In Ganzhou, China’s influence over vital minerals within global supply chains has emerged as a significant factor in trade discussions between Beijing and Washington. Both countries announced a framework to pursue a deal by leveraging China’s longstanding control over the mining and processing of these materials. These critical minerals are vital across various sectors, including electronics, defense, and healthcare.
The city’s vast mine and factory network forms the backbone of China’s mineral control, with generations of locals having engaged in mining activities. Amid rising tariffs and tech-related controls, China now mandates licenses for specific rare earth exports, leading to overseas supply chain challenges. President Trump stated that China would ease access for the U.S. to essential magnets and materials, in return for halting visa revocations for Chinese students in America.
There remains, however, a lack of clarity on the agreement’s specifics, as top leaders in both countries have yet to ratify it. This Saturday, the Chinese Commerce Ministry approved export licenses for rare earths, hinting at concessions made to Trump. Despite this, analysts argue that China is unlikely to fully lift its permit requirements unless the U.S. abolishes tariffs on Chinese goods.
Historically, China has invested heavily in developing a robust rare earth industry, acknowledging their critical role in national security since the early 1990s. The nation maintains a crucial grip on “heavy rare earths,” crucial for manufacturing in sectors like defense and electric vehicles. Moreover, China is a major producer of minerals necessary for semiconductor technology.
The potential risks of dependence on China became apparent in 2010 during a territorial dispute with Japan that led to a temporary export suspension. This action prompted countries like Japan to diversify their rare earth sources. Today, Beijing’s stringent export rules push global electronic and automotive industries to face delays, with reports of production halts due to material shortages.
Within Ganzhou, locals express concerns not about trade tensions but the depletion of mineral resources. Many mines in the area have closed in recent years, with extraction becoming increasingly challenging. This has led companies to source materials from other regions or countries, such as Africa and Cambodia.
Efforts are underway for foreign investments such as the new tungsten plant in Thailand, underscoring China’s quest to maintain mineral dominance amidst dwindling domestic resources. Nonetheless, the U.S. remains heavily reliant on China for rare earths. Since 2020, it has sourced the majority of these compounds directly from China, despite attempts at diversification.
Efforts to bolster U.S. capacity include investing in domestic mining operations and innovations, though experts point out that creating a supply chain akin to China’s could take decades. The U.S. Department of Defense has allocated funds to enhance rare earth supply chains, but full self-sufficiency remains a distant goal.
Friction over mineral supplies offers financial opportunities previously unseen, with government-backed funding emerging for smaller extractors focusing on niche materials like tungsten. These businesses potentially benefit from increasing U.S.-China confrontations that might alter trade dynamics, making erstwhile uneconomic projects feasible.