Presidential Memorandum, new tariffs, and a surprise non-exemption for a critical mineral.
Been sorting through the new Presidential Memorandum from President Trump: Actions by the United States in the Investigations under Section 301 of the Trade Act of 1974 of the Acts, Policies, and Practices of 60 Economies Related to the Failure of Each Economy to Impose and Effectively Enforce a Prohibition on the Importation of Goods Produced with Forced Labor.
Yes, that is the title of the Presidential Memorandum, but what does it mean?
Basically, it takes the 60 countries that the United States has the most trade with and adds a new Section 301 tariff starting at 10% for some countries and up to 12.5% for others. The premise is that these countries are not doing enough to curb forced labor and that directly affects the United States’ economy.
And yes, it stacks with other tariffs and just like other Section 301 tariffs if in the future the U.S. trade representative decides changes need to be made, they can go back and adjust them.
What this tariff is really targeting are textiles, apparel, agricultural products, and manufactured consumer goods. The Executive Action and the new Section 301 tariffs are not specifically targeting critical materials. It’s more of a reciprocal tariff replacement for imported consumer goods.
The goal of the Trump administration since the election has been to re-onshore manufacturing, using tariffs as the stick. Mostly, however, it has been akin to the administration jumping in the car, putting it into reverse, and gunning it, ignoring that the garage door is closed, slamming it into drive while a section of the garage door blocks the windshield, racing down the street, and eventually taking out the bus stop at the intersection. At least this time they are using the tools set up for them instead of trying to redefine the legal meaning of a word.
To see if it lined up with the old reciprocal tariffs, because really, all of this is just a way to bring back the tariffs struck down by the Supreme Court, I sorted through the annex included with the executive action, spent the day looking at critical minerals on that list, yelled at AI for not being able to tell me which HS codes were for what, and fell down a rabbit hole of legal and policy websites until I found the HS codes I needed.
And for now, when it comes to critical minerals, there are very few that are not exempted from their raw forms to their processed forms. This is in line with the old reciprocal tariffs and was expected; the goal is to re-onshore manufacturing, and this is a tad easier if you do not have to pay extra for the raw inputs you need. But that applies to raw materials and processed chemicals; parts, engineered materials, and the like were never exempted then and are not now.
There are two key materials for lithium-ion batteries that are not exempted. The first is synthetic graphite, which makes sense since that looks to be a product oil companies like ExxonMobil are planning to bring to market using their refining waste as the feedstock.
The second is that while raw phosphate is on the exemption list, the processed forms of it needed to produce the pCAM for lithium iron phosphate are not. It is going to be interesting to see how considering the pivot in the U.S. by legacy cell manufactures and automakers from ternary to LFP how they will react to this.
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DISCLAIMER: This article should not be construed as an offering of investment advice, nor should any statements (by the author or by other persons and/or entities that the author has included) in this article be taken as investment advice or recommendations of any investment strategy. The information in this article is for educational purposes only. The author did not receive compensation, from any of the companies and or persons mentioned to be included in the article.