Trump’s Tariffs on China are Backfiring for the U.S. Energy Industry

On April 4, the Chinese government announced restrictions on rare earth exports, putting several global manufacturing industries at risk.

The restrictions are part of a broader retaliatory response by China to President Trump’s tariffs on U.S. imports, instituted days before. Trump’s taxes on Chinese imports, sitting at 145%, are significantly higher than other countries, which are now facing a blanket 10% tariff. China responded with a 125% tax on U.S. products, igniting a massive trade war.

China dominates the production of many critical minerals, including lithium, cobalt, and nickel, which are used for rechargeable batteries that fuel electric vehicles and backup energy grid storage. China is also responsible for making 90% of rare earth magnets, products of rare earth metals, that are used for many kinds of electric motors and are therefore critical for auto, aerospace, semiconductor, and military manufacturing.

This could have serious ramifications for the global clean energy transition. Rare earth elements and critical minerals are vital for several clean energy technologies such as wind turbines and electric vehicles. Renewable energy technologies rely more on these minerals than current energy resources, meaning that without access to them, we risk backpedaling in the clean energy transition. And since China’s rare earth export restrictions apply to all countries, not just the U.S., renewable energy leaders worldwide will be hit and the impacts will be even greater.

Chinese control extends beyond manufacturing alone; Chinese companies also hold major stakes in mineral-rich countries like Indonesia, the Democratic Republic of Congo, and Zimbabwe.

Rare earth elements are difficult to extract and refine, and the U.S. only has one operational rare earth mine. As a result, U.S. companies have been forced to stockpile rare earth materials, and shortages will likely begin in the upcoming months if China’s restrictions continue.

Companies can theoretically acquire special licenses to import rare earth metals and magnets, but China has been slow in instituting a process for license distribution. It is unclear whether U.S. companies who need them will be able to acquire these licenses.

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