President Trump has tasked the Department of Commerce with studying the potential for imposing tariffs on critical minerals as part of a trade offensive against China, which is the dominant player in all things critical minerals.
In an executive order signed on Tuesday, Trump directed the department to investigate the United States’ dependence on imports of critical minerals, arguing that excessive reliance has negative national security implications.
“Processed critical minerals and their derivative products face significant global supply chain vulnerabilities and market distortions due to reliance on a small number of foreign suppliers,” the order read. “These vulnerabilities and distortions have led to significant United States import dependencies. The dependence of the United States on imports and the vulnerability of our supply chains raises the potential for risks to national security, defense readiness, price stability, and economic prosperity and resilience.”
Tariffing critical mineral imports would be a rather risky move—precisely because of China’s overwhelming dominance in the sector on a global scale. To shake off its dependence on imports from China, the U.S. needs to build its critical mineral supply chain pretty much from scratch, and it will face obstacles along the way, mostly in the face of environmentalists who strongly dislike the idea of opening new mines.
Over the long term, however, an effort to reduce the dependence on imports will pay off. Last week, China instituted export curbs on certain critical minerals like it did several years ago with Japan amid a trade dispute. In other words, China is no stranger to using its dominance in the sector as lever against trade partners with import dependence. China produces as much as 90% of the world’s rare earths output. This prompted a push by Western nations to diversify into their own rare earth supply chains but doing this has proven much trickier than talking about it.
Source: By Irina Slav from Oilprice.com