On ‘liberation day’, President Trump revealed America’s strategic vulnerabilities

By exempting certain critical minerals from his latest tariffs, Trump has demonstrated the fragile interdependence underpinning modern industrial economies – and provided a wake-up call for the EU and UK.

Expert comment Published 7 April 2025 4 minute READ

Dr Patrick Schröder

Senior Research Fellow, Environment and Society Centre

Beyond the shock of its sheer scale, the Trump administration’s extraordinary new tariff regime, announced on 2 April 2025, was notable for the exemptions it contained. Certain critical minerals – including rare earths like Yttrium that is used in permanent magnets, or gallium for microchips – are exempt from the tariffs, whether imported from China or elsewhere.   

With this carve-out, President Donald Trump revealed both an important strategic through line in his seemingly erratic policymaking, and a vulnerability. Even within this new aggressive protectionist framework, the US is compelled to recognize its continuing dependence on Chinese-dominated critical mineral supply chains that are essential to high-tech manufacturing, AI development, defence technology and the clean energy transition. 

The Annex II list published by the White House exempts critical minerals, semiconductors and other strategic energy-related tech from the new tariff regime. The critical minerals exemption, (especially for imports of rare earths elements, but also battery metals such as cobalt and lithium and base metals such as copper and aluminium) underscores the reality: the US cannot afford to disrupt these flows without jeopardizing its own economic and technological ambitions. It seems that even for the Trump administration there are limits to economic nationalism.

China’s response

This exemption has not gone unnoticed by China. Beijing has retaliated not only with a 34 per cent tariff on US products, but also new export controls on rare earth elements as well as permanent magnets (used in electronic equipment, motors, and wind turbines).   

These export controls kicked in on 4 April. The China Nonferrous Metals Industry Association stated that the export controls on rare earths will not affect the stability of international supply chains. But the impact will likely be felt well beyond the US. It will ripple across global technology value chains, potentially throttling production in economies like Japan, South Korea, the EU and the UK. 

While it is not known if Trump expected this response from Beijing, his administration is taking measures to reduce reliance on China, which controls 69 per cent of global rare earth production and over 90 per cent of global processing capacity. 

Trump issued an executive order on 20 March titled ‘Immediate Measures to Increase American Mineral Production’ aiming to increase domestic mining. In parallel, the US is negotiating a minerals deal with the Democratic Republic of Congo – the world’s largest producer of cobalt, much of which is also controlled by China. 

But these measures will not address the dominance of Chinese companies in the short-term. While efforts to diversify supply chains are underway, this transition will take time and the US will remain exposed to Beijing’s influence through its overseas investments and control of mineral processing. In the meantime, a trade war risks disrupting the highly interconnected and globalized nature of mineral extraction, refining, and the technology value chains built around them, potentially creating more instability than strategic advantage.

Cascading unintended consequences 

A critical risk in this looming trade war is the cascade of unintended consequences, where measures aimed at a single adversary provoke disruptions far beyond the original scope. In this case, China’s export controls on rare earths are not limited to the US. They could affect other global buyers, sparking uncertainty in a sector already vulnerable to concentration risk.

In a globally interconnected economy, aggressive unilateral actions and reactions can provoke systemic shocks.

Trump’s tariffs on the one side, and China’s retaliatory export controls on rare earths on the other, are a reminder that in a globally interconnected economy, aggressive unilateral actions and reactions can provoke systemic shocks that harm not just adversaries, but allies and domestic industries alike.

This could have several knock-on effects. Prices could become volatile for rare earth-dependent industries. Sectors like renewable energy manufacturing, aerospace and electronics could face delays or increased costs. And strategic stockpiling by countries and major companies could accelerate, further tightening global supply by pulling more material out of circulation than is immediately needed.

Implications for Europe and the UK

For Europe and the UK, this should be a wake-up call. Diversifying supply chains, investing in domestic capabilities, driving a circular economy of critical raw materials and building strategic partnerships beyond China and the US are no longer just long-term goals. They have become urgent economic and geopolitical imperatives.

If critical raw material prices spike, European manufacturers – particularly in Germany and the UK – could face sharply rising input costs, further eroding industrial competitiveness at a critical moment. Both countries are already grappling with sluggish economic performance and stagflation, having recorded close to zero growth so far in 2025.

Disruptions in supply…could slow deployment timelines for clean energy technologies (and) threaten emissions targets ahead of COP30.

EU and UK climate targets could also be impacted. Europe’s Green Deal and the UK’s Net Zero targets hinge on steady access to critical minerals for wind turbines, EVs, and battery storage. Disruptions in supply or rising costs could slow deployment timelines for clean energy technologies, threaten emissions targets ahead of COP30, and increase dependency on fossil fuels in the interim.

The EU has already taken some steps to reconfigure its critical mineral supply chains. In 2024 the bloc adopted the Critical Raw Materials Act to reduce dependency on single-source suppliers. The UK is also in the process of updating its existing Critical Minerals Strategy in spring 2025 to align with the new industrial strategy.

But to navigate President Trump’s new era of protectionism, more effective action will be needed. New cooperative frameworks will be required to ensure supply security, particularly among like-minded economies with shared goals in clean energy, technological innovation and strategic autonomy.

For Europe and the UK, this means moving beyond national strategies and investing in cross-border alliances with trading partners, joint ventures, and multilateral partnerships to secure resilient and diversified supply chains for critical raw materials and technology markets.

In this respect President Trump’s new tariffs offer not just a warning, but also an opportunity. As the US increasingly pursues its interests in isolation from (or even at the expense of) its previous global trading partners, Europe and the UK need to move in the opposite direction. True supply security of critical minerals will not be achieved through tit-for-tat measures in a global trade war.

Instead, in the first place, they must strengthen their existing international partnerships on minerals, and further diversify supply chains by forging new partnerships. In the medium term, as the existing global order is being re-shaped, they need to lead the charge toward a cooperative framework for responsible resource governance and trade at the international level. This will not be easy to do at a time when the US and China are openly competing for control of the world’s critical minerals – but Europe now has little choice.