Is The United States Considering Launching a Section 232 Investigation into Chinese Neodymium Magnets?

According to information reported by White House officials, the U.S. Treasury Department is considering launching a Section 232 investigation on the grounds of “national security”. The object of the investigation is the import of neodymium magnets widely used in electromechanical products, motors and other industrial products, while the import of neodymium magnets in the United States Mainly from China.

In February of this year, U.S. President Biden ordered federal agencies to conduct a 100-day review of the supply chain of four key products: semiconductors, rare earth minerals, large-capacity batteries for electric vehicles, and pharmaceuticals. The 100-day findings, submitted to Biden on June 8, recommended that the U.S. Department of Commerce evaluate whether to open an investigation into neodymium magnets under Section 232 of the Trade Expansion Act of 1962. Neodymium magnets play a key role in motors and other equipment, and are important for both defense and civilian industrial uses, the report noted. However, the United States relies heavily on imports for this critical product.

Is The United States Considering Launching a Section 232 Investigation into Chinese Neodymium Magnets

Is The United States Considering Launching a Section 232 Investigation into Chinese Neodymium Magnets

It is unforgettable that the former US President Trump, when he took office less than 100 days ago, abandoned the conventional trade remedy measures such as countervailing and anti-dumping, and flagrantly launched the Section 232 investigation on imported steel products on the grounds of “national security”. , and then extended the investigation to imported aluminum, and announced on March 8 of the following year that tariffs of 25% and 10% were imposed on Chinese imports of steel and aluminum, respectively. On April 1 of that year, China decided to suspend tariff reduction obligations for some imported goods originating in the United States and impose additional tariffs of 15% or 25%. The tariff war between the U.S. and China has kicked off.

The 232 investigation is based on U.S. domestic law, and usually results in imposing tariffs on related products or imposing import quotas. It is a trade protectionist measure and has been widely criticized. From 1963 to 1991, the United States launched a total of 21 232 investigations, all of which focused on the Cold War period. However, from the establishment of the WTO in 1995 to the end of 2016, the U.S. government has only initiated two Section 232 investigations without taking relevant measures. However, the former US President Trump, who pursued the “America First” strategy, took office less than half a year ago. In March 2017, he launched the 232 investigation on the grounds of “endangering national security”. The U.S. approach at that time was opposed by the Chinese side. Wang Hejun, director of the Trade Remedy and Investigation Bureau of the Chinese Ministry of Commerce, said that the findings of the U.S. Section 232 investigation were groundless and completely inconsistent with the facts. Exports of steel and aluminum products from various countries to the U.S. have not compromised U.S. national security. Wang Hejun pointed out that the United States should not rashly impose further restrictions on imported steel and aluminum products on the grounds of “national security”. Because the scope of “national security” is very broad and lacks a unified definition, it is easy to cause abuse.

However, the spearhead of the US 232 investigation this time points to rare earth products from China – neodymium magnets. Information shows that neodymium magnets are widely used in electronic products, such as hard drives, mobile phones, headphones, and battery-powered tools. China is the largest producer of neodymium magnets. According to data, the total global output of neodymium magnets in 2019 is about 170,000 tons, of which China’s neodymium-iron-boron output is about 150,000 tons, accounting for about 90%. An industry insider told the Global Times that China is the world’s largest producer and exporter of rare earths, and the United States must also import from China if additional tariffs are imposed. Therefore, the logic of the United States launching the Section 232 investigation is somewhat confusing.

Huo Jianguo, vice-chairman of the China Association for the Study of the World Trade Organization, analyzed to the Global Times reporter on June 9 that the current US administration has established a certain foundation in the strategy of uniting allies to fight against China, and has begun to try to directly “contact” with China. It’s actually a return to the old ways of the Trump era. Huo Jianguo believes that the Trump period put high pressure on China and imposed tariffs on a large scale to reduce the trade deficit with China or change the industrial division of labor with China, but this attempt ended in failure. Therefore, it is difficult for the Biden administration to follow the old way of Trump and achieve the desired effect.

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