On 10th July, the US Trade Representative applied a further 10% tariff on a wide range of goods imported from China, estimated to amount to US$200Bn. The additional quotas were applied after China placed duties on a range of products imported from the USA in response to a 25% ad valorem tariff announced by the US Trade Representative on 20th June, which covered potential trade valued at US$50Bn. The 10th July tariffs have been applied to several industrial and chemical products sourced from China, including rare earth compounds, metals and alloys.
Roskill View: The USA has, historically, been dependent on imports of rare earth products from China, since the Mountain Pass mine and processing facility in California (the only US domestic operation) was placed on care and maintenance in 2015. In 2017, the USA imported 14.2kt of rare earth compounds and a further 422t of rare earth metals and alloys from China, representing 8% of global production. China was the source of 70% of these imports, as there are limited alternative sources of separated rare earth products, required by US-based manufacturers of auto catalysts and FCC catalysts. As a result, existing non-Chinese producers, such as Lynas Corporation in Australia/Malaysia and Solikamsk Magnesium Works in Russia, may benefit from increasing US demand for non-Chinese material, though any significant changes are doubtful.
The introduction of a 10% tariff on rare earth products is unlikely to deter US-based consumers from sourcing Chinese rare earth products from a price viewpoint, as current prices are low compared to those seen in 2014. During 2014, imports of Chinese rare earth products into the USA were increasing despite domestic supply being available, indicating consumers were accepting of those price levels.
The implementation of further tariffs to rare earth compounds and metals & alloys would be required to support the development of a domestic rare earth mining and processing industry in the USA. If more stringent tariffs were put in place, however, the necessary rare earth mines and processing facilities would take years to construct and commission, barring the forced purchase and recommissioning of the Mountain Pass mine and processing facility currently exporting rare earth mineral concentrates to China. Further tariffs could even promote the transfer of manufacturing capacity outside of the USA, as occurred to the REE processing and manufacturing industry during in the 1990s and early 2000s.