President Trump’s righteous and economically prudent trade war with China is likely to produce benefits for the US economy in the long run.
However, for now, among its various challenges, it also exposes the US to a rather precarious situation in the mining sector. Many American industries are critically dependent on mineral imports in large quantities.
Let’s take a quick look at some facts:
- The US Geological Survey tracked 90 minerals and metals in 2018
- America is more than 100% import-reliant for 20 of them
- The country is also more than 50% import-reliant for 50 of them
This extensive dependency on mineral and metal imports is posing a challenge to the country’s industrial sector.
We depend on the imported minerals and metals for almost everything; from lithium-ion batteries for mobile phones, computers, electric cars to wind turbines, and solar panels. Our current and future energy systems seem to be completely reliant on imported minerals. Though America is loaded with amazing farm land, natural gas deposits, and so on but this is another topic.
Under China’s Control
As of now, the US has been spending around $7-$8 billion a year on the imported metals and minerals. The future expenses are obviously going to grow higher at the rate we are going. And who do you think our biggest supplier is?
You guessed it – China.
But it’s not that China is producing a ton of these minerals; their trick lies in their extreme control on the supply chains of essential minerals.
Take lithium for example. China is famous (infamous?) for their tight grip on lithium which is crucial for the manufacturing of batteries. Tianqi Lithium, a Chinese company, controls more than half the present global production of lithium.
Let’s talk about cobalt. Cobalt is the chief ingredient used in the production of lithium-ion batteries.
And even though the Democratic Republic of Congo extracts over 60% of the global cobalt, China is responsible for 85% of the world’s cobalt supply.
China Tariffs Hit the US Coal Exports
Ever since Trump was elected as our president, he’s been working relentlessly to bring around the US coal industry. And the results have been surprising – US coal exports have increased by 61% in 2017 as the exports to Asia have more than doubled.
Unfortunately, that’s when the trade war started.
Apparently, China was planning to buy more from the US before the trade war began. Even though China is working hard to become a nation that uses less coal, they still consume and import more coal than any other country. According to customs data, China imported 271 million metric tons of coal in 2017.
According to a report from the Energy Information Administration, America exported 3.2 million short tons of coal to China in 2017.
And as Bloomberg Intelligence reported, the US coal exports to China in 2017 had a total value of about $395 million. Around 90% of this coal was of the metallurgical variety, which is essentially used in manufacturing steel.
But the continuing trade war has threatened what could have been a highly profitable deal for the US coal industry. With that said, America’s economy is still at 3% (something it never did from 2009-2016) because of lower taxes and less regulations and China needs more products that America has than vice versa. China still has trouble feeding itself and having enough energy that is required, for example.