US policy to increase mineral production must include revisiting tariffs

Regarding specifics, the US government should impose different tariff rates for mined minerals (e.g., ores, concentrates) and refined minerals (e.g., metals, chemicals). The US government should also use tariff rate quotas and phase in the tariffs over two tranches to moderate the price shocks on downstream US firms, allowing time for them to adapt their supply chains and for upstream mineral companies to expand existing US mines and refineries and to develop new US mines and refineries.

A tariff rate quota allows a specific volume of goods to be imported at lower tariff rates during the quota period; after the quota is met—that is, after the quota period—higher tariff rates apply. During the quota period, the US government should impose lower tariff rates on mineral imports with the most resilient supply chains. Evaluations of import resilience should consider factors like jurisdictional risks and shipping routes to the United States, with the corresponding tariff rates incentivizing imports with the most resilient supply chains. For example, during the quota period, minerals produced in Canada would face the lowest tariff rates given Canada’s low jurisdictional risks and its proximity and overland shipping routes to the United States, while minerals in China would face the highest tariff rates given the risks of Chinese export controls. After a quota is met, a higher tariff would apply that makes all imports of the mineral cost-prohibitive.

For the first tranche of tariffs seeking to increase US mining, the US government should impose tariff rate quotas on imports of ore and concentrate. The US government could use the following formula to calculate the volume of ore and concentrate that can enter the United States annually at tariff rates based on the import resilience evaluations: US consumption of ore and concentrate – US production of ore and concentrate. The difference is ostensibly the United States’ reliance on imported ore and concentrate. For example, with titanium mineral concentrates, if the United States consumed 900,000 metric tons and produced 100,000 metric tons in one year, the US government would allow 800,000 metric tons of imported titanium mineral concentrates to enter the United States the next year at lower tariff rates based on the import resilience evaluations. After 800,000 metric tons of imports, higher tariff rates would trigger making the imports cost-prohibitive.

The second tranche of tariffs on mined minerals would replace the first tranche of tariffs, and they would be imposed three years after the imposition of the first tranche, with the tariff rate quotas updated annually thereafter. The tariff rate quota formula for this tranche could be the following: US consumption of concentrate and ore – (US production of ore and concentrate + reserves). For instance, with titanium mineral concentrates, if the United States consumed 800,000 metric tons, produced 200,000 metric tons, and had reserves—which are economically recoverable deposits—of 2 million metric tons one year, the United States theoretically has adequate production and reserves of titanium mineral concentrates to meet US consumption the following year. Therefore, the US government would impose second-tranche tariffs making all imports of titanium mineral concentrates cost-prohibitive.

Importantly, the three-year phase-in period is practically four years as it takes about a year from initiating the investigation to imposing the tariffs. This four-year period would allow time to expand some operational mines and build several new mines that target existing reserves. Because reserves are generally verified at the feasibility study stage, prior mine development steps like extensive exploration are often unnecessary, shortening the estimated mine development timeline to the period from the conclusion of the feasibility study to the conclusion of the mine construction, which is about six years for a hypothetical medium-sized mining project. This timeline can be shorter or longer based on the individual project and permitting efficiency. For example, Jervois concluded the feasibility study for its Idaho Cobalt Operation in January 2020, and before it suspended final construction due to low cobalt prices, it forecasted production of its first concentrate to occur in mid-2023, giving it a 3.5-year development timeline after the conclusion of the feasibility study.

Next, with the first tranche of tariffs aiming to increase US mineral refining, the US government should impose tariff rate quotas on refined minerals, which include metals and metal-based chemicals. The US government could use the following formula to calculate the volume of refined minerals that can enter the United States annually at tariff rates based on the import resilience evaluations: US consumption of metals and chemicals – US production of metals and chemicals. The difference is the United States’ reliance on imported metals and chemicals. For instance, with refined zinc, if the United States consumed 908,000 metric tons and produced 220,000 metric tons one year, 688,000 metric tons of refined zinc would be allowed to enter the United States the following year at lower tariff rates based on the import resilience evaluations. After importing 688,000 metric tons, higher tariffs would trigger, making imports of refined zinc cost-prohibitive.

The second tranche of tariffs on refined minerals would replace the first tranche of tariffs, and they would be imposed two years after the first tranche, with the tariff rate quotas updated annually thereafter. To encourage self-sufficiency in mineral refining, this second tranche should make all imports of refined minerals cost-prohibitive. The US government can adopt high tariffs that heavily disincentivize imports because refining—unlike mining—is not constrained by geology. To illustrate, China in 2022 only had about 2%of global cobalt reserves and about 1% of global cobalt mining; however, it had about 75% of cobalt refining. Thus, the US government can rationally impose second-tranche tariffs that seek to make the United States largely self-sufficient in mineral refining.

