U.S. Trade Representative Catherine Tye speaks during a Senate Finance Committee hearing on the President’s 2023 Trade Policy Agenda at the U.S. Capitol in Washington, D.C., March 23, 2023.
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US Trade Representative Katherine Tai said in an exclusive interview with CNBC’s Martin Sun on Saturday that China’s dominance in rare earths has made US supply chains vulnerable.
Rare earth metals are used in high-tech products such as electric vehicle motors. For decades, China has increased its metal processing capabilities, giving it tremendous pricing power in important global markets.
“I would like to draw your attention to more than just the vulnerabilities surrounding Chinese investment.” [overseas]However, the fact that China’s dominant position in the world market is now growing [rare earths] That means you can turn the faucet on and off,” Tai said.
“And until we can access and build additional supply chains, we remain completely vulnerable to their impact,” the U.S. Trade Representative said. Mr. Tai was speaking in New Delhi, India, beside the B20, the G20’s official business dialogue forum.
About a decade ago, Mr. Tai said, China pushed rare earth prices so high that some U.S. mines were allowed to operate in the industry again, but were forced to close when China lowered prices. pointed out.
Prior to the 1980s, the United States held a majority stake in the rare earth metals market. But lower labor costs overseas and less pressure on environmental standards have forced the rare earth industry out of the United States.
Meanwhile, Beijing supported the industry.
“Chinese dominance in terms of dominance is not necessarily a natural advantage,” Tai said. “It’s not that they have more rare earths, it’s that they could pursue coordinated industrial and trade policies that would allow them to corner the market.”
The Chinese government makes economic plans at least every five years, and some goals, such as increasing technology self-sufficiency and achieving carbon neutrality, are set years in advance.
While such top-down planning is not guaranteed to pay off, the electric vehicle industry is an example of how the Chinese industry has been able to capture significant market share across the supply chain, including the final product.
America’s reliance on China-based manufacturing reached the forefront during the Trump administration and accelerated further when the 2020 COVID-19 pandemic disrupted global supply chains. The Biden administration announced a multibillion-dollar effort to encourage companies to develop and manufacture critical technologies in the United States.
“The situation we are in with regards to supply chains is not where we want it to be,” Tai told CNBC on Saturday. “We know we are vulnerable. What we want to be is where the supply chain is more diverse, where we have more confidence in our supply chain, where we have more choice.”
In the case of rare earths, Tai said China dominates the global market. He noted that China is also the sole buyer of Australian lithium production, giving the Chinese government new market leverage.
Lithium is a key component of electric vehicle batteries, but it is not one of the 17 metals that are scientifically classified as rare earths.
This year, U.S. and European government officials have been talking about reducing risk—reducing dependence on China alone. Chinese Premier Li Qiang said in a speech to global business leaders in June that global economic interests were so intertwined that risk aversion was a false proposition.
“Phase 1” Trade Agreement
Just before the pandemic began, the United States and China signed a “Phase 1” trade deal asking China to buy more American goods as a way to make up for the United States’ huge trade deficit with China.
When asked about the status of the deal on Saturday, Mr. Tai said the U.S. was still looking at China falling short of meeting those purchase targets.
Another aspect of the debate, he said, is how “unbalanced” US trade with China is.
According to official US data, the country’s trade deficit with China is 8.3% increase It will reach $382.9 billion in 2022.
High-level visits to China by US officials have resumed this summer after a lull, with US Secretary of Commerce Gina Raimond scheduled to visit China Sunday through Wednesday.
U.S.-Indian relations
Tensions between the United States and China have intensified in recent years, starting with trade and spilling over into technology and finance.
As relations with the United States improve, many companies are beginning to explore opportunities in India.
Thai also met with India’s Minister of Commerce and Industry Piyush Goyal on Saturday to express concerns about India’s high-tech import licensing requirements, according to a release.
“The stars really align between the US and India, and it’s across all policy areas,” Tai told CNBC. She described the relationship as “experiencing new heights.”
She said there was always the potential for more cooperation with India in her economy and trade, but before she “had no idea what to do with it”.
— CNBC’s Samantha Subin contributed to this report.
