used by official Chinese media to warn rivals over major areas of disagreement, for example during a border dispute with India in 2017 and in 1978 before China invaded Vietnam.

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In 2010, Beijing cut rare earth export quotas after a Chinese trawler collided with two Japan Coast Guard ships near uninhabited islands in the East China Sea that both countries claim.

In 2012, Japan, the United States and European Union complained to the World Trade Organization over the restrictions.

Two years later, China was rebuked by the WTO for citing environmental reasons to justify the quotas, and the country ultimately scrapped its export quota system after losing the case.

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The acrimony between the two countries intensified earlier this month when Washington put Chinese telecom equipment company Huawei Technologies on a blacklist that curbed Huawei’s access to US-made components.

China now relies heavily on US technology imports but hopes to cut that reliance significantly if not entirely by 2025 under its “Made in China 2025” campaign to increase domestic production in tech and other sectors.

Washington earlier this month slapped tariffs on $200 billion in Chinese goods, including farm products and consumer electronics, prompting Beijing to retaliate, as talks to end a 10-month trade war stalled.

Trump, who once declared that trade wars were “good” and “easy to win,” has embraced protectionism as part of his “America First” agenda.

With Reuters

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