Trade tensions between the US and China have escalated, especially concerning critical minerals needed for advanced technology and defense. After the US imposed restrictions on exporting chipmaking technology to China, China responded with its own restrictions on critical minerals.
Here's a simplified explanation:
What are critical minerals? Minerals essential for making high-tech products like smartphones, electric cars, and military equipment.
What is the background of these trade restrictions?
- Since 2022: The US has been putting more and more restrictions on China's access to key technologies, including advanced computer chips.
- China's Response: China has blocked imports from some US companies, such as banning Micron chips in sensitive sectors.
What new actions did China take? On December 3, 2024, China announced even stricter controls on exporting critical minerals. This was a direct response to US actions.
What is the impact on global supply chains?
- China is a major supplier of critical minerals, controlling about 60% of production and 85% of refining.
- The US relies on China for these minerals, which creates a problem for them.
- These restrictions have already caused delays for companies like Henkel (a German company), forcing them to declare "force majeure" (meaning they couldn't fulfill contracts due to circumstances beyond their control).
Why are both countries using these restrictions? Both countries say they are acting in the interest of "national security."
- US: Wants to slow down China's progress in areas like artificial intelligence and chip manufacturing.
- China: Says it needs to protect its own security and meet international obligations.
What might happen under a new Trump administration?
- Increased tariffs (taxes) on mineral imports.
- More investment in mining minerals within the US.
- Continued focus on reducing reliance on China.
How are other countries affected? US allies like Canada, South Korea, and Japan, which also export critical minerals, could be negatively affected by US tariffs and might retaliate.
Key Points:
- Henkel: A German company affected by mineral supply issues.
- China's Control: China controls a large percentage of global critical mineral production.
- Micron: A US chip company banned from certain sectors in China.
- Trump's Previous Actions: Trump previously took executive action to reduce foreign dependence on critical minerals.
- Canada's Potential Response: Canada is considering taking action against US tariffs.
What is the overall situation? The definition of "national security" is expanding, and this is having a big impact on global trade. The critical minerals sector is becoming increasingly tied to security concerns, which could further strain international relations.
In simple terms: The US and China are fighting over trade, especially when it comes to important minerals used in technology and defense. The US is trying to limit China's access to technology, and China is limiting exports of minerals that the US needs. This is causing problems for businesses around the world and making relationships between countries more complicated.