Is the US shooting itself in the foot with tariffs on Chinese rare earth elements?
China is the dominant supplier of elements vital to products from lasers to mobile phones, leaving US makers no alternative but to pay more
Among the thousands of Chinese products targeted by the US administration in its latest salvo of tariffs are some rare earth metals, little known chemical elements that are vital to products ranging from hi-tech lasers to wind turbines to lightweight frames for mountain bikes.
Not exactly household names, yttrium and scandium will be subject to 10 per cent levies as part of the US$200 billion worth of Chinese products facing tariffs under US President Donald Trump’s latest shot in the trade war between the two nations.
But analysts said it could be US companies that suffer from tariffs on the rare earth materials, as there simply are little alternative sources of supply.
“It’s kind of nonsense to place import tariffs on Chinese rare earth producers. It is unclear how it offers the US any upside and is unclear how it inflicts any pain on China,” said Ryan Castilloux, founder of Adamas Intelligence, a research firm in Amsterdam. “There really is no ‘buy American’ alternative.”
The focus in the US has been primarily on “more holes in the ground,” or making it easier to mine rare elements, rather than creating an infrastructure that spans from raw materials to refining to creating end-use products, such as magnets, he added.
Until that happens, the creation of new mines will only account for “a small portion of US needs,” he said.