Rare earth minerals and Trump’s tariffs on China; Facts and fictions, subjective narratives versus objective realities;
Unending bluffs of US with a bad
hand that is being called each time damaging US in every aspect from economy to politics.
As the previous administrations
used tariffs as economic weapon to impose its will and subjugate the countries
, now Trump administration is imposing tariffs unilaterally to entire world. Is
tariff action a double edge sword? Or in
a multipolar world order is it a self destructive weapon? What would be the implications of a tariff
for the rare earth minerals by China on the US military Industrial Complex?
Most economic objective experts, including Professor Jeffrey Sachs characterized the tariff policy of Trump as self destructive and explained the reasons for it. I will not repeat those aspects of the implications of tariff but focus on one aspect that actually unravels the “bluffing with a bad hand” character of tariff imposition. US administration has been using weaponizing the trade relations all through its history. However, since 2022, “threats” have transferred in to “bluffs” due to its ineffectiveness and self destructive consequences especially against Russia and China. In order to have a clear understanding of its implications in regard to the “rare earth minerals” we have to get some basic knowledge on the issues.
Let’s start with the tariffs.
Tariff imposition refers to the
placement of taxes or fees on imported goods by a country, effectively
increasing the cost of those goods for domestic consumers. This trade policy
tool is often used by countries to protect their industries from foreign competition
and to generate revenue. However, it also has broader implications that
extend beyond mere economic impacts. This is particularly relevant in
industries such as rare earth mineral extraction, where protecting local
mining operations can ensure self-sufficiency. This is assuming that the country
imposing tariff already has the referenced industry or mining developed within.
Imposing tariffs can easily lead
to trade disputes and conflicts, especially if implemented unilaterally or
unfairly. It can disrupt global supply chains, forcing countries to seek
alternative sources of raw materials, such as rare earth minerals,
either through domestic mining or international agreements. In most
cases this implies that the country is not an ex-colonizer who has been
plundering the natural resources of colonies and thus, did not feel the need
to develop its own mining. Especially, rare earth mining which is an
extremely costly investment, and the investment return takes many years to
benefit from hinders most capitalist countries from mining locally even if they
have it. In other words, the country has to be a state capitalist one in
where the important industries are state owned, not privately owned,
because private enterprises in most cases are not interested in long term
investment but investments that will bring return in short time.
Imposing higher tariffs inevitably
increase the cost of imported goods,
potentially leading to inflation in domestic markets. This, in turn,
affects consumers by making products more expensive and can strain
businesses already operating on tight margins. In other words, unwisely
imposed tariffs can back fire and may be destructive for the economy and for
the purchasing power of people which declines sharply. This is locally in one country which would easily
spread to other countries, because tariffs always causes reciprocal tariffs
from other countries. Tariff wars, such as those seen during the Trump
administration's trade war with China, can escalate into broader trade
conflicts. These conflicts can harm global economic stability and lead to
reciprocity measures by other nations, further complicating international trade
relations.
As I have noted above, those
neo-colonizer and ex-colonizer countries in most cases do not have such
resources in their own countries or if they have, they never needed to mine
them because they were plundering the resources of their colonies in where
mining has been developed through slave labor, or at best low waged slave labor.
That is why controlling access to critical resources like rare earth minerals are
not only economically but strategically important. For the ex-colonial
countries who do have these resources and mining however, Imposing tariffs or restricting imports is a
way to gain leverage in geopolitical scenarios, ensuring that a nation's supply
chains are not vulnerable to external disruptions.
Especially in our era with high-tech
industries are heavily reliant on rare
earth minerals for their operations and are particularly susceptible to the effects of
tariffs. These industries might face higher costs and reduced competitiveness
if tariffs are not matched by comparable increases in domestic production
capacity. As technology evolves, new applications for rare earth minerals
are emerging, particularly in renewable energy and medical fields. Their role
is expected to expand with technological progress. The high demand coupled with
costly extraction processes influences product pricing, affecting
multiple industries.
Trump’s illusionary idea derives
from the fact that during economic crises or global supply chain disruptions,
countries impose tariffs as a policy tool to manage trade deficits or stabilize
their economies. However, this can lead to unintended consequences if it
exacerbates trade tensions or disrupts already fragile global markets
especially related to rare earth minerals.
The U.S. trade war with China under the Trump
administration involved significant tariff imposition on Chinese goods, leading
to reciprocal measures by China. This trade conflict had and will have widespread
economic impacts, including increased costs for U.S. businesses and consumers. A single country's export restrictions could
lead to global shortages, affecting various industries.
In addition, rare earth minerals
are integral to various military technologies and systems, from radar
and communication to energy storage and stealth applications. Understanding
their role in advanced defense industries and addressing environmental and
supply chain challenges is crucial for the military industry's future.
That is why Trump signed an
executive order for “immediate Measures to increase American Mineral
Production which state as purpose; “The United States possesses vast
mineral resources that can create jobs, fuel prosperity, and significantly
reduce our reliance on foreign nations.
