I. The U.S. top-up tariffs are very likely to reduce China’s mineral exports.

　　Following the U.S. proposal on July 11 to impose an additional 10% import tariff on China, another $200 billion worth of Chinese goods has now found itself in jeopardy. The list provided by the U.S. Trade Representative includes mineral resources used in construction, defense, power generation, and chemical applications (including batteries). We believe this move is highly likely to increase the cost of China’s mineral exports—from iron ore to molybdenum and refined copper—leading U.S. buyers to seek alternative, cheaper sources of supply and thereby reducing China’s export volumes.

　　For U.S. domestic mining, this presents an opportunity to expand production and increase investment in mining operations and capacity expansion. China has already been supplying nearly half of the world’s total volume of key commodities, such as steel, iron ore, primary aluminum, copper, zinc, tin, and vanadium.

　　II. The U.S. share of global mineral production will show a catching-up trend.

　　The United States’ share of global mineral production is likely to increase and close in on China’s, particularly in commodities such as copper. This trend will become even more pronounced if China fails to mitigate the escalating impact of the trade war triggered by the Trump administration—specifically, if it cannot shift its mineral export destinations toward non-U.S. markets, thereby leading to a decline in metal production. In the minerals industry, China’s supply market has consistently been the one facing the greatest risks: as the world’s largest producer of numerous minerals—including rare earth elements (81% of global supply in 2017), antimony (73%), vanadium (54%), lead (51%), molybdenum (45%), zinc (39%), and tin (34%)—China’s dominance poses significant challenges.

　　Affected Companies: Mining companies are likely to benefit from potentially higher sales volumes in the U.S. compared to 2017. These companies include: Freeport, BHP, Rio Tinto, Glencore, Antofagasta, and Hydro.

　　III. China Still Holds the Mineral Supplies Essential to Trump

　　China will continue to play an indispensable role in the U.S. mineral commodities market. According to data from the U.S. Geological Survey (USGS) for 2013–2016, more than 70% of the world’s largest economy’s consumption of arsenic, industrial diamonds, and rare earth elements originated from imports from China. The United States even imported 62% of its antimony products from China, the world’s leading producer of antimony. According to a USGS study, in 2017, the U.S. had no established markets or sales channels for mineral resources used in flame retardants and batteries.

　　From 2013 to 2016, the United States imported at least 20% of its tantalum, tungsten, natural graphite, and tellurium from China, as well as more than 10% of cadmium, cobalt, indium, and vanadium pentoxide. Lithium, bromine, and aluminum also came from Chinese exports.

　　IV. Trump is committed to revitalizing both domestic and foreign mining industries.

　　The outlook for the recovery of the U.S. minerals and metals production industry fundamentally stems from the domestic demand for bulk commodities driven by Trump’s potential infrastructure investment. However, expenditures aimed at “rebuilding America with American hearts, American hands, and American resources” could also lead to an increase in imports of mineral commodities—especially from China. China has long been one of the United States’ key sources of bulk commodities; other major suppliers include South Africa, Europe, India, Mexico, and Brazil.

　　Last year’s U.S. Geological Survey pointed out that 21 of the 50 non-fuel commodities in the United States are entirely dependent on imports, with particular emphasis on natural graphite, manganese, niobium, rare-earth metals, tantalum, thorium, and vanadium. These materials are essential raw materials for both the steel and construction industries, and they are also used in battery applications.