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Rare earths are among the most critical raw materials on the planet, yet few people can name them or know what they do. They are used to make so-called permanent magnets that create a field for motors to run in perpetuity. These are in everything from lithium-ion batteries to electric vehicles, wind turbines and missile guidance systems. They’re fundamental as they help transfer energy into movement. They represent a vulnerability for the U.S., which is 80% reliant for rare earths on imports from China, and also for Europe. Now they risk becoming a contentious issue in U.S.-China trade itself.

1. What are rare earths?

Minerals and metals found in the ground. They’re mined like any other commodity, then processed. The phrase refers to a group of 17 chemically related elements that have magnetic and optical properties useful for making electronics more efficient. Electric vehicle makers rely on them for lighter-weight battery and motor components. Neodymium and praseodymium combine to make powerful magnets used in aircraft, headphones and much more. Yttrium, a silvery metal, is used in cancer and rheumatoid arthritis drugs as well as color televisions and camera lenses. They’re also frequent components of everyday objects like light-emitting diodes, or LEDs, used to light up smartphones and stadium scoreboards.

 2. How rare are they?

They’re actually quite widespread in the Earth’s crust. The challenge for mining companies is to find large-enough clusters of them to easily separate into large volumes to sell on a commercial scale, particularly when the mining conforms to the environmental standards of developed countries.

3. Who controls them?

China is the world’s biggest producer of rare earths, with the U.S. a distant second. China mined 140,000 tons in 2020, compared with 38,000 tons in the U.S. The U.S. has about 2.7 million tons of resources that can be mined, but little capacity to refine the metals. Most companies are forced to send their rare earth production to be refined in China. End users only purchase refined metals. Outside of China, the world’s other large reserves of rare earths can be found in Brazil, Vietnam and Russia. Depressed prices in recent years have made opening up new sources unappealing.

 4. What role have rare earths played in the trade war?

5. What’s the message from China?

China controls the market and can cut off supply if it chooses, which would create a crisis, just as it did to Japan more than a decade ago. That’s a step governments and companies don’t want to see repeated. The Financial Times reported in February 2021 that Chinese government officials were exploring how severely defense contractors in the U.S. and Europe would be affected if China limited supplies, indicating that the country is considering options in the event that a trade war worsens between China and the U.S.

6. What leverage does China have?

China blocked exports of rare earths to Japan for more than a month from mid-September 2010 over a disagreement concerning Japan’s detention of a Chinese fishing boat captain. China denied there was any ban, which reportedly ended in late October that year. Shipments to the U.S. and Europe were also briefly disrupted, according to the New York Times. Separately, for 15 years China imposed limits on rare-earth exports, citing a need to cut pollution and conserve supplies. Those quotas were scrapped in 2015, after the World Trade Organization determined that they violated trade rules.