U.S. leaves rare earths, critical minerals off China tariff list

BEIJING (Reuters) - The United States has again decided not to impose tariffs on rare earths and other critical minerals from China, underscoring its reliance on the Asian nation for a group of materials used in everything from consumer electronics to military equipment.

FILE PHOTO: Chinese staffers adjust U.S. and Chinese flags before the opening session of trade negotiations between U.S. and Chinese trade representatives at the Diaoyutai State Guesthouse in Beijing, Feb. 14, 2019. Mark Schiefelbein/Pool via REUTERS/Files

The minerals are set to be among the few items spared from U.S. tariffs in an escalating trade war with China, which is by far the world’s biggest producer of rare earths.

Beijing, however, is set to raise tariffs on around $60 billion in U.S. goods, including rare earth ores, hitting back at a tariff hike by Washington on $200 billion of Chinese goods in the bitter trade dispute.

The office of U.S. Trade Representative Robert Lighthizer also on Monday released a list of further Chinese goods, worth around $300 billion annually, that have been earmarked for a 25 percent tariff. Lighthizer on Friday said this next round of tariffs would cover “essentially all remaining imports from China” not yet hit by tariffs.

The list, which is open for public comments until June 17, does not include rare earth materials and other critical minerals, and also excludes pharmaceuticals and select medical goods, the document said.

“These materials are critical to U.S. industry and defense, and with nowhere else to turn for supplies in the near-term, the tariffs would invoke more suffering on U.S. end-users than China,” said Ryan Castilloux, managing director of consultancy Adamas Intelligence, in an e-mail.

In July last year, the U.S. Trade Representative office included rare earths on a provisional list of tariffs on Chinese goods, only to remove it later from the final list.

The United States “won’t be unable to find a replacement in the short term ... so if they want to tax rare earth products that would make it worse for themselves,” said an analyst at stake-backed Chinese research house Antaike, who asked not to be named.

Rare earths were in a list of 35 minerals deemed critical to U.S. security and economic prosperity published one year ago. Most of these 35 minerals are now subject to the U.S. tariffs on Chinese goods, but rare earths, antimony - used in batteries and flame retardant - helium and natural graphite are not.

Cesium and rubidium, used in research and development and neither of which are mined in the United States, are also spared, as are fluorspar, used to make gasoline, steel and uranium fuel.

Beijing said on Monday it would raise tariffs on U.S. rare earth metal ores from 10 percent to 25 percent from June 1, making it less economical to process the material in China.

The 10 percent tariff still left a profit for the processors, but the higher 25 percent rate will be “quite hard to bear,” the Antaike analyst said.

Reporting by Tom Daly; Editing by Tom Hogue