US targets China rare earth magnets for possible tariffs

The Biden administration is considering an investigation into whether imports of rare earth magnets made largely in China pose a national security threat that could warrant the imposition of tariffs.

The White House said the commerce department would examine whether to probe neodymium magnets, which are used to manufacture everything from smartphones to electric vehicle motors.

President Joe Biden is considering the move as part of measures the White House unveiled on Tuesday to boost the resilience of US supply chains in areas including rare earths, food and pharmaceuticals amid concerns about over-reliance on China.

The administration will decide whether to investigate the national security implications of neodymium magnet imports under Section 232 of a 1962 trade law, which was rarely used until former president Donald Trump employed it to justify tariffs on steel and aluminium imports from US allies.

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

Washington has grown increasingly concerned about China’s dominance in rare earths, 17 metallic elements that are used to manufacture commercial goods such as computer hard drives and military products such as radar, sonar and precision-guided missiles.

The Financial Times reported in February that China was considering limiting the export of rare earths used to produce F-35 fighter jets.

“We’re quite dependent on imports, particularly from China, of neodymium rare earth magnets. Section 232 is another tool we could take to help . . . reduce our dependency,” said a senior US official.

“We’re not looking to wage trade wars with our allies and partners,” the official added.

When Biden ordered the review of supply chains, he put the priority on semiconductors, rare earths, pharmaceuticals and electric vehicle batteries.

Officials said the administration would use the Defense Production Act — a 1950 Korean war-era law that allows the US to compel industry to prioritise government contracts to aid national security — to return the production of 50-100 critical drugs from overseas.

The energy department plans to release a 10-year plan to develop a domestic supply chain for lithium batteries, which are critical for electric vehicles, and will immediately use $17bn in lending facilities to support that effort. The agriculture department will separately commit $4bn to help strengthen and diversify US food supply chains.

Biden will also try to host a forum with allies to boost supply chain co-operation. He is also expected to discuss the issue at an EU-US summit next week in Brussels following the G7 meeting in Cornwall.

The official said the administration would also create a “trade strike force” led by Katherine Tai, the US trade representative, that would propose enforcement actions against countries engaged in unfair trade practices that erode the resilience of US supply chains.

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