A new executive order cites national security concerns to assess potential market distortions.
By Víctor Guillou
The U.S. economy’s high dependence on China for processing and refining may be driving the move, with potential implications for companies like SQM and Albemarle.
The trade war entered a new phase on Wednesday after U.S. President Donald Trump signed an executive order directing the Department of Commerce to launch an investigation into the potential economic impacts and possible market distortions involving a group of critical minerals, including lithium. The action, invoked under Section 232 of the Trade Expansion Act of 1962, cites national security concerns due to the U.S. economy’s significant reliance on these materials—particularly given that China controls roughly 80% of global processing and refining capacity for such products.
“This investigation will evaluate supply chain vulnerabilities, the economic impact of foreign market distortions, and potential trade remedies to ensure a secure and sustainable domestic supply of these essential materials,” the White House said in a statement.
According to a 2023 assessment by the U.S. Department of Energy, critical minerals include 23 materials, such as lithium, uranium, nickel, and 17 rare earth elements. The report classified the supply of seven of these minerals as critical in the short term (2020–2025) and 14 as medium-term priorities (2025–2035), reflecting the growing demand from the world’s largest economy.
The move adds further pressure to a market already under strain, as China—currently the world’s top producer of these minerals—announced this week a suspension of rare earth exports to the United States.
Downward Pressure on Prices
For Juan Carlos Guajardo, Executive Director of mining consultancy Plusmining, the announcement
marks “an escalation in the trade war between the U.S. and China, especially since these products had
previously been excluded from the Liberation Day tariffs.”
“This signals that the U.S. is paying special attention to raw materials critical to cutting-edge industries
and defense, with the goal of reducing dependence on potentially hostile foreign powers,” he added.
Guajardo noted that China’s dominant control over critical mineral supply chains represents “a strategic disadvantage for the U.S.” and argued that American interest in Greenland, proposed agreements with Ukraine, and even talks around annexation scenarios involving Canada could ultimately aim to secure rare earth supplies.
“China has identified a vulnerability in the U.S. raw material supply chain and is exploiting it as a countermeasure in the ongoing trade war,” he emphasized.
However, price impacts across commodities remain a matter of debate. Juan Cristóbal Ciudad, Head of Market Analysis at Plusmining, observed that since lithium and rare earths are not traded on formal commodity exchanges, “the market has yet to show a clear price reaction, unlike what we saw with copper.” “Nonetheless, in the short term, we may see a similar dynamic for minerals where the U.S. faces supply deficits: increased imports to build precautionary stockpiles, potentially pushing prices upward,” he added.
Juan Ignacio Guzmán, CEO of GEM Mining Consulting, believes that the lithium market was more concerned about tariffs on electric vehicles than on lithium itself. “Mutual restrictions on EV exports between the U.S. and China have already led to decreased demand for lithium and, consequently, falling prices,” he explained.
“It’s very likely that lithium prices will not recover in the coming months. If the trade war continues and EV demand keeps dropping, prices could fall further, potentially returning to pre-COVID levels of around US$5,000 to US$6,000 per tonne,” Guzmán said.
Even so, Guzmán questioned the logic behind the U.S. decision, given its dependency on Chinese production. “Imposing tariffs on Chinese imports could simply lead to rare earth shortages within the U.S., undermining the country’s ability to manufacture critical defense and tech equipment,” he stated.
“China’s suspension of exports is undoubtedly a major blow to the U.S. economy and to Trump’s high- tariff strategy. It would take considerable time for the U.S. to either ramp up domestic production or source rare earths from alternative suppliers,” he concluded.
Companies Assessing the Impact
Disruptions in the global lithium market could affect the only two producers operating in Chile: privately held SQM and U.S.-based Albemarle. Both operate in the Atacama Salt Flat and are among the world’s top lithium producers.
When contacted, only SQM responded, stating that it was “analyzing the details of the announcement.” The company noted that “less than 10% of our total 2024 sales were to the U.S., most of which were iodine and potassium nitrate (for agricultural and industrial use).” Albemarle declined to comment.
Source: La Tercera