Mongolia Braces for the Impact of Trump’s Tariffs

The recent deliberations of Mongolia’s National Security Council have underscored an emerging anxiety in Ulaanbaatar: the country’s outsized economic dependence on China, and how this could be exposed by escalating trade tensions between Washington and Beijing.

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At first glance, Mongolia appears to be a peripheral player in the US-China trade war. Exports to the United States account for well under 1% of Mongolia’s total, rendering direct exposure to American tariffs—including the recently imposed 10% levy—largely symbolic. Even potential adjustments under the Generalized System of Preferences would barely register on Mongolia’s trade balance sheet.

But the true threat lies in the indirect fallout from Beijing’s response to Trump's tariffs.

China buys more than 90% of Mongolia’s exports, overwhelmingly in raw materials—copper and coal. Should Chinese manufacturing falter under prolonged tariff pressure, Mongolian commodity exporters would feel the pinch acutely. The risk is not confined to trade volumes alone.

Foreign direct investment, too, is at stake. Much of Mongolia’s FDI either originates in or flows through China, particularly in the mining and infrastructure sectors. A deterioration in Chinese business confidence—already visible in capital outflows and slower project financing—could stifle this crucial pipeline. The Asian Development Bank’s latest forecasts for regional growth, tempered primarily by China’s headwinds, reflect just how interconnected the region’s economic fortunes have become.

Yet Mongolia enters this uncertain moment with some wind at its back. The ADB projects 6.6% GDP growth for 2025, buoyed by the expansion of the Oyu Tolgoi copper mine and a recovering livestock sector. Reforms to coal export mechanisms, launched via the Mongolian Stock Exchange in March 2025, now link prices to international indices and offer more flexible payment terms—steps that should help cushion volatility. Strong foreign exchange reserves further shore up macroeconomic resilience.

Still, recent coal export data tell a cautionary tale: volumes are up, but revenues are down. Commodity dependence remains a double-edged sword. The more pressing question is not whether Mongolia can weather current trade turbulence, but whether it can convert near-term stability into long-term strategic autonomy.

Diversification—in both export markets and domestic economic structure—must take precedence. Attracting capital beyond China’s orbit and nurturing a more dynamic, innovation-led economy will be essential. Mongolia’s location is a latent asset: it sits between two global powers, maintains broadly cordial ties with both, and offers a relatively open investment climate.

Can Mongolia pull off a geopolitical balancing act—welcoming US investment while maintaining deep commercial ties with China? Absolutely, yes. As a starter, the development of critical minerals to supply the West and the USA is long overdue.

A pragmatic posture, akin to Singapore’s economic diplomacy, may hold promise in managing the secondary impacts of Trump's tariffs on Mongolia. Accepting the U.S. tariff while signaling openness to American capital and readiness on critical mineral supplies could help diversify inflows.

Washington, for its part, enjoys a trade surplus with Mongolia ($369.6 million in 2024) —an anomaly that could be spun into leverage.

Ultimately, Mongolia’s long-term economic security will rest not just on how it manages external shocks, but on how boldly it invests in internal transformation. The global trading order may be fragmenting, but for Mongolia, this could be a moment of rare strategic clarity.