May You Live in Interesting Times: Hedging for the | Australian Markets

This historical Chinese expression, deemed a curse, is coming to bear on the Australian financial system quickly.

Do we persist with Team USA or shift allegiance to China?

For a long time, Australia has sidestepped this uncomfortable dilemma… selecting to have its cake and eat it too.

What do I imply?

We’ve adopted US ideology, thrown billions at AUKUS, and allowed the US to construct navy bases all throughout the nation.

If America tells us to leap, we bounce… From the Vietnam War to Afghanistan to main anti-China rhetoric.

Australia lives in a world of contradiction, aligning itself with Uncle Sam however persevering with to chew the hand that feeds it, China.

Recall Australia was one of the first international locations guilty China for its function in the Covid-19 pandemic.

Meanwhile, China continues to pour billions into our financial system, supporting Australia’s huge wealth.

But choice day is coming… Australia might be pressured to select a facet sooner than most count on.

So which direction ought to it go?

If it chooses America, it might have main financial penalties as China seeks various suppliers for its uncooked supplies.

But stepping away from the US leaves Australia ‘vulnerable’ and alone in China’s huge and growing sphere.

To show you what I imply, right here’s a graphic printed by the Northern Miner final weekend:

This reveals the place the battle strains might be drawn as the international financial system divides into separate ‘spheres of influence.’

These theorised alliances are based mostly on copper provide however offer an analogy for all international trading.

In this state of affairs, the US aligns with its southern neighbour, South America.

The world’s largest copper-producing area and total mineral-rich continent.

Forget Greenland. Forget Ukraine. This is the US’s most vital advance if it desires to secure provide chains.

In phrases of China, it has been getting ready for this occasion for years… Throwing trillions at its Belt and Road Initiative.

Developing highways, railways and ports to attach Asia, the Middle East, Russia, Eastern Europe, and Africa to the Middle Kingdom.

This might be a monumental energy battle, and as I’ve highlighted for years… Commodities stay the frontline battleground.

And Australia sits in the Cross-hairs

No different nation has a lot to lose from this new fragmented world order:

China, our most important trading associate, is in a trade struggle with our long-term ideological associate and protector, Uncle Sam.

That places Australia in a more weak place than most.

So, there’s no telling which direction this might go or how large the penalties might be.

One factor’s sure: buyers might be anxious as the international financial system embarks on its most important change in many years.

‘May you live in interesting times.’

This has by no means been so apt for the Australian financial system.

So, has our luck became a curse?

Perhaps.

But let’s have a look at this one other manner…

Whether Australia begins to unpeg its alliances with the US or decides to diversify trade away from China, we maintain one critically important ace.

Australia is a commodity-rich nation.

And sources might be the solely recreation for buyers in this new fragmented world order.

Why?

Well, take into account this: if manufacturing declines in China amid US tariffs, one other nation will need to step in and produce these items.

Consumption might drop, nevertheless it gained’t finish.

Whether manufacturing shifts to the US or a newly fashioned Trump trading alliance… Korea, Japan, Mexico, India, or a mixture—new hubs have to be constructed.

The early 2000s build-out of China’s manufacturing empire gives a blueprint for what this may appear like relating to the demand for uncooked supplies.

So, play it again, Sam.

If Trump will get his manner, a new infrastructure capex growth might be on the horizon.

Think copper, iron ore, aluminium, zinc, nickel, and vitality.

This is what the US (and its companions need) if it desires to rebuild manufacturing outdoors China.

That’s why industrial metals stay a contrarian hedge in opposition to Trump uncertainty. Perhaps it’s one thing to think about earlier than the subsequent tariff deadline hits.

June 15, 2025. The clock is ticking!

Until subsequent time.

Regards,

James Cooper,
Editor, Mining: Phase One and Diggers and Drillers

All advice is normal advice and has not taken under consideration your personal circumstances.

Please search impartial financial advice relating to your own scenario, or if in doubt about the suitability of an investment.