China’s secret trade war option: A rare earth embargo


With the potential for an expanded trade war with China, the U.S. needs to consider some of the less obvious economic and national security risks that could come into play. China holds a secret weapon that could cripple us instantly. Let’s call it, Trade War Option “57 – 71”.

The chemical elements on the periodic table with atomic numbers 57 through 71 make up the critical elements called rare earths. Two more, Scandium and Yttrium, reside elsewhere on the periodic table and complete the group.

{mosads}The U.S. is 100 percent import-dependent on all of these critical defense materials and 100 percent import-dependent exclusively on China for these materials after they are processed into metallic form (the state required for most technology and defense applications).

Rare earth metals are so critical and in so many defense components for guided missiles, smart bombs, targeting lasers, sonar, radar, night vision and high temperature resistant metals for military jet engines, that if China cut us off, the U.S. could not replace or build most of our advanced weapon systems.

These materials are also found in smart phones, small electric motors, sensors and catalysts in automobiles, computers, commercial aircraft and most green technology. If China embargoed these materials the U.S. would be forced to shut down all or most of our nation’s technology manufacturing assembly lines.

This single category of imports, with a global resource value of about $3 billion, becomes an essential input to about $7 trillion in value-added goods on a global basis. The U.S. controls zero.

How did we get into this precarious position?

The most recent 2016 Government Accounting Office (GAO) report called China’s monopoly on rare earths a “bedrock national security issue,” and back in 2010, the GAO warned Congress that it could take up to 15 years for the U.S. to re-develop its own rare earth supply chain. Still, Congress failed to act.

This history of neglect goes all the way back to 1993 when Congress allowed the sale of America’s leading rare earth magnet company, Magnequech, to China via a straw-man transaction that was linked directly to the family of Deng Xiaoping, the former Premier Leader of China. The Indiana-based company produced nearly all of the rare earth magnets for our guided missiles and smart bombs, but Congress chose to ignore the warnings of Pentagon experts like Peter Leitner and let the sale proceed.

With Trump’s Trade war looming and sabers rattling from the White House Executive Office, there is no doubt that China is mulling over its options. What’s very clear, is that “Option 57 -71” could be unleashed on us any time.

While Trump’s trade dispute with China is certainly legitimate, this administration had better have something in place if it’s going to continue to push forward unless it is prepared to back down and concede everything to China.

Unfortunately, the biggest risk to launching a trade war against the People’s Republic of China comes from the most obscure of imported goods. 

Victoria Bruce is the author of Sellout: How Washington Gave Away America’s Technological Soul and One Man’s Fight to Bring it Home. The book follows Jim Kennedy and his quest to wake up Washington to the threat of the Chinese monopoly on rare earths.


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