Sino–US relations, climate policy uncertainty and rare earth prices

This paper examines the impact of Sino-US relations and climate policy uncertainty on rare earth prices using a time-varying parameter vector autoregression (TVP-VAR) model. The findings show that Sino-US relations and climate policy uncertainty are key drivers of changes in rare earth prices. Rare earth supply and demand are the main pathways through which Sino-US relations and climate policy uncertainty affect rare earth prices, with demand playing a more critical role in transmitting price fluctuations. We also investigate the impact of event shocks on rare earth prices. The empirical results show that the South China Sea confrontation and the US re-entry the Paris Agreement significantly impact rare earth prices more than other events and that climate policy uncertainty is stronger than Sino-US relations. The findings provide valuable insights for market participants and government policymakers, helping them to predict rare earth price trends better and improve their risk management strategies in response to market emergencies.