US probe mulls 'critical' minerals tariffs, but analysts flag concerns

The US will not be able to quickly build up processing capacity for a slew of critical metals and minerals if President Donald Trump's administration pursues trade barriers through a new national security probe, some analysts told Platts, part of S&P Global Commodity Insights.

On April 15, the Trump administration announced a wide-ranging investigation under Section 232 of the Trade Expansion Act of 1962 to assess risks to supply chains of processed metals and minerals that the government has deemed critical. These include uranium, aluminum, nickel, cobalt, lithium, graphite and 17 rare earths that are on government lists of "critical" minerals.

The national security probe raises the prospect of fresh policies, including tariffs, that could target more metals. However, some analysts doubted the administration could easily and effectively reshore production capacity through trade barriers and said the administration needs to shore up supply chains that depend on foreign products.

"The US will have to pay up and form alliances to be able to source the critical metals they need ... They are at least 30 years behind China on that front," said David Davidson, an analyst at Paradigm Capital.

Global supply chains

US reliance on imports runs deep for many metals and minerals. In 2024, the extent of US dependence on imports to cover its metal needs included: 80% for rare earths and rare earth compounds, 45% for copper, 48% for nickel, 47% for aluminum and more than 50% for lithium, according to US Geological Survey estimates.

US administrations past and present have sought to lessen that dependence, citing national security risks. US imports of some materials including aluminum, steel and other metal-intensive items such as lithium batteries already face tariffs.

Trump exempted many materials and other products from a 10% global tariff and 145% tariffs on China. However, products on the exemptions list, including lumber, semiconductors and a swath of metals, were still expected to see targeted trade measures or at least greater scrutiny.

Now, many of those metals and metal products face an investigation that could lead to recommendations for trade measures such as tariffs, which the Trump administration has leaned on heavily as part of a broader strategy to try to boost US manufacturing. The US already launched a national security probe into copper imports on Feb. 25.

"For the [US] to manufacture derivative products, it must have ready access to an affordable, resilient, and sustainable supply of processed critical minerals," Trump's executive order on April 15 stated.

"Simultaneously, a resilient and sustainable manufacturing base for derivative products is vital to creating a stable demand base for processed critical minerals. Both must coexist to ensure economic stability and national security," the order said.

As added justification for the latest Section 232 investigation, Trump claimed the US relied too much on a narrow set of regions for supply, amplifying "the risks posed by geopolitical instability and regional disruptions."

But some analysts said that, if the fresh national security probe led to more tariffs on metals and minerals, it could do more damage than good.

"Tariffs might make more sense if we had a relatively self-sufficient supply chain in operation, but right now the tariffs are just a really bad idea," said Chris Berry, founder and president of House Mountain Partners, a battery metals investment consultancy.

Berry said that it could make sense to have nuanced tariffs targeting specific materials while balancing the need for domestic industry to remain cost-competitive in industries that typically have global supply chains.

"I'm not sure the administration could thread the needle," Berry said.

Tariffs, if they come, would make materials more expensive for US buyers. This can send inflation rippling through downstream industries that rely on raw materials and processed products. Further, trade barriers may not quickly address the lack of US capacity, analysts said.

"It will take many years to scale up to a point when a US detachment from China wouldn't cause significant disruption to the current international supply chain structure," David Merriman, a research director at the Project Blue critical minerals consultancy, said in an email.

On the related Section 232 copper investigation, the US Chamber of Commerce has recommended that the US pursue "pragmatic" policies. That includes focusing on domestic processing and working with allies and trading partners with which it has free trade agreements.

Still, more tariffs could give some domestic metal producers a boost.

"It can only be seen as a positive" for US miners of some of the targeted materials, Davidson said. "To shift to alternative sources, the US will probably have to be prepared to accept the reality of two-tier pricing as we are currently seeing in copper and aluminum."

However, analysts including Davidson warned that the broader impact of tariffs may be recession and demand destruction, which could eventually weigh on metal prices.

The White House press office responded to a request for comment by deferring to the April 15 executive order.

Canada impact muted

Canada is among key US markets for metals and was the top source of metals and mineral imports in 2023, accounting for 18.6% of imports that year, according to the US International Trade Commission. It was followed by China at 11.2%.

The Mining Association of Canada said it was not overly concerned by the latest executive order, as the order looked to target countries such as China more than others, given the focus on rare earths and processed metals and minerals.

"This one doesn't concern as much as the one on copper," Pierre Gratton, president and CEO of the Mining Association of Canada, said in an interview.

For Canada, the copper executive order is a bigger issue because of the more integrated markets for the metal, including recycling and smelting.

In targeting processed metals and minerals, the April 15 executive order appeared to leave many metals and minerals on the exemption list, especially less refined materials including some ores. Some analysts have said the US should leave those untouched to hold down raw material costs and bolster domestic processing.

Trump gave Howard Lutnick, the Secretary of Commerce, 180 days to produce recommendations. These could include doing nothing or imposing tariffs and other policies such as industry incentives.