Business
US government to invest in MP Materials’ rare earths production
Business reporter, BBC News
Bloomberg/GettyThe US government is to become the biggest shareholder in the country’s only operational rare earths mine.
It is also going to take a series of other steps to underpin the future of the operation in Mountain Pass, California.
Rare earths are essential to huge amounts of modern technology, such as electric cars and wind turbines.
Access to these metals has been at the heart of a US-China trade war, with Beijing controlling about 90% of global mining capacity.
MP Materials, which owns the mine, has entered into an agreement with the US Department of Defense that is designed to reduce America’s dependency on imports of rare earths.
The deal means that for the next 10 years the US government will commit to MP Materials receiving a minimum price of $110 per kg for its neodymium and praseodymium output.
These are two of the most in-demand of the 17 different rare earths for the global economy. They are crucial for making permanent magnets, which are found in everything from smartphones to MRI scanners and electric motors.
The move follows concerns that China has used its near total control of the industry to push prices down and force companies in other countries out of business.
Getty ImagesChina is home to about 70% of the world’s rare earth mining and 90% of refining capacity as a result of years of government support for the industry.
Under the agreement, MP Materials will build a new US facility to increase how much of the raw materials from the mine it can turn into useable products.
The location is still to be decided, but the company says it will serve both defence and commercial customers.
Much of this will be funded by the Department of Defense buying $400m of newly created shares.
“This initiative marks a decisive action by the Trump administration to accelerate American supply chain independence,” said MP Materials founder and chief executive James Litinsky.
Until now Shenghe Resources, a company partly owned by the Chinese government, has been one of MP Materials’ largest shareholders.
Shenghe had been the sole customer for the output of the Californian mine, which meant that its rare earths were being sent to China for refining.
Earlier this year, MP Materials said that it would stop doing this because of the huge 125% tariffs that China imposed on US goods, in response to the 145% tariffs President Trump had imposed on Chinese imports.
It added that tariffs meant sending its output to China was neither commercially viable nor in alignment with America’s national interests.
Rare earths have been at the heart of efforts to repair a US-China trade relationship that has deteriorated since Trump returned to the White House.
Increased tariffs led Beijing to impose a new export licensing regime that severely limited how much of these materials was reaching American manufacturers.
An agreement to improve that access, in exchange for lifting some of the US’s own export restrictions in other areas, was at the heart of recent trade talks between the world’s two biggest economies in London and Geneva.
Despite that commitment the US complained that it has not been implemented fast enough.
In the longer term, domestic supplies are the US’s best bet on increasing access to the rare earths which are crucial to the manufacturing that is at the heart of Trump’s economic vision for the country.
China’s export controls have also led to criticism in Europe, with the European Parliament voting in favour of a resolution that called Beijing’s controls “unjustified” and “intended to be coercive”.
They also urged the European Commission to speed up the implementation of the Critical Raw Materials Act, which came into force last year and is designed to reduce Europe’s reliance on imports.
On a visit to Germany last week, China’s foreign minister downplayed these concerns, saying it was his country’s “sovereign right” as well as being “common practice” to control exports of goods that have both commercial as well as military uses.
There will be no immediate changes to cash Individual Savings Accounts (Isas), the BBC understands.
Chancellor Rachel Reeves was widely expected to announce plans to reduce the £20,000 tax-free allowance.
The move was aimed at encouraging more investment in stocks and shares, which the goverment says it will still focus on.
“Our ambition is to ensure people’s hard-earned savings are delivering the best returns and driving more investment into the UK economy,” a Treasury spokesperson said.
The Treasury is expected to continue to talk to banks, building societies and investment firms about options for reform.
An Isa is a savings or investment product that is treated differently for tax purposes.
Any returns you make from an Isa are tax-free, but there is a limit to how much money you can put in each year.
The current £20,000 annual allowance can be used in one account or spread across multiple Isa products as you wish.
The economy shrank by 0.1%, the second month in a row it has contracted.
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US President Donald Trump has said he will slap a 35% tariff on Canadian goods starting 1 August, even as the two countries are days away from a self-imposed deadline to reach a new deal on trade.
The missive came as Trump also threatened blanket tariffs of 15% or 20% on most trade partners, and said he would soon notify the European Union of a new tariff rate on its goods.
Trump announced the latest levies on Canada on Thursday in a letter posted to social media and addressed to Prime Minister Mark Carney.
The US has already imposed a blanket 25% tariff on some Canadian goods, and the country is feeling the pain of the Trump administration’s global steel, aluminium and auto tariffs.
The letter is among more than 20 that Trump had posted this week to US trade partners, including Japan, South Korea and Sri Lanka.
Like Canada’s letter, Trump has vowed to implement those tariffs on trade partners by 1 August.
The US has imposed a 25% tariff on all Canadian imports, though there is a current exemption in place for goods that comply with a North American free trade agreement.
It is unclear if the latest tariffs threat would apply to goods covered by the Canada-United States-Mexico Agreement (CUSMA).
Trump has also imposed a global 50% tariff on aluminium and steel imports, and a 25% tariff on all cars and trucks not build in the US.
He also recently announced a 50% tariff on copper imports, scheduled to take effect next month.
Canada sells about three-quarters of its goods to the US, and is an auto manufacturing hub and a major supplier of metals, making the US tariffs especially damaging to those sectors.
Trump’s letter said the 35% tariffs are separate to those sector-specific levies.
“As you are aware, there will be no tariff if Canada, or companies within your country, decide to build or manufacture products within the United States,” Trump stated.
He also tied the tariffs to what he called “Canada’s failure” to stop the flow of fentanyl into the US, as well as Canada’s existing levies on US dairy farmers and the trade deficit between the two countries.
“If Canada works with me to stop the flow of Fentanyl, we will, perhaps, consider an adjustment to this letter. These Tariffs may be modified, upward or downward, depending on our relationship with Your Country,” Trump said.
President Trump has accused Canada – alongside Mexico – of allowing “vast numbers of people to come in and fentanyl to come in” to the US.
According to data from the US Customs and Border Patrol, only about 0.2% of all seizures of fentanyl entering the US are made at the Canadian border, almost all the rest is confiscated at the US border with Mexico.
In response to Trump’s complaints, Canada announced more funding towards border security and had appointed a fentanyl czar earlier this year.
Canada has been engaged in intense talk with the US in recent months to reach a new trade and security deal.
At the G7 Summit in June, Prime Minister Carney and Trump said they were committed to reaching a new deal on within 30 days, setting a deadline of 21 July.
Trump threatened in the letter to increase levies on Canada if it retaliated. Canada has already imposed counter-tariffs on the US, and has vowed more if they failed to reach a deal by the deadline.
In late June, Carney removed a tax on big US technology firms after Trump labelled it a “blatant attack” and threatened to call off trade talks.
Carney said the tax was dropped as “part of a bigger negotiation” on trade between the two countries.
The Prime Minister’s office told the BBC they did not have immediate comment on Trump’s letter.
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