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Donald Trump has threatened to apply tariffs on critical minerals in a move that could increase tensions with China and open a new front in a global trade war that has rattled markets.
In an executive order on Tuesday, the US president ordered the commerce department to study the critical mineral supply chains and come up with ways to boost American production while cutting reliance on imports.
The investigation could lead to new tariffs being imposed. Trump’s announcement comes just over two weeks after his “liberation day” tariffs sparked days of market turmoil and warnings that the deepening stand-off with China could tip the global economy into recession.
“President Trump recognizes that an overreliance on foreign critical minerals and their derivative products could jeopardize US defense capabilities, infrastructure development, and technological innovation,” the order read.
The investigation threatens to trigger a new critical minerals trade war as the US tries to wrestle back control of a crucial industry that is dominated by China. It comes after China suspended exports of several heavy rare earth metals and rare earth magnets used in the defence, robotics and energy industries to buyers around the world.
The Trump administration is following on from initiatives started during the Biden administration to reduce American reliance on adversaries for minerals and metals that are used in everything from electric car batteries to jet engines to missiles.
Although the White House emphasised the importance of minerals and rare earths for military applications, any shortage could affect companies in sectors from energy to auto manufacturing.
The Financial Times reported this week that the White House was drafting an executive order to enable the stockpiling of metal found on the Pacific Ocean seabed, as part of the broader effort to counter China’s dominance of rare earth supply chains.
The probe would be carried out under Section 232 of the Trade Expansion Act of 1962, which Trump has used to launch investigations into chips, copper and lumber. He has also used the law to apply tariffs to autos, steel and aluminium.
The executive order said any resulting tariffs would replace any “reciprocal” tariff rates placed on these critical minerals, which could in theory lead to tariffs on those minerals being lowered instead of raised.
The White House said the US remained “heavily dependent on foreign sources, particularly adversarial nations, for these essential materials”, arguing that it exposed the country to “economic coercion”.
In a recent article in the Washington Quarterly, Evan Medeiros and Andrew Polk, two China experts, said Beijing had since 2018 expanded its set of economic tools to retaliate against the US and other countries.
Instead of fighting tariffs with tariffs, Beijing has significantly expanded its coercive tool kit to include export controls on critical minerals. In December 2023, for example, China hit back at American efforts to cut its reliance on Chinese mineral supply chains by banning the export of critical rare earths processing equipment.
Along with barring exports of rare earths this week, China recently banned exports to the US of gallium, germanium and antimony, in addition to other materials with military applications, the White House said.
Last year, Beijing warned Japan that it would block exports of gallium, germanium and graphite if Tokyo aligned too closely with Washington on technology-related export controls. The US wanted to impose certain controls to make it harder for China to obtain advanced American technologies in the fields of semiconductors and artificial intelligence.
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