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Pentagon working to reduce US reliance on Chinese rare earth minerals after trade war threat

Key Points
  • The department continues to work closely with the president, Congress and the industrial base to improve U.S. competitiveness in the mineral market," Lt. Col. Mike Andrews, a spokesman for the U.S. Defense Department, told CNBC.
  • The move came after China threatened to use its dominance in rare earth minerals as a countermeasure in the trade war with the U.S.
  • China's rare earth materials are crucial to the production of a slew of technology items including iPhones and electric vehicles.
Defense Department's Patrick Shanahan, before he was tapped by President Donald Trump to serve as the department's Acting Secretary
Department of Defense

The Pentagon presented a report to Congress on rare earth minerals in an effort to reduce reliance on China.

"The department continues to work closely with the president, Congress and the industrial base to improve U.S. competitiveness in the mineral market," Lt. Col. Mike Andrews, a spokesman for the U.S. Defense Department, told CNBC Thursday. Reuters first reported the submission of the report. 

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China threatens to withhold rare earth metal sales to gain leverage on trade

The move came after China threatened to use its dominance in rare earth minerals as a countermeasure in the trade war with the U.S. The biggest Chinese newspaper explicitly warned the U.S. on Wednesday that China would cut off the rare earth supply, saying "don't say we didn't warn you," a phrase it used ahead of China's border war with India in 1962 and the 1979 China-Vietnam war.

The rare earth report was a requirement resulting from vulnerabilities identified in a report the Defense Department produced last year that said the increased imports of strategic and critical materials, such as rare earths are "causing a trade-off between supply dependency and lower costs."

China's rare earth materials, while only accounting for a small part of the $420 billion U.S. goods deficit with China in 2018, are crucial to the production of a slew of technology items including iPhones, electric vehicles and advanced precision weapons.

— Click here to read the original Reuters report.