The two-year phase-in for tariffs on refined minerals is essentially three years given the one-year timeline from initiating the import investigation to imposing the tariffs. The phase-in period is shorter for tariffs on refined minerals than mined minerals as it takes less time to expand or build a refinery than a mine. This effectively three-year period would also allow time to expand existing refineries and build new refineries. For example, Benchmark Mineral Intelligence estimates that the timeline for building a lithium refinery is two years. As another example, Syrah estimates that the expansion of its Louisiana plant that produces graphite-based active anode material will take about three years from a final investment decision to first commissioning.

Importantly, during the quota period for both the tariffs targeting mined minerals and the tariffs targeting refined minerals, the US government should impose countervailing duties on imports of minerals produced by Chinese companies outside China, like Indonesia. Countervailing duties are tariffs that offset subsidies received by foreign mineral producers. These duties would prevent overseas Chinese mineral producers—which often receive government subsidies, such as concessional financing from state-owned development and commercial banks—from circumventing higher tariffs imposed on mineral imports from China during the quota period. To illustrate how the countervailing duties would work, during the quota period, tariffs on minerals imported from Indonesia would face lower baseline tariffs than minerals imported from China, but imports of minerals produced by Chinese companies in Indonesia would also face countervailing duties.

Lastly, if the US government seeks to maximize the effectiveness of the mineral tariffs, it should deny product exclusions and countrywide exemptions from the tariffs. Product exclusions would exempt certain mineral imports from the mineral tariffs, while countrywide exemptions would exempt all the mineral imports from certain countries from the mineral tariffs. Such exclusions and exemptions would undermine the aim of the mineral tariffs, which is to limit mineral imports. For instance, with the Section 232 steel tariffs, Benjamin Blase Caryl, associate general counsel at US Steel, estimates that only 15% of US steel imports year-to-date had been subject to the Section 232 tariffs due to product exclusions and countrywide exemptions. Additionally, the multiyear phase-in periods give firms in the United States time to adapt their supply chains to moderate the price effects of the tariffs, precluding the need for special exclusions and exemptions.

Yet, there are counterarguments to this draft tariff policy. The first counterargument is that the tariff phase-in period is not long enough for companies to build new mining capacity in the United States. However, the practically four-year phase-in period considers the timeline to extract existing reserves, which are usually verified at the feasibility study stage, obviating the need for many more years of extensive exploration and further studies. Indeed, after exploration and the necessary studies, the average timeline to render a construction decision, build, and start up a mine was 3.8 years, according to an S&P Global study on 127 global mines that entered production between 2002 and 2023. For the three US mines assessed in the study, it took 4.3 years to render a construction decision, build, and start up the mines. Thus, commissioning new mining capacity in the United States in an essentially four-year period is possible. As Matt Michael noted in August 2024, “Based on all the effort that went in the last two, three years with exploration and projects being curtailed…supply would be able to come on a lot quicker from newer operations and scale-ups….”

Furthermore, the relatively short phase-in periods for the tariffs on both mined and refined minerals make implementing them politically feasible: a presidential administration in one term can initiate a Section 232 investigation at the start of the term, conclude the investigation, impose the first tranche of tariffs, and impose the second tranche of tariffs before the conclusion of the term.

The second counterargument is that US firms will still rely heavily on mineral imports when the US government imposes the second tranche of tariffs, which—if prohibitively high—could seriously disrupt industrial production and profitability. However, in addition to incentivizing domestic mineral production, the high prices of mineral imports should incentivize domestic mineral recycling and mineral substitution, including with cheaper, domestically produced minerals. For example, high prices of platinum group metals have driven high recycling rates of the metals, like from automobile catalytic converters, and the higher price of cobalt versus nickel has led to increased substitution of cobalt with nickel in electric vehicle batteries. The impending risk of high prices for imported minerals should encourage mineral consumers in the United States to source domestic minerals, to recycle minerals, and to find mineral substitutes.

Both a future Harris administration and a future Trump Administration seem to have accepted tariffs as a part of US minerals policy. If either presidential administration wants to use tariffs to increase US mineral production, the most effective tariff policy would impose tariff rates that maximize reserve extraction and target refining self-sufficiency in the United States. Importantly, the US government should use tariff rate quotas and phase in the tariffs to moderate the price shocks on downstream US firms, allowing time for them to adapt their supply chains and for upstream mineral companies to expand existing US mines and refineries and to develop new US mines and refineries. This draft tariff policy—especially when combined with streamlined permitting, grants for mineral exploration, and concessional loans for mine development, expansion, and refining facilities—would help increase US mineral production.

Gregory Wischer is a non-resident fellow at the Payne Institute for Public Policy at the Colorado School of Mines. He is also a non-resident fellow at the Northern Australia Strategic Policy Centre at the Australian Strategic Policy Institute.