President Trump’s re-election on 6 November 2024 - and the Republican Party’s control of the US Senate - has caused a ripple effect throughout global commodities markets, and will undoubtedly have broader repercussions for the energy and resources sectors. In this article, we take a look at what might be in store for critical minerals under the Trump administration.
Pre-election commitments: Critical minerals firmly on the agenda
Going into the 2024 election, both Donald Trump and Kamala Harris pledged their support for mining and recognised critical minerals’ strategic importance for energy transition and national security. Both candidates also focused on the continued ‘decoupling’ from China – though each favoured vastly different methods.
The areas we’ll be watching closely as Trump takes office broadly fall into these categories:
- ‘Decoupling’ from China and reliance on foreign supply chains
- Expedited permitting and reduced environmental regulation
- Changes to the Inflation Reduction Act and other legislation
'Decoupling' from China and reliance on foreign supply chains
China’s dominance in critical mineral supply chains has attracted global interest, with some 80 per cent of critical mineral supply chains estimated to run through the region1. It is unsurprising that many nations, such as the US, Australia, and the EU, have sought to shore up domestic production of these materials to ensure security of supply.
Trump’s approach to ‘decoupling’ from China takes a more hardline approach to tariffs than we’ve seen under the Biden administration, proposing 10 to 20 per cent baseline global tariffs, and 60 per cent – or higher – tariffs on Chinese imports. As at the date of this article, Citi analysts estimated that a 60 per cent tariff could push down China’s GDP by up to 2.4%.
There are currently mixed views on how tariff increases will unfold, not only given China’s potential pushback, but also factoring in the risk of ‘stagflation’ (i.e. stagnant economic growth and high inflation), and supply chain disruptions.
Beyond China, in contrast with Harris’ ‘friendshoring’ approach to critical minerals on the campaign trail, Trump is expected to prioritise reshoring. It’s uncertain exactly what this would mean for critical minerals group alliances like the US-led Minerals Security Partnership. While these alliances would likely still move forward to some extent, they may take a backseat to policy measures focused on domestic mineral production – that is, a focus on building mines, processing facilities and refineries in the US; and pursuing policies that would streamline permitting to incentivise domestic mineral production.
This focus is unsurprising based on Trump’s previous policies directed at the critical minerals sector. In his first term, Trump issued two Executive Orders about critical minerals:
- The first, in 2017, called agencies across the federal government to develop a strategy to reduce the Nation’s susceptibility to critical mineral supply disruptions.
- The second, in 2020, declared a National Emergency in the mining industry aimed at cutting the country’s dependence on China and strengthening the US Supply Chain.2
While these policies may support domestic critical minerals production in the US, producers of critical minerals in other countries, such as Australia, may suffer as a result.
Expedited permitting and reduced environmental regulation
Trump is also expected to have a strong focus on reducing bureaucracy and rolling back environmental regulations in the mining sector, given his vocal support of domestic mining. During the campaign trail, Trump promised to overturn a 20-year moratorium on mining in north Minnesota. This stance could see mining permits being granted more often and mines entering the production stage faster.
Earlier this year, it was reported that the US has the second longest lead times in the world for developing critical mineral mining projects, taking an average of 29 years from discovery to production3. Complexity around the permitting process was identified as one of the key challenges.
The decreased regulation in the mining sector overall will likely make it easier for domestic critical minerals producers to commence or expand operations.
Changes to the Inflation Reduction Act and other legislation
Prior to the election, Trump vowed to repeal the Biden administration’s Inflation Reduction Act (IRA).
A full repeal is unlikely – particularly given 80 per cent of IRA investments have been made into Red States – however we may see the removal of certain provisions like the $7,500 tax credits for EVs, and a diversion of the green subsidies made under the IRA to other priorities.
Today, we're also likely to see the House voting on two energy-focused bills, including one that would see copper added to the federal critical minerals list. H.R. 8446, the Critical Minerals Consistency Act of 2024, would amend the Energy Act of 2020 to ensure that all critical materials designated by the Department of Energy (DOE) are included in the US Geological Survey (USGS) critical minerals list. This could change the trajectory for the five materials that are not currently on the USGS list:
- Copper
- Electrical steel
- Fluorine
- Silicon
- Silicon carbide
The USGS critical minerals list offers more extensive benefits than the DOE list - like tax credits, faster permitting, and financing support. Should the above go through, this would be great news for US copper mining.
Ultimately, while the Trump administration’s focus on fossil fuels (and the diversion of IRA funding) could be detrimental to the critical minerals sector, and felt most acutely by junior miners, other policy measures outlined above could well mitigate any negative impacts.
Conclusions
The election of Trump for a second term is likely to see a strong focus on domestic production of critical minerals in the US, with increased tariffs, particularly directed at Chinese producers, as well as reduced regulations in the mining sector to support domestic production. This focus on domestic production is likely to benefit US critical minerals producers – and foreign companies with a foothold in the US – but producers in Australia and EU who rely on exporting to the US may suffer.
We will continue to monitor developments closely in this space. To understand how you may be affected as the landscape evolves, please reach out to us.
References
- ‘Remarks at the U.S. Chamber of Commerce’s Critical Minerals Summit’ at https://www.state.gov/remarks-at-the-u-s-chamber-of-commerces-critical-minerals-summit/
- See: https://www.defensenews.com/congress/2020/10/01/trump-executive-order-on-rare-earths-puts-material-risk-in-spotlight/ and https://www.doi.gov/pressreleases/trump-administration-announces-strategy-strengthen-americas-economy-defense
- See S&P Global report, “Mine development times: The US in perspective” at https://cdn.ihsmarkit.com/www/pdf/0724/SPGlobal_NMA_DevelopmentTimesUSinPerspective_June_2024.pdf
Disclaimer
The articles published on this website, current at the dates of publication set out above, are for reference purposes only. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action.