Tariffs can help make the US a minerals powerhouse again

In the first half of the 20th century, the United States was a minerals powerhouse. From 1910 to 1950, the country represented between 30 percent and 40 percent of total global mining production.

The U.S. was even self-sufficient in many minerals, such as copper, fluorspar and zinc. This self-sufficiency strengthened the U.S. industrial base as American industries did not have to rely on mineral imports — and face corresponding disruption risks — for the manufacture of important goods. In 1916, U.S. Secretary of the Interior Franklin K. Lane wrote, “We can build a battleship, or an automobile, a railroad or a factory, entirely from the products of American mines….”

However, for many minerals today, the U.S. relies heavily on imports to meet its domestic consumption. Of the 50 minerals on the U.S. critical minerals list, imports in 2023 met 100 percent of U.S. consumption for 12 of the minerals, and imports met over 50 percent of U.S. consumption for 29 other minerals.

Such imports not only make the U.S. dependent on foreign mineral production — and adversaries like China — but also undermine U.S. mineral production. In 1918, U.S. metal production was valued at nearly $44 billion in 2023 inflation-adjusted dollars; despite the U.S. population more than tripling and U.S. metal consumption per capita remaining approximately the same, U.S. metal production had declined to approximately $35 billion by 2023.

To decrease foreign mineral imports and increase domestic mineral production, the U.S. government should increase its tariffs on minerals with U.S. reserves.

Tariffs work by increasing the costs of imported minerals. If the costs of imported minerals exceed the costs of U.S.-produced minerals, mineral consumers in the U.S. should more greatly demand domestically produced minerals, incentivizing increased U.S. mineral production.

As Harold Barger and Sam H. Schurr wrote in a 1944 National Bureau of Economic Research publication, “Whenever the enactment of an import duty leads us to satisfy a larger fraction of our needs from domestic, and a smaller fraction from foreign sources, the output of domestic mines…will tend to increase.” Thus, tariffs should help encourage greater domestic mineral exploration, production, and, ultimately, national self-sufficiency.

When the U.S. was a minerals powerhouse in the first half of the 20th century, the tariff was the primary policy to influence U.S. production of key minerals, such as copper, lead and zinc. In 1945, Elmer Walter Pehrson, chief of the economics and statistics branch at the U.S. Bureau of Mines, wrote that for these minerals, “[A] large measure of self-sufficiency has been maintained for many years with moderate tariff protection.” He added, “Because [production] costs are higher in the U.S., the tariffs for these commodities have been highly effective….”  For instance, U.S. tungsten production crashed and then ceased completely from 1917 to 1922 due to oversupply, including from “excessive imports.” But in 1922, tariffs were imposed, and the U.S. again began producing tungsten in 1923.

Starting in the second half of the 20th century, however, the U.S. government reduced tariffs, including for minerals. The tariff on cobalt oxide, for instance, decreased from $0.20/lb. in 1930 to $0.04/lb. in 1960. Consequently, cheap mineral imports increased and undermined U.S. mineral production, with the U.S. becoming increasingly reliant on mineral imports.

In 1954, the U.S. was 100 percent import-reliant for eight minerals and more than 50 percent import-reliant for 28 minerals; in 1984, the U.S. was 100 percent import-reliant for 11 minerals and more than 50 percent import-reliant for 38 minerals; and in 2014, the U.S. was 100 percent import reliant for 19 minerals and more than 50 percent import reliant for 47 minerals.

Today, tariffs would help make more costly U.S. mineral production price competitive with foreign mineral production. Although it depends on the mineral, the U.S. generally has higher-cost mines than the rest of the world. For example, in 2012–2013, the U.S. was in the 78th cost percentile for copper, meaning 78 percent of global copper production occurred at lower costs.

The U.S. was also in the 92nd cost percentile for iron ore production and the 94th cost percentile for molybdenum production. U.S. mineral production faces higher costs due to geological constraints such as lower ore grades, as well as jurisdictional reasons like foreign governments offering greater state support to their mineral industries and imposing lower labor, safety and environmental standards on their mineral projects. Therefore, U.S. mineral tariffs would also levy costs for externalities frequently accompanying foreign mineral production, including local pollution, high carbon emissions and violations of labor rights.

The primary counterargument to imposing mineral tariffs is that tariffs may result in higher mineral prices for U.S. industries and ultimately U.S. consumers, given both the tariffs on imported minerals and the higher costs of U.S.-produced minerals. However, tariffs can increase domestic production, and increased domestic production can help lower domestic prices as happened with iron ore in the 1890s after the opening of the Mesabi Iron Range in Minnesota.

Even if mineral prices do not decrease, higher mineral prices that incentivize domestic mineral production do hold benefits: increased supply chain security, increased U.S. mining jobs, and greater mineral production adhering to high labor, safety and environmental standards. Thus, the tradeoffs of higher mineral prices from tariffs are acceptable from a national security and economic perspective.

Tariffs helped make the U.S. a mineral powerhouse in the first half of the 20th century. But as the U.S. government reduced its tariffs in the second half of the 20th century, cheap imports increased and undermined U.S. mineral production. Eugene N. Cameron noted, “Deterioration of the mineral position of the U.S. became accepted as the price of providing mineral raw materials to the consumer at the lowest possible cost.”

Today, the decline of the U.S. mineral industry is no longer an acceptable price for cheap mineral imports, while tariffs are now an acceptable price for the rise of the U.S. mineral industry. Indeed, tariffs can help make the U.S. a mineral powerhouse again.

Gregory Wischer is a non-resident fellow at the Payne Institute for Public Policy at the Colorado School of Mines. He is principal at Dei Gratia Minerals, a critical minerals consulting firm. He is also a non-resident fellow at the Northern Australia Strategic Policy Centre at the Australian Strategic Policy Institute.