Asia Advisory

Beijing’s riposte to the Huawei ban

Date: June 10, 2019

In an escalating trade war, China has announced that it is looking to restrict exports of rare earth minerals to the United States. Rare earth minerals – there are 17 in all – are crucial components for high end products such as smartphones, lasers, instrument panels, magnets, wind turbines, MRI machines and military equipment. As new digital technologies have taken route, the use of these obscure rare earth minerals has become part of daily lives. China, which has a near monopoly on the rare earth mineral global trade accounting for over 80 percent of all rare earth minerals produced globally. The United States has been the largest importer of Chinese rare earth minerals followed by high technology producing countries such as Japan and South Korea.

With the trade war already disrupting supply chains globally, a rise in rare earth mineral prices will impact global prices for high technology products. Meanwhile, President Trump has responded by saying tariffs on China could be raised by another $300 billion if necessary. Rising prices are likely to affect imports the world over, including Pakistan, which is already facing a current account deficit due to a high import bill. The restriction on rare earth minerals will also mean that both China and the United States, Pakistan’s largest investment and export market respectively, have entered a new stage in their ongoing trade war, complicating global economic relationships and straining existing patterns of trade and engagement, including for Pakistan.