{"id":747,"date":"2019-06-13T14:27:27","date_gmt":"2019-06-13T11:27:27","guid":{"rendered":"http:\/\/www.liberalglobe.com\/?p=747"},"modified":"2019-09-05T15:28:48","modified_gmt":"2019-09-05T12:28:48","slug":"global-recession-trade-war-and-rare-earths","status":"publish","type":"post","link":"https:\/\/www.liberalglobe.com\/?p=747","title":{"rendered":"Global Recession, Trade War and Rare Earths"},"content":{"rendered":"\n

The partial collapse of talks between the US and China on any agreement\nbetween the level of tariffs imposed by the US and the exclusion of Huawei, the\nChinese telecom and techonlogical giant, from the US market forced the China to\nuse as a last resort the threat of using in the future an embargo on\nrare-earths exports.<\/p>\n\n\n\n

A growth of this type will be the culmination of commercial\/geopolitical\ncompetition between the world’s two largest economies.<\/p>\n\n\n\n

by Thanos S. Chonthrogiannis-https:\/\/www.liberalglobe.com<\/em><\/strong><\/p>\n\n\n\n

What does the term “rare earths” mean?<\/strong><\/strong><\/p>\n\n\n\n

Before proceeding with our analysis, it is very important for the reader\nwho does not know, to be informed what the term “rare earths” means.\nWhen you mention the term rare earths, it refers to a group of seventeen (17)\nrare metals with unique properties. Briefly we will mention that these seventeen\nin number rare metals are: <\/p>\n\n\n\n

Cerium (Ce), Dysprosium (Dy), Erbium (Er), Europium (Eu), Gadolinium (Gd), Holmium (Ho), Lanthanum (La), Lutetium (Lu), Neodymium (Nd), Praseodymium (Pr), Promethium (Pm), Samarium (Sm), Scandium (Sc), Terbium (Tb), Thulium (Tm), Ytterbium (Yb), Ytirium (Y). <\/p>\n\n\n\n

\"\"
Rare Earth Oxides<\/strong>
Clockwise from top<\/strong> center: praseodymium, carium, lanthanum, neodymium, samarium and gadolinium<\/strong>
Photo by Author: Peggy Greb, US department of agriculture, licensed public domain
Source:https:\/\/www.ars.usda.gov\/is\/graphics\/photos\/jun05\/d115-1.htm<\/figcaption><\/figure><\/div>\n\n\n\n

Their usefulness and application are made in a massive way,<\/p>\n\n\n\n

1.<\/strong> in the innovative industry of high technology, smart energy networks, wind turbines, photovoltaic, hybrid, hydrogen and pure electric cars respectively, in digital information and communication technology, magnetic tomography, hydrocarbon catalysts, various high-tech weapons systems and elsewhere.<\/p>\n\n\n\n

2.<\/strong> In addition, we should mention that rare earths have been used as improvers in agricultural production since the early 1980. China is making massive use of these in its agricultural sector.<\/p>\n\n\n\n

China’s strategic threat with an embargo on rare earth\nexports<\/strong><\/strong><\/p>\n\n\n\n

The threat from China in the future implementation of this measure in the\nnon-zero game theory is in the form of a future transaction of\ncounter-performance of equal countermeasures to the current US applicable\nmeasures (of the opponent) against China. <\/p>\n\n\n\n

It is a game of type tit-for-tat and in the case of China was not\nimplemented in the USA but was used as a warning for future use if the US does\nnot mitigate the measures to date that have imposed or if they have not only\nstopped the measures already imposed and continue to impose new measures\nagainst China in the future (e.g. if the US imposes 25% duties on other Chinese\nimports worth $300 billion).<\/p>\n\n\n\n

This type of game is customary to appear and has special application in\ntrade, particularly in situations of commercial warfare and especially in cases\nwhere duties and quotas are imposed as measures to reduce imports from one\ncountry to another.<\/p>\n\n\n\n

Essentially, China has warned that if the US continues to impose measures\nagainst the Chinese economy and more generally against China they will\n“hit” the US, with the implementation of this threat measure, in the\nsofter underbelly of the United States. In raw materials-rare earths- which are\nhighly necessary in the manufacture and production of low cost high- tech\nproducts.<\/p>\n\n\n\n

How the United States will respond in such a case is difficult to predict.\nThe most likely scenario is the even greater exclusion of Chinese products not\nonly in the US markets but also in the overall markets of the West. This would\nbe a very unpleasant development for the two largest economies on the planet\nand, more generally, for the global economy and peace.<\/p>\n\n\n\n

At the same time, the US and the West in general should develop extraction,\nseparation and processing processes in other areas of the world with rare-earth\nreserves.<\/p>\n\n\n\n

Due to the increased costs for these rare earth acquisition processes, the US Congress at 07\/03\/2017 passed a bill (H.R. 1407-Metals\nAct 115th<\/sup> Congress (2017-2018), https:\/\/www.congress.gov\/\nbill\/115th-congress\/house-bill\/1407<\/a>) which will commit 1% of the general costs (overhead\ncosts) of the US defense budget in order to become a specific investment fund\nthat strengthens through low-interest loans US mining companies for a series of\nmetals which are strategically\/critically considered in the production of\nhigh-tech systems. In fact, rare earths are photographed with this bill.  <\/p>\n\n\n\n

