US considers new tariffs on Chinese rare earth imports

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The US Department of Commerce is set to investigate whether imports of Chinese rare earth imports pose a national security threat.

The US is considering whether to impose new tariffs on the import of rare earth materials from China as part of a review of critical supply chains.

According to the Financial Times (FT), the White House has asked the Department of Commerce to investigate whether neodymium magnets - used in the manufacturing of a wide range of goods from smartphones to electric vehicle motors - poses a national security issue.

It quoted a senior US official as noting that, while Joe Biden's administration does not want to wage trade wars with allies and partners, it is concerned about how dependent the country is on rare earth imports from China.

If the investigation does conclude there are national security issues related to the import of these goods, tariffs could be imposed under Section 232 of the 1962 Trade Expansion Act. This is the same legislation that former president Donald Trump used to add duties to the import of steel and aluminum from the EU in 2018.

Martijn Rasser, a technology expert at the Center for a New American Security in Washington, told the FT: "In the case of neodymium magnets, those tariffs would be directed squarely at China, which dominates their manufacture. If the tariffs are high enough, that could provide financial incentives to build up a US domestic industry.”

Demand for rare earth magnets is set to increase from around 130,000 tonnes a year to 270,000 tonnes by 2030, especially for use in sectors such as electric vehicles.

At present, around 88 percent of magnets for use in EV motors come from China, with Japan being the next-largest producer.