The increasing control China holds over the minerals essential for America's advanced technology is no longer a faraway geopolitical issue; it's an economic danger that has already infiltrated U.S. Supply chains.
Wilbur Ross, who previously served as U.S. Secretary of commerce during the Trump administration, issued this warning, stating that Beijing has figured out how to employ rare earth minerals as a bargaining chip against the United States and might be planning to escalate the weaponization of supply chains.
TL;DR
- China controls 90% of global rare earth processing, essential for US technology and defense.
- Former Commerce Secretary Wilbur Ross warns China uses rare earths as a bargaining chip.
- US supply chains face disruption risk within six to 12 months if tensions persist.
- Ross believes China has no incentive to negotiate a trade resolution currently.
“Rare earths are a very useful weapon for China,” the private equity mogul told Coins2Day in an interview. “For giving up a little bit of revenue, they are achieving a pretty good bang for the buck.”
While China doesn't hold sway over the majority of the world's rare earth mines, it commands the refining and processing infrastructure, accounting for 90% of global capacity. These elements, roughly 17 less common ones such as neodymium and dysprosium, are critical components for electric vehicles, magnets, wind turbines, advanced semiconductors, F-35 fighter jets, and guided missiles.
Ross states that the U.S.'s susceptibility has been growing subtly over time, yet it only became apparent once China implemented new export licensing rules, which he describes as a “disguised rationing system.”
“They have imposed a registration process, which is just a way to mask the controls,” Ross said. “Who knows how deliberately slow they’ll make the approvals.”
Ross believes China has the capability to limit supplies to American businesses, and this could be accomplished without breaching trade accords.
“It’s a very effective weapon … and it attacks our high-tech things and our national defense needs.”
Factory shutdowns now a real risk
Ross warned that supply strain may start hitting U.S. Industry within six to 12 months unless trade tensions ease. Several automakers stockpiled rare earths at the start of the trade war, he said, but those reserves were only ever “a rounding error.”
“No one knows exactly how big the excess quantities of rare earths that American companies built up are,” he said. “But you probably would have some shutdowns if this standoff continues.”
Ford Motor has already publicly warned indicated that it might have to temporarily halt operations at one of its plants if the availability of rare earth minerals becomes more constrained. Although this would affect a minor part of the nation's production capabilities, Ross believes it could signal the beginning of more widespread interruptions.
“Rare earths are used in fighter planes, rockets, all kinds of applications,” Ross said. “Basically anything that requires advanced semiconductors usually has some need for rare earths.”
Because modern manufacturing relies so heavily on sophisticated chips, even minor disruptions have significance. The average U.S. Car today is equipped with 400–500 semiconductors, and electric vehicles necessitate a greater quantity, positioning rare earths as a critical vulnerability for both the shift to clean energy and national security.
Ross: China has ‘no incentive’ to negotiate
Asked whether a trade resolution with China is realistic, Ross was skeptical.
“It’s not at all clear to me that China really wants a trade deal,” he said, adding that years of negotiations across both the Trump and Biden administrations have yielded “not a heck of a lot to show for it.”
Ross said Beijing sees no urgency to bargain.
“[President] Xi [Jinping] can continue portraying this as something the evil U.S. Is doing,” he said, explaining that China benefits politically from framing itself as the target of American aggression.
“So far, there hasn’t been enough pain inflicted on China for them to feel a need to get serious about negotiating.”
The subsequent front could prove even more turbulent. Legislators in Washington have broached the concept of restricting advanced AI chip exports to China, yet Ross cautioned this might trigger a significant escalation.
“Putting an embargo is a pretty hard thing to do. That could very well be interpreted as an act of war,” he said. “If we did that, China might put a blockade on Taiwan.”
A decision like that would devastate worldwide tech industries instantly. Taiwan Semiconductor Manufacturing Co. (TSMC) makes more than produces 90% of the planet's most sophisticated semiconductors, which are essential for American defense technologies and advanced artificial intelligence.
“That would be catastrophic,” Ross said.
He now feels the U.S. Is still lagging behind in a mineral dispute that China had been planning for years. While processing facilities are being established in the U.S. And Europe, he noted, they won't be ready in time to mitigate immediate supply concerns.
“We have a timing disconnect,” he said. “China is acting now.”