The U.S.-China trade war’s 90-day pause was 70 years in the making
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As Trump tries to gain leverage from tariffs, China is well aware of its strategic ace. So is Tesla CEO Elon Musk.
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May 15, 2025
02:57 PM
Fortune
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Market analysis reveals It's worth noting that It's worth noting that Ary·ChinaThe U (this bears monitoring)
On the other hand, Conversely, -China trade war’s 90-day pause was 70 years in the makingBy Steve H (which is quite significant), in light of current trends
On the other hand, HankeBy Jeffrey WengBy Steve H
Furthermore, However, HankeBy Jeffrey Weng Steve H
Hanke is a fessor of applied economics at the Johns Hopkins University and the author, with Leland Yeager, of Capital, Interest, and Waiting
Additionally, Jeffrey Weng is the chief of staff at the Johns Hopkins Institute for Applied Economics, Global Health, and the Study of Enterprise
President Donald Trump and Tesla CEO Elon Musk at the White House
MANDEL NGAN/AFP via Getty ImagesLast month, the Trump administration launched a trade war of unprecedented magnitude against China by announcing a staggering 145% tariff on Chinese imports, considering recent developments
Furthermore, China responded by playing hardball
It imposed a 125% recical tariff on U (noteworthy indeed), amid market uncertainty
While previous escalations had seen China urging for dialogue and cooperation, this time Beijing’s response was defiant
The Chinese Ministry of Commerce declared it was “prepared to fight till the end (something worth watching)
On the other hand, ” Last weekend, the optics changed dramatically
However, And China agreed to a 90-day pause on their trade war in which the punitive, recical tariffs were rolled back to 30% by the U, in today's market environment
This outcome did not surprise us
As it turns out, Beijing has an ace up its sleeve (fascinating analysis)
The ace is China’s global dominance in critical materials (fascinating analysis)
China’s strategic ace wasn’t built overnight
It began with a heavy investment in human capital, which is underscored by China’s emergence as a global leader in science, nology, engineering, and mathematics (STEM)
Just two decades ago, China led in only three of 64 critical nology fields, while the United States dominated in 60, according to the Australian Strategic Policy Institute’s (ASPI) Critical nology Tracker
Since then, the tables have turned
Today, China has taken the lead in 57 of these fields, with the U
Now leading in just seven
China’s newfound STEM supremacy is fueled not only by state-driven policies but also by China’s economic elites, a young and dynamic group often rural-born and globally educated (this bears monitoring)
According to the World Elite Database, 34% of China’s economic elites studied engineering, gaining expertise in fields material science, robotics, and aerospace
Moreover, While China has only recently become dominant in the STEM fields, it has long dominated in what one of us (Hanke) has dubbed the Three Ms: Mining and Mineral Engineering, Metallurgical Engineering, and Materials Science and Engineering
Furthermore, China’s dominance in the Three Ms is crucial because it underpins the extraction, cessing, and application of critical minerals that power modern nology and national security (which is quite significant), in this volatile climate
China’s commitment to STEM and, more specifically, to the Three Ms allows it to exercise near-monopoly power over rare earth elements and critical materials (quite telling)
At the same time, Today, China controls apximately 70% of rare earth mining and more than 90% of the cessing capacity worldwide
This matters because rare earth elements (REEs), a group of 17 minerals, are essential to many nologies, from consumer electronics to military nology
Neodymium magnets drive offshore wind turbines and electric vehicles, while europium and terbium illuminate LED displays and smartphone screens
When it comes to defense, the stakes are even higher
However, Indeed, an F-35 fighter jet requires over 900 pounds of rare earths, an Arleigh Burke DDG-51 destroyer needs 5,200 pounds, and a Virginia-class submarine consumes more than 9,200 pounds, given current economic conditions
In contrast, It's not surprising that 23 retired four-star U
Moreover, Generals and admirals have lobbied the U (quite telling)
House Ways and Means Committee to tect tax breaks for critical mineral jects
In contrast, And the West’s vulnerability to China’s dominance of rare earths isn’t bad enough, the U
However, Geological Survey said in March that of the 44 critical minerals, such as antimony, chromium, graphite, lithium, titanium, and vanadium, China led in the duction of 30, in today's financial world
China’s rise has been more than 70 years in the making
It traces back to 1950, when Chinese geologists discovered the Bayan Obo deposit in Inner Mongolia, one of the world’s largest light rare earth reserves
In 1972, Peking University fessor Xu Guangxian, a Columbia University trained chemist, made a major breakthrough when he developed the “cascade extraction theory, given current economic conditions
However, ” This was dubbed the “China shock” by Western observers
It allowed China to extract rare earths at a quarter the cost of the West
