As the global shift towards clean energy and electric vehicles (EVs) accelerates, the demand for critical minerals like cobalt, graphite, and lithium is set to surge, underscoring the urgent need to address the implications of tariffs on these minerals.
These minerals are essential components in EV batteries, pivotal to reducing carbon emissions and combating climate change.
The EV value chain for these minerals spans five crucial stages: from initial extraction to the production of EVs themselves (see Table 1).
At each stage, trade flows are governed by varying tariffs, creating a phenomenon known as tariff escalation, where tariffs increase as products move up the value chain.
Developed economies typically impose lower tariffs on raw minerals but escalate them significantly for processed goods and finished EVs.
This tariff structure poses a challenge for developing economies rich in these minerals, potentially hindering their ability to move beyond raw material exports and participate in higher-value processing stages.
The implications of tariff escalation are profound. It could discourage investment in local processing facilities in developing economies, perpetuating their role as mere suppliers of raw materials.
To address this, there is a growing call for flattening tariffs and promoting fairer trade practices that facilitate technology transfer and local capacity building.
The need for a well-functioning multilateral trading system supported by equitable tariff structures is paramount.
This approach not only supports sustainable development and enhances economic opportunities in developing economies but also ensures they benefit more fully from the global EV revolution, offering a promising future.
For more detailed insights, the World Tariff Profiles 2024, jointly published by the WTO, ITC, and UNCTAD, offers comprehensive data on global tariffs and non-tariff measures, shedding light on the complex dynamics shaping international trade in critical minerals.
By addressing tariff escalation and fostering sustainable practices, developing economies, policymakers, trade officials, and stakeholders can play a pivotal role in achieving structural transformation, elevating living standards, and shaping the future of clean energy.
