Diplomatic fights and international friction actually cause countries to trade more critical raw materials with each other, not less.
March 31, 2026
Original Paper
The Geoeconomics of Trade in Critical Raw Materials
SSRN · 6452059
The Takeaway
Standard economic logic suggests that political tension kills commerce, but for critical minerals like lithium, the opposite happens. Fearing future blockades, countries engage in 'strategic stockpiling,' rushing to buy as much as possible from their rivals immediately, which paradoxically fuels the market precisely when relations are at their worst.
From the abstract
This paper investigates the extent to which free trade agreements mitigate the adverse commercial effects of geopolitical friction in critical raw material markets. Using a multi-product structural gravity model augmented with an interaction term, we analyze a comprehensive panel dataset of annual bilateral trade data covering 30 distinct critical raw materials across 233 countries from 1995 to 2021. Our empirical estimations rely on the Poisson pseudo-maximum likelihood estimator and reveal tha