#MacroFriday: China's Strategic Grip on the West
After Wednesday’s Econopolis Economic Encounter, with guest speaker Professor David Criekemans discussing his new book Hyperrealism, it is only logical we dedicate our MacroFriday to geopolitics. The lack of resources in some regions, or the strategic control over them in others, can play a vital role in economic developments. And China holds considerable leverage over the West through its dominance in rare-earth magnets.
Two days after Liberation Day, the Chinese government promptly retaliated against U.S. import tariff increases, striking the West at its Achilles’ heel: export restrictions on rare-earth elements (REEs) and scarce permanent magnets. These restrictions resulted in a dramatic collapse of rare-earth magnet exports from China to the rest of the world in April and May. In June, a truce between American and Chinese negotiators led to a partial easing of restrictions (for now) and a subsequent recovery in Chinese exports of rare-earth materials. Nevertheless, some Western companies were already experiencing disruptions in their supply chains.
Why is this important from a geopolitical standpoint? China accounts for approximately 90% of global magnet production, which is of vital importance for high-tech, automotive, clean energy, and defense applications. These magnets are indispensable to modern military capabilities (including precision-guided munitions, missile navigation systems, and stealth technologies). With the export restrictions in Q2, China demonstrated the shifting balance of power between global actors.
comments powered by Disqus