Trump opts for trade talks over mineral tariffs

U.S. President Donald Trump is choosing trade talks with price floors rather than imposing new tariffs on critical mineral imports after a government probe found the lack of supplies affects national security.

The move in a new executive order sent prices for copper and silver lower late Wednesday as metals traders considered the administration’s approach. The industry last year expected the White House to impose tariffs on copper because of the so-called Section 232 investigation, with domestic companies amassing stockpiles of the plumbing and wiring metal.

The new order doesn’t rule out tariffs but appears to “kick the can” down the road as the administration awaits a Supreme Court decision on the legality of Trump’s widespread “Liberation Day” tariffs last April, BMO Capital Markets analysts said in a note on Thursday.

“This represents somewhat of “placeholder” and maintains the optionality of import tariffs in the future,” Helen Amos and George Heppel said. “As expected, we are seeing a reactionary sell-off on this news, silver especially, but as Trump has not categorically ruled out tariffs, we would expect this to be transient.”

Trade talks

Trump issued a new executive order on Wednesday authorizing Secretary of Commerce Howard Lutnick and U.S. Trade Representative Jamieson Greer to start negotiations that would improve supplies of rare earths, lithium, cobalt, uranium and other processed critical minerals and their derivative products (PCMDPs).

Lutnick’s probe under Section 232 of the Trade Expansion Act of 1962 found the U.S. is totally reliant on imports for 12 critical minerals and taps foreign supplies for more than half of its needs in 29 others. The president is only acting now on the Secretary’s report, which was filed in October.

“I determine that it is necessary and appropriate to enter into negotiations with trading partners to adjust the imports of PCMDPs so that such imports will not threaten to impair the national security of the United States,” Trump says in the order. “In negotiating, the Secretary and the Trade Representative should consider price floors for trade in critical minerals and other trade-restricting measures.”

The order outlined how the U.S. lacks mineral processing capability even where it has domestic mining for elements such as cobalt, nickel and rare earths. These minerals have to be exported and re-imported after refining for use in industry and defence. The U.S. also lacks supply chain security and must contend with varying prices.

“Mining a mineral domestically does not safeguard the national security of the United States if the United States remains dependent on a foreign country for the processing of that mineral,” according to the order. “Supply disruptions can still expose important sectors — such as defence, aerospace, telecommunications, and transportation — to serious risk.”