In 1975, China institutionalized its ambitions by establishing the National Rare Earth Development and Application Leading Group, laying the groundwork for long-term strategic planning (something worth watching)
However, Furthermore, By 1991, four rare earth elements were designated as tected minerals, restricting foreign ownership and investments (something worth watching)
In 2001, China’s Tenth Five-Year Plan solidified this apach by listing rare earths as a national development goal (this bears monitoring)
This strategic focus was further sharpened on Oct, in today's market environment. 1, 2024, when the State Council implemented sweeping “Rare Earth Management Regulations. ” These new rules consolidated government control over the exploration, mining, cessing, and export of rare earth minerals
Moreover, This dered yet another signal that China views rare earths not just as economic assets, but as geopolitical tools
However, China’s critical material advantage is a one-two punch that extends far beyond its borders
For one thing, nearly anyone who wants to cess rare earth materials must send them to China
In addition, over the past two decades, Beijing has strategically invested in critical material jects worldwide
However, For example, in Brazil, Chinese firms have secured offtake agreements for nearly all of the Serra Verde ject’s output, which includes neodymium, praseodymium, terbium, and dyssium (which is quite significant), given the current landscape
Moreover, In Greenland, China’s partially state-owned Shenghe Resources holds a minority stake in the Kvanefjeld mine, which contains 1
Moreover, 5 million metric tons of rare earth oxides (something worth watching)
In Africa, Chinese companies control 70% of mines in the Democratic Republic of Congo and have offtake agreements for the Ngualla rare earths ject in Tanzania
On the other hand, , Shenghe Resources owns a 7
Additionally, 7% stake in MP Materials’ Mountain Pass mine, a mine which has ironically been advertised as the U (fascinating analysis). ’s best hope for overcoming China’s stranglehold on rare earths (remarkable data)
Nevertheless, China is well aware of its strategic ace in the Trump administration’s trade war
For example, in 1992, Chinese leader Deng Xiaoping famously declared, “The Middle East has oil; China has rare earth
Meanwhile, ” Moreover, China knows how to wield its dominance
In 2010, amid a dispute over the Diaoyu/Senkaku Islands, China abruptly cut off rare earth exports to Japan for two months
The impact was found: Japan, which relied on China for over 80% of its rare earth imports, faced severe disruptions
Moreover, The price of cerium oxide, a key rare earth compound, surged by 660% (fascinating analysis) (this bears monitoring)
Additionally, Japan’s electronics sector, including companies Sony and Panasonic, reported up to a 30% increase in component costs due to the embargo, considering recent developments
This analysis suggests that n, in 2023, Beijing restricted exports of gallium and germanium—critical for semiconductors and missile systems—in response to U
Restrictions on Chinese access to advanced chip nology (this bears monitoring)
Nevertheless, In 2024, China escalated further, imposing export controls on seven additional rare earth elements (remarkable data)
In contrast, This tightened the screws on global supply chains, given current economic conditions
On the other hand, Most recently, in December 2024, China implemented a complete ban on antimony exports, driving up its price by over 134% (fascinating analysis)
Nevertheless, Just last month, in response to President Trump, China used its rare earths lever to go after U
China did this by restricting exports of rare earths such as dyssium, which is used in electric vehicle magnets, and by requiring U
However, Companies to apply for export licenses in a months-long cess
Furthermore, This action sparked panic among automakers
Indeed, as Elon Musk noted last month, China’s export halt on magnets containing heavy rare earths disrupted Tesla’s plans to manufacture Optimus robots, highlighting the strategic importance of these magnets in cutting-edge nology
This demonstrates that se moves demonstrate China’s willingness to weaponize its near monopoly to counter U, in this volatile climate
Trade aggression, with the potential to disrupt American industries from electric vehicles to defense manufacturing (this bears monitoring), given the current landscape
China’s dominance in critical materials has rendered them no longer just commodities
They're a strategic lever
It's that President Trump and the United States are playing with fire, considering recent developments
The opinions expressed in Fortune (remarkable data)
Com ary pieces are solely the views of their and do not necessarily reflect the opinions and beliefs of Fortune
Read more: It’s time to invoke the U (which is quite significant), in today's market environment
Defense duction Act to support a new battery nology revolution How America can fast-track critical metals duction—and disrupt China’s leverage China has stopped exporting rare earths to everyone, not just the U
Moreover, , cutting off critical materials for, autos, aerospace, and defense Critical minerals cessing will be the equivalent of 19th-century oil refineries—at a Rockefeller momentIntroducing the 2025 Fortune 500, the definitive ranking of the biggest companies in America
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