Transportation, infrastructure, defense capabilities, and the next generation
of technology rely upon a secure, predictable, and affordable supply of
minerals. The United States was once the
world’s largest producer of lucrative minerals, but overbearing Federal
regulation has eroded our Nation’s mineral production. Our national and economic security are now
acutely threatened by our reliance upon hostile foreign powers’ mineral
production. It is imperative for our
national security that the United States take immediate action to facilitate
domestic mineral production to the maximum possible extent.”
Is it doable?
Lets find out first what these “rare earth
minerals” are, where it is used and who leads the world in production, how costly
the mining of it is.
Rare earth minerals are a group
of elements with unique properties, including cerium, lanthanum, neodymium,
etc. They are named for their low natural concentration in the Earth's
crust. These minerals are pivotal in modern technology, used extensively in
military industry, technology; smartphones,
computers, and electronic devices. Neodymium is particularly crucial for
magnets in hard drives and speakers. They also find applications in fluorescent
lamps, catalysts, pharmaceuticals, and specialty chemicals due to their
specific properties like magnetic characteristics and radiation absorption.
Industrial significance of rare earth minerals
Military Industry:
First off, rare earth minerals
are important for certain types of weapons or equipment for radar
systems or communication devices critical for military operations because those
often require specialized materials. Also, some magnets used in weapons
or machinery are made from rare earth elements because magnets are crucial for
various applications in the military. Considering the cost and availability
factors, the military might prioritize research into alternative materials to
mitigate any supply chain issues or high costs associated with rare earth
mineral extraction and processing.
Neodymium magnets, made from rare
earth elements, are used in various military applications, including weapons
and machinery, for their strong magnetic properties. These minerals play a role
in materials used for stealth technology and high-tech radar systems, enhancing
the performance and effectiveness of defense equipment.
Energy Industry:
Rare earth minerals are utilized
in batteries and energy storage solutions, which are crucial for powering
military equipment. Their use contributes to more efficient and sustainable
energy sources for defense needs. With the push towards renewable energy
and more efficient power sources, having rare earth materials could be
beneficial. Rare earth minerals are also crucial for creating more efficient
renewable energy technologies, some green technologies use these minerals to
create more sustainable products such as solar panels and wind turbines, which
require strong magnets and advanced materials.
Defense Industry:
Components like missile guidance
systems and laser weapons rely on rare earth minerals for their durability and
performance, ensuring that these systems operate at optimal levels. That’s why there's
an aspect of defense technology. High-tech materials often require these rare
earth elements to function optimally. For example, some types of aluminum used
in aircraft contain rare earth minerals for better performance.
These advanced systems, like missile guidance or laser technology, need
highly reflective or durable materials, which could be made using rare earth
elements.
Medical applications
Additionally, rare earth minerals
can be used in medical applications; there's a connection through dual use
technologies where materials used for defense also have medical benefits.
Strategic Resources:
Control over rare earth minerals
can be strategically important, driving competition among nations. The military
may focus on securing sources or developing processing capabilities to enhance
national defense strategies.
Lets have an idea on the cost
Locating the minerals
A geological survey and mapping
is needed to determine where and how far below the ground these minerals are. This, according to the experts, is a job that will take several years.
Rare earth minerals are found in
low concentrations, typically 100 to 500 parts per million, making their
extraction challenging. Advanced mining techniques, such as hydrometallurgical
processing, are often employed to separate these minerals from ore. In situ
leaching and heap leaching are methods used to extract rare earth elements from
ores without fully dissolving the rock.
The first challenge and cost is
related to locating these minerals. Engineers and geologists use specific methods
to locate rare earth minerals, often focusing on certain rock formations more
likely to contain these elements.
Extraction
Experts indicates that it takes an average of 18 years to develop a
mine, and building the mines and separation plant costs close to a billion, if
not billions of dollars.
First off, mining usually
involves digging into the Earth to find these minerals. But rare earth minerals
aren't just sitting around in big piles; they're scattered in rocks and often
in very low concentrations. So, the process is pretty complex and energy-intensive. It involves
infrastructure projects, related to the extraction of resources, including
processing plants, ports, pipelines, railways, and roads. That is why the extraction of rare earth
minerals is a critical yet complex industry that balances technological
advancement with environmental and economic considerations. As demand for these
minerals grows with advancements in technology, sustainable practices and
innovative solutions will be essential to ensure continued availability and
minimize ecological impact.
Extraction involves complex
techniques due to the low concentration of these minerals in the earth. Key
methods include, Hydrometallurgical Processing which Uses chemicals to break
down ore and extract rare earth elements, and Concentration by Flotation which
Utilizes chemicals to separate minerals through froth formation where chemicals are used to make the rare earth
minerals stick to a froth, which can then be separated and processed further.
It is a pretty complex process and
requires a lot of resources, which is why it's done in large-scale related operations
near deposits like those in China.
Environmental Considerations:
On the environmental side,
there's a debate about mining these minerals because it can have negative
impacts on the environment. The environmental impact of extraction is a
critical concern, with potential pollution from harmful chemicals, due to
potential contamination of water and soil, as well as habitat disruption. Strict regulations are in place to manage
waste and mitigate ecological damage. The use of toxic chemicals in processing
can exacerbate these issues.
