To understand what’s going on in the economy, politics and more, our experienced Kiplinger Letter Team will keep up with the latest developments and forecasts (get a free issue of your Kiplinger letter or subscription). I subscribe to all the latest news, but I’ll publish many (but not all) of my predictions online in a few days. This is the latest…
As the US threatens new tariffs, one of China’s most powerful trade weapons it is wielding is the near stranglehold of rare earth elements, a group of obscure minerals essential to many high-tech applications and products. Rare Earth is not at all uncommon. But they are difficult to mine and process. They are not evenly distributed all over the world. Extracting and purifying them is a troublesome process that can cause many contamination.
China has noticed decades ago and decided to exploit significant rare earth deposits, ignoring environmental damage. The leader wanted to push the market down, but they did. Consider what requires rare earth: drones. missile. Fighter plane. Spaceship. Wind turbine. Electric car. AI server. It’s just a partial list. Rare earths are generally the key to magnets in advanced electric motors. Therefore, it is essential for applications like advanced robots.
The US has already eased tariffs in response to China’s recent ban on rare earth exports. However, Beijing is still a slow sales of rare earths to American importers. Furthermore, it does not yet permit them to export to US defense contractors. Companies both domestically and internationally are rushing to reduce their dependence on rare earths as much as possible. For example, BMW sells EVs whose electric motors do not use rare earth. Other car manufacturers are trying to do the same. Japan stockpiled a year’s worth of rare earth after suffering an early Chinese export ban more than a decade ago. But it’s just a stopgap.
What you need is rare earth mines and processing plants outside of China. Unfortunately, it takes time to open them. This is an estimate once for three years. Still, we hope for a coordinated push to reduce the world’s dependence on China. Countries with the most promising deposits: Brazil, South Africa, Namibia and other African countries. Greenland is also thought to have a rich herd of them. This is one reason why President Trump is so keen to win it, but mining may not be possible.
For now, there is only one functional mine in California in the US, known as the Mountain Pass. The new processing plant is ongoing work. It has just opened in Malaysia. Australian miner Linas is building another in Texas, but is waiting for new funds from Uncle Sam. There will also be a talk about plants at Elk Creek Deposit in Niocorp, Nebraska. There are two major hurdles to building these plants. First, their wastewater and other toxic byproducts generally cause local opposition. Second, Beijing positioned China as the leading manufacturer of equipment for treating rare earths.
Ultimately, they will steal political will either in the US or overseas to support (and possibly fund) alternatives to Chinese supply.
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This forecast has been running since 1923 and is a brief weekly forecast for business and economic trends, as well as a brief weekly forecast for what to expect from Washington, first published in Kiplinger Letter, which helps you understand what is happening to make the most of your investment and money. Subscribe to the Kiplinger Letter.
