Chips Won the Cold War. Rare Earths May Win the Next

IN RETROSPECT, THE symbolism of the moment was foreboding.

- Bloomberg

On May 15, 2019, President Donald Trump signed an executive order banning US firms from doing business with Chinese telecommunications companies, including Huawei Technologies Co. Five days after that first broadside in a brewing trade-and-technology war, President Xi Jinping was photographed touring a factory producing rare-earth magnets. Such devices, his visit seemed to imply, could be a geopolitical weapon for China quite as potent as advanced semiconductors are for the US.

Six years later, those battle lines are hardening. In the first major US-China trade dispute of Trump's second term, Beijing was able to use its control of rare earths to force Washington to a deal last week. The magnets produced from them are essential for the lightweight, powerful motors driving everything from automated car seats to guided missiles. After the US imposed its first round of tariffs in April, China started limiting export permits, causing US manufacturers to warn of imminent shutdowns.

"FULL MAGNETS, AND ANY NECESSARY RARE EARTHS, WILL BE SUPPLIED, UP FRONT, BY CHINA," Trump said in a social media post Wednesday, announcing the trade deal had been finalized. Beneath the all-caps boastfulness there's a worrying note of desperation. America has been caught napping.