It’s easy to sometimes feel removed from the threat of trade wars when your livelihood isn’t directly dependent upon raw materials. However, the reality is that no industry is protected from the effects. In recent weeks, as discussions between the Trump administration and China have intensified, it has become clear that nearly every industry and every individual is certain to be somehow affected.
In early July, when the Trump administration suggested the imposition of tariffs on an additional $200 billion in goods from China, the Chinese government threatened to match the tariffs dollar for dollar. Analysts indicate that it could do so by refusing to import American products or destabilizing the market by liquidating its portfolio of Treasuries. But more likely, others assert, China will simply cut off critical components of the global supply chain.
China is a major supplier of several basic materials that are essential for industries around the world. Among these are materials used to power electronics and advanced technologies. These include arsenic metals for semiconductors and cadmium for rechargeable batteries.
Materials called rare earths could also be at risk. These 17 elements, while not truly rare, are essential to many of the electronics omnipresent in our lives today such as smartphones, televisions, components for intelligent infrastructure, and hybrid cars.
Processing the minerals is complicated and expensive. Therefore, most are currently refined at only two plants in China and Malaysia. This creates a potential gap in the supply chain that some experts believe China could use to its advantage.
A recent New York Times article explains that it wouldn’t be the first time China has leveraged its grip on rare earths. “In 2010, it stopped exports to Japan for two months over a territorial dispute. Speculators hoarded rare earth minerals, sending prices soaring.”
What are your thoughts? How will trade tariffs and a potential trade war affect your business? Would a scarcity of rare earth elements impact your industry?