Donald Trump has ignited a new trade and technology war with China, and the first casualty could be Elon Musk’s electric car company.
The current President of the United States, as you may know, initiated a massive tariff war with China, which has now been scaled back, but which keeps the fuse of the battle between these two great powers burning . The Asian giant’s response? Beijing has responded by turning off the rare earth tap .
For those who are a bit confused, these are essential minerals for manufacturing everything from electric cars to mobile phones and wind turbines. The result is that China now has absolute power over global technology, and the consequences are already being felt throughout the industry.
Trump’s move seemed like it would go without a hitch: raising tariffs on Chinese products to protect American industry and curb China’s advance in sectors like electric cars.
But Beijing’s response has been masterful, with the country controlling nearly 70% of global rare earth production and more than 90% of refining, allowing it to decide who has access to these materials and under what conditions .
Now, with the new restrictions, any company wanting to import rare earths or magnets made in China will need a special license, which can be denied if there’s suspicion the material will end up in military technology or in the hands of strategic rivals. In short, the same thing the US has done with Nvidia, for example, and its AI chips .
An ace up China’s sleeve that Trump seems not to have seen coming
Today, although it may not seem like it, rare earths are the secret and necessary ingredient for everything currently required in technology. Without them, there are no batteries for electric cars, smartphones, fighter jets, or wind turbines.
An electric car carries, on average, one kilogram of rare-earth magnets; a marine turbine can require up to six tons . Until now, the West had assumed it could always buy them at a good price on the global market. But China played the long game and secured control of the entire chain, from mining to refining.
The new licensing system announced by Beijing allows the Chinese government to block exports on a case-by-case basis . The trick is that many of these materials are considered “dual-use”: they can be used in both a blender and a missile. This allows China to stop supplies to any company or country it considers a threat or that has imposed sanctions on it. A win-win situation.
The impact of all this is already being felt, and the first to throw up his hands is Donald Trump’s former right-hand man: Elon Musk . Tesla, which had emerged unscathed from this war until now, is now in a difficult position.
If the supply of rare earths is cut off or becomes more expensive, electric car and component production could be halted or prices could skyrocket. The same could happen to other technology companies, from Apple to European battery and turbine manufacturers.
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The perfect storm looms over the US
Dependence on Chinese materials and components continues to be an Achilles’ heel for this country , and many brands are already looking for alternatives to the challenges ahead. Renault, for example, has already developed electric motors that don’t rely on these minerals, using wound rotors instead of permanent magnets.
However, not everyone is so lucky, and these kinds of advances require a lot of foresight, time, and money.
In the short term, what will be most noticeable will be the rising cost of electric cars, cell phones, and other devices . In the long term, the battle for control of critical materials will determine who manages to seize almost global power.
