Imposing taxes on Chinese rare earth products under the guise of "security risks"? There are divisions within the G7

According to a report by Reuters on the 25th, multiple informed sources revealed that the Group of Seven (G7) member countries and the European Union are considering setting a price floor for rare earths to promote rare earth production and plan to impose taxes on certain rare earth products exported from China to incentivize investment in related fields.

The report stated that, except for Japan, G7 member countries are highly or completely reliant on China for various materials such as rare earth magnets and battery metals. To address the so-called security risks, G7 leaders launched the "Critical Minerals Action Plan" in June this year, and a technical team held a meeting in Chicago earlier this month.

One informed source revealed that the core topic of the Chicago meeting was "whether to raise the regulatory threshold for foreign investment in critical raw materials to prevent companies from flowing to China." Australia also participated in this meeting. However, there is uncertainty within the G7 regarding whether to adopt a confrontational strategy against China on this issue.

The aforementioned informed source added, "Another option is to implement geographic restrictions, but there are also differences within the G7." It is reported that such restrictive measures may include localization procurement rules or restrictions on procurement from specific countries like China in public procurement tenders.

Reuters also cited two other informed sources stating that the G7 discussed proposals to impose tariffs or carbon taxes on China's rare earth and minor metal exports, with specific tax rates calculated based on the proportion of non-renewable energy used in their production.

A U.S. government official also confirmed to Reuters on the 24th that the U.S. is discussing broader trade measures with G7 and EU leaders to prevent low-priced dumping of rare earths, including tariffs, price floors, or other means.

Sources revealed that the U.S. has recently launched a price floor mechanism to encourage domestic rare earth production, and G7 officials are also considering emulating the U.S. subsidy-supported price floor policy. Canada is positive about this but has not yet committed to taking such action. Australia is also separately considering setting a price floor to support critical mineral projects, including rare earths.

However, for companies in G7 countries, China's significant position in the global rare earth industry chain makes it difficult for them to sever ties. According to Bloomberg, Rahim Suleiman, CEO of Canadian metal supplier Neo Performance Materials Inc., stated during a rare earth meeting on the 24th, which focused on "how to build a supply chain that does not rely on China," that China should continue to be an important part of the global rare earth supply chain due to its technological and market competitive advantages.

Suleiman stated, "China will still be the leader in this field, and frankly, it should continue to maintain this position."

Bloomberg reported that for decades, China has established a strong dominant position in the rare earth sector. The efforts of Western countries to exclude China from the supply chain are facing practical challenges: Chinese rare earth products have a price advantage and excel in meeting specific customer needs.

Author: Ni Hao, Source: Global Times, Original Title: "Imposing Taxes on China's Rare Earth Products Under the So-called 'Security Risks'? There Are Differences Within the G7" Risk Warning and Disclaimer

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