Quick Post about Section 232 and Critical Materials.

Got a DM this morning asking about price floors and the Executive Proclamation from President Trump. Wasn’t the whole point of that about setting floors?

Sort of.

The January 14, 2026 Section 232 proclamation on processed critical minerals and their derivative products does direct the U.S. to negotiate with foreign partners about minimum import prices for critical minerals. The aim is to stop wild swings in price and heavy reliance on countries like China from shutting down U.S. domestic production of materials that are critical for defense, batteries, semiconductors, and the energy infrastructure.

It’s not as simple as slapping a price floor on everything tomorrow.

The approach starts with negotiation with Commerce and USTR leading the talks. They’re required to give an update within 180 days, around July 2026. If those talks fail or foreign partners don’t follow through, the fallback includes tariffs, direct minimum import prices enforced at the border, quotas, or other restrictions.

The Section 232 floor is not fixed and can be adjusted based on market conditions, but because it depends on foreign trade agreements and enforcement, it is less flexible than a purely market-driven approach.

Here’s how it works in practice:

Imagine a country, let’s call it Slaphappystan, is the leading exporter of refined needthisium. They’re selling into the U.S. at a price that domestic producers can’t survive on but not so low that it legally counts as dumping. One reason Slaphappystan sells at this low price is to deter competition and investment in other countries. Dumping, in trade law, is selling below fair value while harming U.S. industry. This could be said to be true for Slaphappystan, but it wouldn’t fly if challenged at the WTO. However they can enforce punitive actions in the name of national security.

So the U.S. government tells Slaphappystan:

“We need you to sell no lower than $20 per kg under a trade agreement. If you don’t or break it later, we’ll hit your imports with a 25% tariff.”

Now imagine the market shifts. A new cheap mine opens somewhere else. Global prices drop to $19 per kg. U.S. producers can’t compete. If Slaphappystan agreed to a voluntary deal, they’re locked in at $20 per kg. Breaching that triggers the tariff. This either raises the effective price for importers or forces Slaphappystan to eat part of the cost. Either way, U.S. producers aren’t crushed by the flood of cheap imports.

If it’s a direct minimum import price enforced at the border, the mechanics are similar. Any shipment below $20 per kg gets hit with an extra duty paid by the importer, which passes the cost forward. The result is the same. Imports can’t undercut the floor, protecting domestic production.

Another approach to managing critical material prices is using derivatives on futures contracts. By setting price floors through commodity derivatives, the U.S. could create a flexible system that adjusts for each material, where exchanges could tailor an option for each company based upon current market prices. This would allow floors to be much more responsive to changes in market conditions, production costs, and demand while still guaranteeing a baseline price that makes domestic production viable.

Companies would have a predictable revenue floor without requiring permanent subsidies. The government could monitor and intervene only when needed. This approach would be more dynamic than fixed tariffs or agreements and could be tailored to different critical minerals individually.

At the end of the day, Section 232 is deliberate government intervention. It overrides what the free market would do in a flood of low prices. It does this all in the name of national security and rebuilding U.S. supply chains. It helps producers survive but comes at the expense of higher costs for batteries, magnets, electronics, and critical materials and components for defense systems.

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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 mentioned to be included in the article.