With the guiding principle of the Trump 2.0 administration shifting back to security, we can expect a tougher stance on China and increased focus on diversification of critical mineral supplies, according to Frank Fannon, former US Assistant Secretary of State for Energy Resources.
“The Biden administration’s organising principle at the outset […] was to mitigate climate change. It required more reliance [on] China, not less, given that they are the dominant manufacturing powerhouse of clean technologies, as well as [having] the control of that critical mineral supply chain,” Fannon, MD, Global Advisors, told Resourcing Tomorrow in London last week.
Under the new Trump administration, that organising principle or ‘north star’ will be back to security, Fannon added.
The goal, he said would be to achieve “an appropriate security situation in the United States, and seeking that goes to the industrial base, including the development of clean energy technologies but also things like the defence systems that are required that use some of these key and niche critical metals.”
Bipartisan support for critical minerals partnerships
Pointing out the US’ multi-year, multi-administration effort to diversify critical minerals supply chains, Geoffrey Pyatt, Assistant Secretary of State for Energy Resources at the US Department of State, said that the issue has “significant support in Washington from both sides of the aisle”.
Notably, Senator Marco Rubio, Trump’s nominee for secretary of state, introduced the Global Strategy for Securing Critical Minerals Act of 2024 alongside Democratic Senator Mark Warner to combat China’s dominance in the field, as well as ensure the US and its global partners can count on a secure end-to-end supply of critical minerals.
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By GlobalData
Pyatt pointed to the work done under the Minerals Security Partnership (MSP), a collaboration of 14 countries and the EU that aims to catalyse public and private investment in responsible critical minerals supply chains globally.
MSP has completed milestones on 14 of the 30 projects it has funded, according to Pyatt. These include support for HyProMag’s rare earth magnet recycling project in Birmingham, UK; expanding the global supply chain for germanium by brokering deals between STL Gecamines and Belgium’s Umicore; and approving $150m to support Syrah Resources’ Twigg Balama graphite project in Mozambique.
Speaking on China’s dominance of critical minerals at Resourcing Tomorrow on Wednesday 4 December, Pyatt said: “Here are the PRC’s trademarks: price volatility, widespread corruption, weak labour and environmental standards. It is a business model that treats mineral-rich countries as extraction sites and the market as something to dominate.”
He added that the US “wants partners”, “wants fair competition” and “recognises that if we want to have energy security you need diversification of supplies and resilient markets”.
“That isn’t the Democratic or Republican version of foreign policy. That is an American approach.”
Partnerships important, but change in approach expected under Trump
Fannon, too, pointed out that partnerships will be important under the next Trump administration.
“There is a clear recognition that the US ─ even though we have an amazing minerals endowment ─ there is the time horizon that is necessary to develop them.”
“That means… with security [as] ‘north star’ it is going to require investment overseas and partnerships overseas,” he told Resourcing Tomorrow.
However, Fannon suggested we will see “a bit of a different approach” under Trump 2.0.
Pointing to the painstaking work required to set up multinational agreements on critical minerals such as the MSP, Fannon said Trump is likely to focus on “action and deployment of capital”.
“I think we will seek a degree of continuity with some of the international fora and some of the partnerships, but it is going to have to be with clear, clearly articulable objectives in terms of development.”
Trump has a ‘responsibility’ to review the IRA
There is not that same bipartisan support for Biden’s IRA, which has led to $450bn of investment in the energy transition across the public and private sectors, according to Pyatt.
Last week, the Biden Administration surpassed the milestone of awarding $100bn in clean energy grants through the IRA. The administration is also on track to exceed its objective of disbursing more than 80% of available IRA grant funding by the end of Biden’s presidential term in January 2025.
Fannon, Pyatt’s predecessor in the first Trump administration, told delegates at Resourcing Tomorrow that the president-elect has “a responsibility” to review the IRA.
“Not one Republican in either chamber of Congress voted for it [the IRA],” he said.
“The fact that Republicans won both chambers of Congress and [Trump] won the popular vote… that they would want to look at the partisan Inflation Reduction Act, I think that is not only expected, but they would have a responsibility to the constituency to do so now.”
What could revisions to the IRA look like?
According to Fannon, when it comes to the IRA, we can expect to see some areas that are permissive on China being tightened under the Trump administration.
“In the context of electric vehicle [EV] credits… if it comes from China, then it should not benefit from US taxpayer subsidy,” Fannon said.
He added: “With the Biden administration [we go] back to the competing interests of security versus climate change. They said up to 25% can be Chinese content [in EVs].
“I think permissive provisions like that, which send a mixed signal to the investment community, are likely to be scrapped.”
Unlike China’s ban on exports of some critical minerals to the US, Fannon said there is no prohibition against Chinese content coming into the country, stating: “The only question before us is whether the US taxpayer will subsidise an adversarial power.”
Fannon also believes that any changes to the IRA are likely to be taken with a “scalpel” rather than a “hatchet” approach.
According to analysis, more than half of the announced projects benefitting from IRA funding are based in Republican congressional districts. According to various analysts, this means that any changes would be sensitive to what has already occurred.
Notably Pyatt pointed to the fact that two Republican-led States – Texas and Florida – are now leading the US in solar energy production.
With Trump set to take office on 20 January 2025 and his focus on security, we can expect to see changes in both policy approach and the way in which incentives and tariffs focus on critical minerals supplies from China.
