A Place where Tariffs Would Actually Help

Most of the concern about President Trump’s tariff strategy is that it will raise costs and reduce international trade, but in the case of nuclear fuel, the opposite may be true. The United States has been reliant on Russia for enriched uranium since the early 1990s, and only decided that it needed to be self-sufficient after Russia invaded Ukraine in 2022.

The United States’ recent UN vote against a resolution to condemn the Russian invasion raises the prospect that the United States could similarly backtrack on its plan to wean itself off Russian imports, including enriched uranium. This is a particular problem for a capital-intensive, slow-moving industry like uranium enrichment. Even the possibility of rapprochement can hurt the fuel industry, and damage the commercial nuclear energy business more broadly.

A little background on making nuclear fuel will elucidate the problem:

Nearly all uranium is one of two types, uranium-238 and uranium-235. In water-moderated reactors (the only kind in use in the United States at the moment), the kind that splits easily is U-235. But in nature, that is only 0.7 percent of all uranium.

So, to be useful in a water-based reactor, the uranium must be “enriched.” That is, the proportion of U-235 has to be raised to at least 3 percent, from 0.7 percent, a level called “Low-Enriched Uranium,” or LEU. The United States invented a technology for doing that as part of the Manhattan Project. For a long time, the U.S. had a monopoly outside of the Soviet Union, and initially when it made enriched uranium available to the utilities, it retained ownership of the fuel.

Over the years, the business went through major changes. Utilities started calling for fuel with higher enrichments, so the reactors could run for 18 months or two years between re-fueling. That required enrichments around 5 percent. And they began experimenting with “accident-tolerant fuel,” doped or coated with materials that made the fuel able to withstand higher temperatures before it began to melt. But the new materials tend to steal neutrons, the sub-atomic particles that are liberated when a nucleus is split and that go on to split other nuclei, sustaining the chain reaction. So, the fuel requires enrichment above 5 percent but below 10 percent. The industry calls that product LEU+.

Using accident-tolerant fuel could increase the safety margin or could allow reactors to operate without quite as many hair-trigger emergency systems to rush in cooling water in case the main cooling system failed. That could cut costs, but whether the savings would justify the extra cost of the fuel has yet to be demonstrated. Widespread use would raise demand for enrichment.

The other change is the approach of advanced reactors. Most of them are designed to use fuel near the top end of the definition of LEU, which is 20 percent. The industry calls this High-Assay Low Enriched Uranium, or HALEU. If that market for HALEU develops as advocates predict, demand for enrichment will rise even more.

The catch is that at the moment, the Russian state nuclear monopoly, Rosatom, is the only commercial source for HALEU, and the developers said after the invasion of Ukraine that they would not source their fuel there.

We can’t have “energy dominance” without advanced reactors. And we can’t have most of those reactors without a domestic supply of HALEU, or, at minimum, a world market in which the West, plus perhaps Japan and South Korea, are self-sufficient in enrichment.

But if the Russian state nuclear monopoly, Rosatom, is let loose in the world market, it will price enrichment to seize a huge slice, to gain influence and foreign currency. Since the fall of the Soviet Union, the United States has set a quota for Russian uranium imports, but arguably, it was too high. We should not make our nuclear industry dependent on Russian exports. The clear solution is either tariffs or outright market restrictions.

Setting Limits

A key economic decision is how much effort to put into scrounging U-235 out of natural uranium. The answer depends on the value of uranium. For most of its history, the Department of Energy and its predecessor agency, the Atomic Energy Commission, harvested roughly half of the U-235 from virgin uranium, but if the price of processed uranium ore dropped, enrichers could use more and recover a smaller portion of the U-235. If it rose, they could use more enrichment. To make a given quantity of fuel, a manufacturer could add extra enrichment to a smaller quantity of uranium, or add extra uranium ore and use less enrichment work. The decision rests mostly on the price of processed uranium ore and the market value of enrichment.

Thus, enrichment shows a high degree of what the economist call “supply elasticity.” The need depends on its price and the price of other segments in the supply chain.

The limit for Low Enriched Uranium is set at 20 percent because governments do not want material in commercial use that approaches the enrichment needed for a weapon. Anything above that is Highly Enriched Uranium. The number commonly cited for weapons-grade uranium is 90 percent, but if the delivery system—air plane or missile or ship—can accommodate a larger core, the enrichment level can be in the 80 percent range.

Along with growing demand for enrichment, as the number of reactors grew and they used higher enrichments, the technology changed. When the U.S. had a monopoly, it used a technology called gaseous diffusion. Uranium in a compound with fluorine gas, called uranium hexafluoride, was forced through a semi-porous barrier, but the two types of uranium pass through the barrier at different rates, so running the gas through repeated cycles allowed substantial enrichment.

But other countries modernized to use centrifuges, which use the same gas to do the same work, with about 90 percent less electricity. The U.S. government privatized its uranium enrichment enterprise but the privatized company, known initially as USEC, for United States Enrichment Corporation, did not modernize, and eventually went bankrupt. Its last plant for enriching uranium closed in May 2013.

The company is now called Centrus, and has developed a new class of centrifuges, but is a small-scale producer at the moment.

Stepping into the gap were two government-owned companies in Europe. One, URENCO, under joint British-Dutch-German ownership, built a centrifuge plant in New Mexico that serves some of the American market. It has announced plans to add capacity. Another, French-owned Orano, would like to build in the United States.