The military in some countries may, in others
may not be interested in sustainable practices to mitigate environmental impact
from rare earth mining. This includes exploring alternatives or more efficient
extraction methods to reduce ecological damage.
Economic Considerations
The mining process is
capital-intensive due to the need for advanced technology, specialized
equipment, and infrastructure. This high cost affects the availability and
affordability of these minerals in various applications.
The global distribution of
reserves, with China currently holding a significant majority, influences
market dynamics and can lead to supply chain disruptions. Controlling over
reserves in some countries can affect global access. Many countries are reliant
on other nations for rare earth minerals, which could be a vulnerability.
The military might be concerned
about this dependency and look into ways to diversify their supply sources or
develop synthetic alternatives to reduce reliance on mining.
Lastly, there's the aspect of
national security and strategic resources. Control over rare earth minerals
could be a point of competition among nations, so the military might have
interests in securing sources or developing their own
capabilities to process these minerals independently.
Conclusion
As we see mining for rare earth
minerals are crucial especially for those who have military and technology industries.
It is a capital-intensive investment because of the low concentration, timely
and costly process, and the need for advanced technology. In the case of “rare earth minerals in
Ukraine, co-chair, Critical Minerals Expert Jack Lifton of the Critical Mineral
Institute (CMI) said in an interview; " There are no rare earth deposits
in the Ukraine", emphasizing the lack of viable rare earth deposits and
the implausibility of making a profitable business case...."If we are
going to develop rare earth mines in Ukraine they still be being developed when
your grand children are retiring. Ukraine case "is not even worth
discussing". This actually confirms the long and extensive process of
mining rare earth minerals.
There are rare earth minerals in
so many countries, but the question is locating, preparing for the mining and
all the required infrastructure for mining, and mining itself ; it requires both
long period of time huge investments.
Obviously, US has unprocessed rare earth minerals. Mountain Pass Mine operates
the only fully integrated rare earth mine and processing facility in the
United States since 1950 is located in
California. However, despite all the confusing and false statements and statistics on internet and on
Western Media, the “proudly” mentioned Texas plant is not a functioning one.
It is set to be built by a company called Lynas which supposedly has secured
more than $300 million in contracts from the Pentagon and this facility will be operational within 2
years. That is the intention and prediction for which market conditions present a significant
challenge due to the dominance and increase in supply from China which probably raises
doubts about the long-term financial viability of many new costly projects
outside China. None seems to be able to beat China’s high-tech production and its market cost.
Let’s compare and consider two type
of countries in relation to “long term’ and “high cost” investments.
1) State capitalism where all
existing important industries are "privatized".
In this system, long-term investments
such as infrastructure, superstructure, and public transportation are reduced
to the minimum possible. Private investors are interested in investments that
will bring the most profit in a short time. Banking and military industry are
the most important sectors of these. As in every industry, in order for the
Weapons Industry to make a profit, the necessary environment suitable for it
must exist, or if it does not exist, it must be created. In other words, for a
military industry to profit a n unstable world in which constant hostilities,
conflicts, and wars must continue. In the Military-Weapons industry, the
profits obtained in a single move in a short time are at a level that is more
than the total of some other industries in a year. The state and its
institutions also fulfill the duties of creating this conflict-war environment
in the service of private capital. In the meantime, other branches of industry
either move to other countries or disappear. One of the main reasons why the US
has deindustrialized, except for a few basic branches, and has shifted from
being the largest production country to being the largest consumption country
with almost no production is that its economy focused on the basis of banking
and war industry. In other words, the "rare minerals" do not have a
value that can be considered as an investment for the US.
2) - State capitalism in which
all existing important industries are nationalized.
In this system, it is an
inevitable result for the state to make long-term investments. It aims to gain
value in the long term, not short-term profit, and to strengthen its economy,
because this is the most important form of investment that the state must
implement in order to exist, survive and solidify its place as an institution.
The most concrete example of this is China, which has risen to its feet in the
last decade with dams, gardening deserts and mountains, covering the country
from one end to the other with high-speed train networks passing through every
city and town, and jumping to the top of the world in terms of GDP PPP. It is
no coincidence that it has gone from being a colonial country dominated by
feudalism to a production country that meets the world's consumption needs.
In other words, producer and
production-oriented countries like China look favorably on long-term
investments, while consumer countries look favorably on short-term
investments that will bring the most profit in the shortest time.
The top 10 in the world ranking of rare minerals, is as
follows; China, Australia, Vietnam, Russia, Brazil, Thailand, India, and far
behind them; Malaysia, Greenland, and America.
China has restricted exports of
seven critical rare earth metals, dominating 90% of global production. These
materials are essential for electronics, defense systems, and clean energy
technologies.
Trump’s tariff on China will not
only destroy US economy in general, but will affect its Military Industry and its production. His
bluff with a bad hand against a great hand will backfire in a destructive way
if he does not backtrack.
.jpg)
No comments