“When two elephants fight, it is the grass which suffers,” goes the Kenyan proverb. Pakistan must be feeling very grass-like as China slapped a series of export restrictions on rare-earth metals, because the action has provoked US President Donald Trump into a waspish post on his Truth Social account, where he basically made two points: first, that the USA can also play at this because it has a monopoly on certain minerals as well; and second, that the USA is in the midst of calculating what tariff to impose on China. Though this is probably not the only factor, the 50-percent tariff imposed on China clearly has this in mind. Pakistan is caught in the middle because it would like its rare-earth elements mined by the USA, and has even made one agreement to this effect. Unless the US firm uses no Chinese equipment, it will need to obtain a Chinese import licence to send its product to the USA.
It is to be noted that Mr Trump’s weapon of coercion, economic sanctions, is being turned on him by China. He can hardly complain, for the USA has already applied its Foreign Direct Product Rule to Chinese chipmakers, thus prohibiting them from using chips using US technology to make anything. The US FPR has been in place since 1959, and it was applied to Chinese chips by the Biden Administration. The FPR is being used to prevent third countries from selling chip components to China, with Taiwan, Singapore and Israel being prevented from exporting certain components. China is already facing a 30 percent tariff on its goods, while it has placed a 10 percent tariff on US goods. However, Mr Trump has threatened a 100 percent additional tariff, if China persists with the rare-earths tariff.
In this quarrel, Pakistan is in a peculiar position. It has tried to meet US concerns over its surplus, by importing US crude, and by selling rare earths. Though the minerals form a transaction between a Pakistani and a US concern, if Chinese equipment in its mining is used, the mined product will need a Chinese export licence. Unless the US miner can bring in mining equipment made elsewhere, there will be a problem. Pakistan can also expect Chinese pressure, perhaps from another direction, because it is not expected that such a brotherly ally would enable toe US to circumvent the Chinese stranglehold on rare earths. Pakistan has so far avoided taking sides. That is becoming increasingly difficult.
