Trump tariffs target high-tech minerals that US needs

This article first appeared in The Edge Financial Daily, on July 12, 2018.
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SHANGHAI: Given the Trump administration’s stated aim of maintaining its advantage in manufacturing prowess over China, there are some curious inclusions in yesterday’s list of new tariffs.

Among them are rare earths, an esoteric collection of minerals with strange names (yttrium, praseodymium), high-tech applications and a history of scarcity. They are used in everything from hybrid vehicles to electronic gadgets and military hardware.

China’s grip on rare earth supply is so strong that the US joined with other nations earlier this decade in a World Trade Organization (WTO) case to force the nation to export more of the materials, not less, after prices spiked amid a global shortage. The WTO ruled in favour of the US, while prices eventually slumped as manufacturers turned to alternatives.

Imposing duties will “bring home to the American public the reality of how much of what they use in everyday life contains these technology metals,” Jack Lifton, the Michigan-based founder of rare earth consulting service Technology Metals Research LLC, said by phone. “The Chinese mine the rare earths, they separate them, they refine them. This is the long-term trend and a 10% tariff will not do anything to stir any domestic production in the US.”

In December of last year, US President Donald Trump signed an executive order to reduce the country’s dependence on external supplies of what the government called critical minerals — including rare earths, cobalt and lithium. That was aimed at reducing US vulnerability to supply disruptions by identifying new sources, and streamlining regulations to “expedite production, reprocessing and recycling of minerals,” according to a White House statement.

China produced more than 80% of the world’s rare earth metals and compounds in 2017, according to the US Geological Survey. It has about 37% of global reserves and supplied 78% of US imports.

Also in Trump’s sights is cobalt, an increasingly hot commodity that is a vital ingredient in the batteries for electric vehicles. China is a major refiner of the material, which is also used in so-called super-alloys for jet engines and space vehicles, and a small but not insignificant exporter to the US. — Bloomberg