Last Wednesday, US trade representative Katherine Tai released a complete list of the products hit by Section 301 tariffs, a week after introducing the measure to protect domestic industries against China’s “unfair, non-market practices.”

The updated list, open for public comment for 30 days, covers $18 billion worth of goods, including some critical minerals.

From 2024, imports of manganese and cobalt in ores and concentrates form will be subject to a 25% tariff. Rates of 25% will also apply to permanent magnets and natural graphite, starting in 2026.

These come alongside hikes to 100% import duty on EVs and to 25% on lithium-ion EV batteries and battery parts, effective this year; double duties on semiconductors to 50% from 2025; and an increase to 25% tariff on lithium-ion non-EV batteries in 2026.

A symbolic move

Looking at recent US trade data, the new tariffs apply to small volumes of goods. The potential impact on the goods for which the tariffs are effective from this year seems to be virtually nil. Conversely, the government is giving importers a two-year buffer period for alternative supply to be put in place before tariffs on more crucial products start in 2026.

Between January and March this year, the US registered no imports of cobalt ores and concentrates from China or anywhere in the world. However, in the same period last year, it imported 520 t of the commodity, all from China.

Small amounts of manganese ores and concentrates have been imported from China recently. Last year, the volume was 76 t. In the first quarter of 2024, there were no imports from China, but volumes from the rest of the world more than doubled to 75,586 t, compared to the same period last year.

The trend in the import of permanent magnets and natural graphite is different, with US buyers still reliant on Chinese supply. Imports from China for the magnets used in electric motors and wind turbines rose 14.6% to 6,685 t in Q1, while imports from the rest of the world increased 12.5% to 1,206 t.

On the other hand, US imports of Chinese natural graphite, a key anode material with several other applications, declined 61.2% to 4,390 t. Imports from the rest of the world were 33.2% lower at 5,084 t, indicating the trade pattern is tied to supply/demand fundamentals.

According to Kenneth Stein, vice president for policy at the Institute for Energy Research, the new tariffs are purely a political move ahead of the presidential election in November and may not have the desired effect on domestic industry.

For example, some Chinese EVs are still cheaper than their US counterparts, even with the additional duty, so they could still potentially be brought into the market. US imports of Chinese EVs are currently very small.

Meanwhile, developing local mines or refineries can be challenging due to strict environmental requirements, mining laws that some consider outdated, and a lack of support from the general public and Native Americans.

“I think Biden and his administration have an excessive amount of confidence in the Inflation Reduction Act, and I think they think that, because they’ve handed out a bunch of money to subsidise these things, therefore all this stuff will just be made [in] the United States,” Stein tells Kallanish.

“I don’t think they’re worried about the tariff impacts – I personally think it’s a fantasy,” he adds.

Tariffs can often be sidestepped. Chinese solar panels, part of Section 301 since 2018, used to be shipped to the US through Southeast Asian countries, which the White House addressed by slapping tariffs on solar cells and modules coming from Cambodia, Malaysia, Thailand, or Vietnam, Whac-A-Mole style.

“Minerals like cobalt can pass through several hands before arriving in the US as imports from a nation far removed from their original destination – we are likely to see traders and middlemen at work to circumvent the tariffs,” states Olimpia Pilch, founder and director of Critical Minerals Association USA.

She says the tariffs may cause “some short-term pain” to the US downstream sector reliant on manganese and cobalt while it finds alternatives, since most refined materials are in China or the hands of Chinese-controlled entities.

In fact, not only does China have bountiful resources at home, it also controls much of the supply chain in other mineral-rich countries.

For example, despite holding around one-third of the world’s reserves, China now accounts for 60% of global rare earth mined production, 85% of rare earth processing capacity, and over 90% of high-strength permanent magnets manufacturing. Interestingly, MP Materials’ Mountain Pass, the only rare earth mine in the US, exports to China.

As for cobalt, Chinese entities own or have stakes in nearly all producing mines in the Democratic Republic of Congo, which produces over 70% of the world’s cobalt supplies.

Diversifying supply

President Biden’s efforts to build a critical minerals supply chain go beyond implementing tariffs and handing out subsidies.

The US government has been building trade agreements with countries such as Canada, Japan and Australia and a literal railway to export metals from Central Africa’s Copperbelt – the $2.3 billion Lobito corridor linking Congo, Zambia and Angola.

It has also been negotiating a critical minerals agreement with the EU and recently entered talks with Brazil. The South American country is a partner of China through Brics, but the US Embassy in Brasilia reckons “the IRA will likely increase demand for Brazil’s minerals and has already sparked partnerships between Brazilian and US firms.”

The US is also part of the Minerals Security Partnership, an initiative of 14 countries and the EU to boost public and private investment in global critical minerals supply chains. 

Moreover, foreign companies can benefit from the IRA as, by 2027, 80% of the value of critical minerals in an EV battery must be mined, processed, or recycled in North America, or mined or processed in countries with a free trade agreement with the US.

This means the tariffs should make certain imports more price-competitive than the usual cheap Chinese products, opening up new avenues for trade.

“Traditionally Australian manganese ores are destined for consumption in the Asian steel industry,” says Australian miner Element 25, which is building a refinery in Louisiana. “The new tariffs provide an opportunity to Australian producers to develop supply chains into the US for both traditional steel markets and the fast-growing EV battery supply chain.”

According to Ascend Elements, a company that recycles lithium-ion batteries, the tariffs will have “a generally positive impact” on the battery recycling industry. 

Yet, amid potentially positive effects, there is also the risk of Chinese retaliation, such as export restrictions or bans.

“These are likely to be on processing and refining technology to kneecap US ambitions to beneficiate more critical minerals domestically, creating a larger gap between Chinese technological prowess as US companies need to go back to the drawing board, test, pilot and commercialise processes and equipment,” warns Pilch. 

These countermeasures could raise prices for the US downstream sector and, ultimately, EV buyers.

“On the flip side, the tariffs send a strong signal to the downstream to diversify, to investors to bet on America and projects from aligned nations, and to miners to develop domestic projects,” adds Pilch, stressing that this shift will take time. Whether the 18 months between now and 2026 are enough to find alternative supplies of permanent magnets and natural graphite remains to be seen.