China is counting on one crucial advantage as it seeks to grind out a deal to ease its high-stakes trade war with the United States — dominance in rare earths.Used in electric vehicles, hard drives, wind turbines and missiles, rare earth elements are essential to the modern economy and national defence.AFP takes a look at how rare earths have become a key sticking point in talks between the US and China.- Mining boom -“The Middle East has oil. China has rare earths,” Deng Xiaoping, the late Chinese leader whose pro-market reforms set the country on its path to becoming an economic powerhouse, said in 1992.Since then, Beijing’s heavy investment in state-owned mining firms and lax environmental regulations compared to other industry players have turned China into the world’s top supplier.The country now accounts for 92 percent of global refined output, according to the International Energy Agency.But the flow of rare earths from China to manufacturers around the world has slowed after Beijing in early April began requiring domestic exporters to apply for a licence — widely seen as a response to US tariffs.Under the new requirements — which industry groups have said are complex and slow-moving — seven key elements and related magnets require Beijing’s approval to be shipped to foreign buyers.- Deep impact -Ensuring access to the vital elements has become a top priority for US officials in talks with Chinese counterparts, with the two sides meeting this week in London.”The rare earth issue has clearly… overpowered the other parts of the trade negotiations because of stoppages at plants in the United States,” said Paul Triolo, a technology expert at the Asia Society Policy Institute’s Center for China Analysis, in an online seminar on Monday.That disruption, which forced US car giant Ford to temporarily halt production of its Explorer SUV, “really got the attention of the White House”, said Triolo.Officials from the two countries said Tuesday that they had agreed on a “framework” for moving forward on trade — with US Commerce Secretary Howard Lutnick expressing optimism that concerns over access to rare earths “will be resolved” eventually.- Rare earth advantage -The slowing of licence issuance has raised fears that more automakers will be forced to halt production while they await shipments.China’s commerce ministry said over the weekend that as a “responsible major country” it had approved a certain number of export applications, adding that it was willing to strengthen related dialogue with “relevant countries”.But that bottleneck has highlighted Washington’s reliance on Chinese rare earths for producing its defence equipment even as trade and geopolitical tensions deepen.An F-35 fighter jet contains over 900 pounds (more than 400 kilograms) of rare earth elements, noted a recent analysis by Gracelin Baskaran and Meredith Schwartz of the Critical Minerals Security Program at the Center for Strategic and International Studies.”Developing mining and processing capabilities requires a long-term effort, meaning the United States will be on the back foot for the foreseeable future,” they wrote.- Playing catch up -The recent export control measures are not the first time China has leveraged its dominance of rare earths supply chains.After a 2010 maritime collision between a Chinese trawler and Japanese coast guard boats in disputed waters, Beijing briefly halted shipments of its rare earths to Tokyo.The episode spurred Japan to invest in alternative sources and improve  stockpiling of the vital elements — with limited success.That is “a good illustration of the difficulty of actually reducing dependence on China”, said Triolo, noting that in the 15 years since the incident, Japan has achieved only “marginal gains”.The Pentagon is trying to catch up, with its “mine-to-magnet” strategy aiming to ensure an all-domestic supply chain for the key components by 2027.The challenge facing Washington to compete with Beijing in rare earths is compounded by sheer luck: China sits on the world’s largest reserves.”Mineable concentrations are less common than for most other mineral commodities, making extraction more costly,” wrote Rico Luman and Ewa Manthey of ING in an analysis published Tuesday.”It is this complex and costly extraction and processing that make rare earths strategically significant,” they wrote.”This gives China a strong negotiating position.”

Stock markets rose Wednesday as investors welcomed a China-US agreement to lower trade tensions that stoked hopes the economic superpowers will eventually reach a broader tariff deal.After two days of closely watched talks in London, the two sides said they had set up a framework to move towards a pact, following negotiations in Geneva last month that saw them slash tit-for-tat levies.The news provided some relief to markets after US President Donald Trump accused Beijing of violating that deal.”Constructive talks between the US and China have put markets on a firmer footing, as investors hope that the worst of the tariff turbulence may have passed,” said Richard Hunter, head of markets at Interactive Investor. Paris and Frankfurt enjoyed modest gains in midday deals.London edged higher also as investors awaited finer details of the UK government’s latest spending and investment decisions due Wednesday.Asian stock markets won a lift on the China-US progress, with Hong Kong among the best performers. Analysts said investors would be keen to get a closer look of the agreement’s details.”There’s perhaps a little disappointment… that we haven’t yet got a bigger announcement, even though there’s time to hear the full conclusions of the meeting,” said Deutsche Bank economist Jim Reid. As well as tariffs, a key issue in the discussions was China’s export of rare earths used in smartphones and electric vehicles, while Beijing was keen to see an easing of restrictions on its access to tech goods.China said the trade talks made new progress, and vice premier He Lifeng stressed the need for Beijing and Washington to strengthen cooperation.US Commerce Secretary Howard Lutnick said he was upbeat that concerns over rare earths “will be resolved” eventually, as the agreement is implemented.Chinese President Xi Jinping and Trump must approve the framework first.The talks came as World Bank downgraded its 2025 forecast for global economic growth to 2.3 percent — from the 2.7 percent predicted in January — citing trade tensions and policy uncertainty.It also said the US economy would expand 1.4 percent this year, half of its 2024 growth.In a speech in Beijing, European Central Bank chief Christine Lagarde called for a de-escalation in the tariffs standoffs, warning that “coercive trade policies” risked harming supply chains and the global economy.”Once the US reaches an agreement with China, we expect the EU to be next in line,” said Kathleen Brooks, research director at trading group XTB, referring to US-EU negotiations to avert steeper tariffs next month.Investors also awaited US inflation data due Wednesday, which analysts expect to reinforce the Federal Reserve’s slower pace of interest rate cuts. The dollar was mixed against main rivals ahead of the release, while oil prices firmed.In company news Wednesday, shares in Zara owner Inditex fell more than three percent in Madrid, after the world’s biggest fashion retailer posted disappointing first quarter sales. – Key figures at around 1040 GMT -London – FTSE 100: UP 0.1 percent at 8,859.25 pointsParis – CAC 40: UP 0.3 percent at 7,823.94 Frankfurt – DAX: UP 0.2 percent at 24,046.23Tokyo – Nikkei 225: UP 0.6 percent at 38,421.19 (close)Hong Kong – Hang Seng Index: UP 0.8 percent at 24,366.94 (close)Shanghai – Composite: UP 0.5 percent at 3,402.32 (close)New York – Dow: UP 0.3 percent at 42,866.87 (close)Euro/dollar: UP at $1.1438 from $1.1426 on TuesdayPound/dollar: DOWN at $1.3495 from $1.3501Dollar/yen: UP at 145.13 yen from 144.88 yenEuro/pound: UP at 84.76 pence from 84.61 penceBrent North Sea Crude: UP 1.2 percent at $67.68 per barrelWest Texas Intermediate: UP 1.5 percent at $65.94 per barrel