China’s Critical Minerals Monopoly in U.S.-China Trade War

China’s Dominance in Critical Minerals Sparks Concerns Amid U.S.-China Trade War

China’s grip on the mining and processing of critical minerals essential for semiconductors and other technologies has raised alarms in the U.S. as tensions between the two economic powerhouses continue to escalate. According to a recent report from JPMorgan, China holds a “near monopoly” on the production and processing of key minerals, highlighting the country’s strategic advantage in the global supply chain.

President Biden’s recent move to impose tariffs on Chinese products, including solar cells, electric vehicles, and batteries, has further fueled concerns about China’s dominance in critical minerals supply. In 2022, China produced a significant portion of the world’s rare earth minerals, graphite, and cobalt, essential components for various industries, including electronics, defense, and renewable energy.

JPMorgan’s executive director of strategic research, Amy Ho, and global head of research, Joyce Chang, warned that China’s control over critical minerals could potentially be leveraged as a weapon in the ongoing trade war with the U.S. The Biden administration’s efforts to address China’s unfair trade practices have raised questions about the implications of China’s dominance in the global supply chain.

The U.S. Geological Survey has identified several minerals critical to the U.S. economy and national security, for which the U.S. heavily relies on imports. These include arsenic, cesium, fluorspar, gallium, graphite, indium, manganese, niobium, rubidium, scandium, tantalum, and yttrium. China is a top source for five of these minerals, with other countries like Germany, Japan, and South Korea also playing significant roles in the global supply chain.

With the U.S. dependent on imports for over 50% of its supply of 29 additional minerals, the vulnerability of the U.S. supply chain becomes apparent. The potential for China to weaponize its control over critical minerals poses a significant risk to industries such as electronics, defense, and energy.

Despite the concerns, JPMorgan’s strategists believe that a full-scale mineral turf war is unlikely in the near term. They suggest that the U.S. explore alternative suppliers, implement new mining technologies, and strategically stockpile key minerals to mitigate potential supply chain disruptions. Additionally, technological innovation, recycling, and material substitution could help reduce demand and alleviate pressure on the supply chain.

Ho and Chang emphasized the importance of diversifying mineral sourcing and collaborating with allies such as Canada, Australia, the EU, and Japan to secure the critical minerals needed for various industries. By adopting strategic measures to stabilize the supply chain, the U.S. can protect its defense industry, support the transition to electric vehicles, and safeguard against potential economic fallout from a commodity trade war.

As the U.S. navigates the challenges posed by China’s dominance in critical minerals, proactive measures will be essential to ensure the resilience and security of the country’s supply chain. By leveraging technological advancements, strategic partnerships, and innovative solutions, the U.S. can mitigate the risks associated with China’s near monopoly on key minerals and safeguard its economic interests in an increasingly complex global landscape.

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