But there are problems, related to the technical details of enrichment. The product, uranium hexafluoride, is a commodity, but the economics of enriching uranium defies common logic.

The first problem is that adding capacity is very expensive. The second is that in other process industries, like oil refining, if demand declines or supply increases and prices fall, producers can respond by cutting production. But once a centrifuge is spinning, engineers do not like to stop it for any reason. Production will continue, and prices will decline further.

A Tough Risk for the Private Sector

There are three other obvious risks. One is that for years, engineers have been trying to figure out how to use lasers to differentially excite the uranium hexafluoride molecules, sorting U-235 from U-238 using less energy than centrifuges do. There is no commercial laser process today, but the Department of Energy recently issued a list of companies that would be eligible for major contracts it would issue for uranium enrichment, under a $3.4 billion program voted by Congress to strengthen the domestic fuel supply chain, and two laser companies were on the list. Technical improvements might let lasers do to centrifuges what centrifuges did to gaseous diffusion.

The second risk to new enrichment capacity is that it may be undercut by reprocessing firms that can flood the market with new fuel by recycling nuclear waste. They might do this because it is cheaper than using virgin uranium, or because governments decide the step is helpful because it reduces the volume of nuclear waste. Reprocessing means chopping up the fuel, dissolving it, and recovering the U-235 that was not fissioned, as well as plutonium-239. When U-238, the dominant isotope, is hit by a neutron, often it absorbs the neutron rather than spitting, and is transmuted into plutonium-239, a good reactor fuel. Most light water reactors in the U.S. can be adapted to use a plutonium-uranium mix. One plant, Palo Verde, was designed for it.

And the third is that another Chernobyl or Fukushima stifles the growth of nuclear energy. Each of those events led to delays in the completion of reactors under construction and gave ammunition to opponents of new projects. The risk of another mishap on that scale is very small, but hard to quantify.

The Non-Market Threat

For the enrichment companies, though, there is another risk, one that is controllable if the Trump administration recognizes the problem. That is that Russia will be allowed back into the U.S. market. Even re-entry into the European market would be a problem for Western enrichment enterprises, because their market share would shrink.

Russia does not mine a lot of uranium, but it does enrich it. In Soviet times, it took uranium from what is today the independent country of Kazakhstan, in central Asia, enriched it and shipped it out through the port then called Leningrad, which is today Saint Petersburg. Post-Soviet Russia can still be a major player in uranium, and is not quite a market-based operator. It will price the product because of a government need for foreign currency, or because it wants to maintain political influence, rather than the traditional economic calculation of whether revenue will exceed costs.

In May 2024, Congress passed a law that seeks to force a phase-out of imports from Russia. The Energy Department can waive the ban until 2028. Before the law, Russian imports were limited to a quota by law.

Russia has enormous capacity to enrich uranium, although nobody is quite sure how enormous. A year ago, the Energy Department estimated that Russia was supplying 44 percent of global enrichment, and 20 to 30 percent of the enriched uranium product used in the United States and Europe. The reason is clear; in the cutthroat electricity market in the United States and elsewhere, reactor operators have been eager to buy from the lowest-priced bidder.

For the twenty years ending in 2013, half of the United States’ enrichment needs were met by Russia diluting high-enriched uranium produced by the Soviet Union for nuclear weapons and nuclear submarine propulsion. The program was a success on a policy level, because it eliminated enough highly enriched uranium to produce 19,000 warheads. But it was devastating to America’s enrichment complex. Not only did enrichment suffer, but so too did the business of converting ore into uranium hexafluoride (the chemical form needed for centrifuges) and “de-converting” it to a solid that could be turned into ceramic fuel for power reactors.

Hence the American nuclear fuel chain was nearly wiped out.

Now the Energy Department is trying to rebuild the U.S. nuclear fuel supply chain. The industry has a chicken-and-egg dilemma because potential suppliers don’t want to invest in the hardware needed to do the work without assurance that the market will develop, and backers of advanced reactors are set back by the fact that there is no ready source for the fuel.

The fix, created by the Biden administration and Congress, was for the Energy Department to function as a strategic reserve, taking in enriched uranium to assure that it would be there when the industry needed it. . The department would stockpile the material as uranium hexafluoride, the intermediate form that could be turned into a variety of fuel forms, depending on the reactor for which it was destined.

The Inflation Reduction Act, provided $700 million for the Department of Energy to begin a “HALEU Availability Program.” And the United States is coordinating with Great Britain, France, Japan and Canada to strengthen supply chains. Collectively, the governments expect to spend $4.2 billion. The Department of Energy said the goal was to “establish a secure and resilient global nuclear fuel supply chain to ensure continued operation and support the growth of nuclear energy deployment around the world free of Russian influence.”

The Trump administration, however, has already laid off hundreds of Energy Department employees and summarily terminated a variety of government programs. And the administration’s approach to Russia has been mostly friendly. At a time of budget cuts, the future of the uranium enrichment program is not certain.

The program does include help for Centrus, which alone among enrichment companies could provide enriched uranium for defense use, unconstrained by international non-proliferation agreements. But its production ability so far is modest. And under Trump, the government is not in a spending mode.

The idea after the Russian invasion of Ukraine was to make the country self-sufficient in uranium fuel processing, but that effort could end up as collateral damage of other Trump policies. The Trump administration, assertively pursuing an “America First” strategy, could easily destroy a cornerstone of energy independence, and one of the key rationales for building more nuclear reactors.