The use of China’s global strategic position on the rare\nearths<\/strong><\/strong><\/p>\n\n\n\n

China used this threat with rare earths because it holds 40% of the world’s\nrare earth reserves. Certified stocks of rare earths exist in the USA,\nAustralia, Kazakhstan, Vietnam, Norway, Brazil, India, Australia, Malaysia, Greece.\nWhile there are indications of large stocks of rare earths in the Arctic.<\/p>\n\n\n\n

Bayan-Obo is the largest deposit of rare earths in the world and is geographically located in the inner Mongolia of China. It has more than 40 million confirmed stocks of these rare earth metals (REE) and to date has extracted only 35% of these stocks.<\/p>\n\n\n\n

\"\"
Rare Earth mine in Bayan Obo, China<\/strong>
Photo by Author: NASA Earth Observatory, licensed public domain
Source: http:\/\/earthobservatory.nasa.gov.\/10TD\/view.php?id=77723&src=eoa-iotd<\/figcaption><\/figure>\n\n\n\n

The problem with rare earths is the processes of extraction, separation and\nprocessing that are of high cost. They are capital intensive procedures and in\naddition are destructive to the environment because these rare metals are mixed\nwith the radioactive elements thorium (Th), uranium (U) and want special\ntreatment because they create radioactive waste. From the family of the\nseventeen rare earths metals only the Promethium (Pm) is radioactive.<\/p>\n\n\n\n

The rational process of extraction, separation and treatment of these rare\nearths is costly if the environment is to be protected. Only Canadian and\nAmerican companies in this industry follow high standards for the protection of\nthe environment during these processes.<\/p>\n\n\n\n

To increase the profitability of this industry, China does not apply these\nstringent standards, which should be applied throughout the process of\nacquiring rare earths. The company Baotou Steel throws the waste of this\nprocess into the Yellow River, sacrificing both the health of the workers and\nthe natural environment itself.<\/p>\n\n\n\n

The rare earths are used in products of a total commercial value that range\naround $6-$7trillion.<\/p>\n\n\n\n

China, by controlling the entire value chain of rare earths has the\npotential to determine price fixing and supply of finished processed products\n(rare earth oxides, permanent magnets etc.). <\/p>\n\n\n\n

This single element-advantage gives it the ability to determine the price\nlevel through the spin-at-the-test offer of these final products. In a drastic\nrestriction of the global supply of these rare metals, due to the imposition of\nan embargo on these exports, prices will increase dramatically making difficult\nhigh-tech mass application in all areas of modern civilization, leading the world\neconomy very quickly in a strong recession. \n<\/p>\n\n\n\n

The great danger of the global recession<\/strong><\/strong><\/p>\n\n\n\n

As US President Donald Trump has previously expressed his desire the FED to\nreduce its dollar borrowing rates-in contrast to existing macroeconomic data-to\nfurther strengthen the US economy by bringing as example the economic policy\nimplemented by China to strengthen the Chinese economy, it is very likely that\nUS President Donald Trump to bring the FED to a fait accompli and enforce its\nrequested policy, to proceed with the implementation of tariffs of 25% and on\nother Chinese imports worth $300 billion.<\/p>\n\n\n\n

If these tariffs are imposed, then the FED will be forced to further reduce\nits borrowing rates to boost the US economy.<\/p>\n\n\n\n

The investors generally tend to underestimate\nthe dangers inherent in trade wars and the unpleasant effects they have on the\nglobal economy and growth in general.<\/p>\n\n\n\n

Since the trade war intensified between the US and China, making use of\nboth sides of their above described threats, the recession at global level will appear in less than a year\n(once the measures are fully enforced-threats so far on both sides) due to a\ndrastic increase in product prices and a more than corresponding reduction in\nconsumer demand.<\/p>\n\n\n\n

Thanos S. Chonthrogiannis<\/strong><\/p>\n\n\n\n

The law of\nintellectual property is prohibited in any way unlawful use\/appropriation of\nthis article, with heavy civil and criminal penalties for the infringer.<\/em><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"

The partial collapse of talks between the US and China on any agreement between the level of tariffs imposed by the US and the…<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[859,5],"tags":[717,161,715,655,61,714,712,713,719,718,70],"class_list":["post-747","post","type-post","status-publish","format-standard","hentry","category-economics","category-economic","tag-bayan-obo","tag-china","tag-chinas-strategic-threat-with-an-embargo-on-ree-exports","tag-donald-trump","tag-fed","tag-global-recession","tag-global-recession-trade-war-and-rare-earths","tag-rare-earths","tag-the-great-danger-of-the-global-recession","tag-the-use-of-chinas-global-strategic-position-on-the-ree","tag-usa"],"_links":{"self":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/747","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=747"}],"version-history":[{"count":1,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/747\/revisions"}],"predecessor-version":[{"id":750,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=\/wp\/v2\/posts\/747\/revisions\/750"}],"wp:attachment":[{"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=747"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=747"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.liberalglobe.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=747"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}