This follows China’s unprecedented new restrictions on exporting rare earths and related products. Despite the legal limbo created by launching a new technology, this bold move has sent shock waves through the global industry. China is the dominant producer of rare earths, accounting for 92 percent of the world’s production in 2021. These restrictions are poised to affect a number of industries dearly.
The new restrictions also apply to various products containing rare earth elements—raw materials as well as end-user products. This switch has huge ramifications for lots of industries. Not surprisingly, tech manufacturers are crying foul! At the same time, our industries have become increasingly reliant on these materials to manufacture electronics, renewable energy technologies, and other high-tech applications. Now that supply chain security has become a key concern, businesses are preparing for increased production disruptions and costs.
According to industry analysts, entire industries are already experiencing the costs of sanctions. This spans all types of manufacturing – from consumer electronics to automotive manufacturing. Many companies are currently assessing how these export limitations will affect their operations and are exploring alternative sources of rare earths outside of China. Non-China producers could see a boost in demand as companies seek to diversify their supply chains and mitigate risks associated with Chinese dependence.
China is doing this and much more as it pursues the so-called overall strategy. This policy shift is designed to reassert US dominance over global supply chains. Using its monopolistic control over the rare earth market, China hopes to affect the course of global trade. For good reason, policymakers and industry observers alike are closely watching what’s happening there. Like all of us, they are looking for evidence of tradestorm economic contagion.
The downstream impacts of these restrictions might result in higher manufacturing costs to businesses that depend on rare earth elements. Firms are still very much figuring this space out. Others are already looking for solutions, like establishing partnerships with non-Chinese suppliers or shoring up domestic rare earth production capacity.