China Fires Another Shot in the Tariff War by Halting Rare Earth Mineral Exports
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The US-China tariff wars continue to rage, as China has halted exports of rare earth minerals and magnets, reports Reuters. The move will likely cause shortages of materials for the manufacturing of components in the iPhone and other products outside of Chinese borders.
Some observers had expected the war of wills over tariffs between US President Donald Trump and Chinese officials to ease following Trump’s granting of tariff exemptions for select electronic device and semiconductor manufacturers. However, China is raising the stakes by halting rare earth mineral exports.
China halted shipments of rare earth minerals and magnets on April 4, placing them on an export control list. This means the materials can no longer be exported to other countries to produce parts and components for various products.
The seven rare earth minerals and other materials on the list are used in several major industries, including tech, automotive, energy, and defense products.
Exporters must now apply to the Ministry of Commerce for export licenses. This rather taxing process can usually take from six weeks to several months to complete.
“When asked by my clients when their cargo will be able to leave China, we give them an estimated time of 60 days, but it may actually take longer than that,” said a rare earth trader in China, speaking on the condition of anonymity.
While companies that use the materials may have built up stockpiles, those could quickly deplete. In the face of the escalating trade battle between the two countries, it could be particularly difficult for US clients to obtain export licenses. This could lead to production lines being halted, also impacting other companies in the supply chains.
The export license requirement will eventually cause problems for supply chains around the world, as China produces approximately 90% of all rare earth materials used worldwide. This leaves manufacturers with few alternative sources, giving China a powerful weapon to use against other countries, the United States in particular.
The shortage will leave numerous companies fighting for a piece of a quickly dwindling materials pie, meaning the price for such materials will rise unless China changes its mind.
At this point, we don’t know what Apple’s rare earth stockpiles look like, so it’s unclear how long it will be before Apple is forced to halt production of its devices.
Apple uses several rare earth minerals throughout its supply chain. The company uses Neodymium, Praseodymium, Dysprosium, and Terbium due to their magnetic properties to help improve performance. Magnets are also used in several Apple product components, including MagSafe, the Taptic engine, and more.
Many of Apple’s components and products are manufactured and assembled inside Chinese borders, so they won’t be subject to the export halt. However, China’s restrictions will impact Apple’s supply chain, as the Cupertino firm does manufacture some of its devices outside of China, such as some iPhone models assembled in India, which require these embargoed rare earth materials.
