Economist Delves into Trump Tariffs and Critical Minerals

Highlights

• President Trump imposes 10% tariff on Chinese imports, prompting retaliatory measures from China, including export controls on rare metals.
• CSIS consultants warn that tariffs on North American trade partners could increase manufacturing costs, fuel inflation, and potentially harm domestic industries.
• The strategic use of tariffs raises questions about long-term economic security and potential unintended consequences in global trade relationships.

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In response to President Trump’s recent imposition of a 10% tariff on Chinese imports, President Xi Jinping has swiftly retaliated by implementing new tariffs and designating several rare metals as controlled exports, granting him the authority to halt shipments to the United States at will. This move highlights a fundamental contrast between American and Chinese economic power: while the U.S. leverages its purchasing capacity and dominance in global finance, China’s emerging coercive strength lies in its control over critical supply chains as reported by The Economist (opens in a new tab).

According to consultant Gracelin Baskaran, PhD (opens in a new tab) and Meredith Schwartz (opens in a new tab) of the Centre for Strategic and International Studies (opens in a new tab) (CSIS), addressing rising US/China friction and potential implications for mineral supply chains stated “In terms of strengthening military preparedness, China is operating in a wartime posture while the United States is operating in a peacetime posture,” which makes some significant assumptions. The consultants declared “Bans on vital mineral inputs will only further allow China to outpace the United States.”

According to CSIS on the recent Trump tariffs targeting Canada, Mexico, and China risk disrupting U.S. supply chains, increasing costs for businesses and consumers, and straining key economic alliances. The consultants argue that, invoking emergency economic powers, Trump aims to bolster domestic industries and pressure trade partners on issues like fentanyl smuggling, but the strategy comes with significant risks.

For example, tariffs on North American trade partners will drive up costs in automotive manufacturing, energy, and critical minerals, sectors heavily reliant on cross-border trade. The added costs could fuel inflation and lead to job losses, particularly in industries that depend on integrated supply chains with Canada and Mexico.

The consultants suggest that tariffs can serve as a tool for economic protectionism; their broad application to critical trade partners risks harming the very industries they aim to protect. Is it the case that the very act of strengthening America’s economic security could exacerbate inflation, strain diplomatic ties, and reduce U.S. leverage in global trade disputes in the field of critical mineral and rare earth dynamics? 

The question remains: will this move yield long-term gains, or is it a costly miscalculation?