Rare Earths: China’s Unused Trump Card | Australian Markets

In response to Trump, it’s his favorite phrase within the English dictionary, however I’ll be glad when the ‘T-word’ begins to fade from the press… Tariffs.

However earlier than we shelve this subject (for a whereas at the very least), I need to deliver your consideration to at least one of China’s key retaliation efforts in opposition to US tariffs final week…

As detailed on this article from Mining.Com:

China hits back at US tariffs with mineral export curbs

So, right here’s a fast run-down…

Beijing has positioned export controls on tungsten, tellurium, bismuth, indium, and molybdenum, key minerals utilized in US defence, tech, and different high-end manufacturing.

Nonetheless, because the article factors out, export controls fall short of having any actual impression on the US financial system.

As an example, the US is already a main producer of molybdenum.

In different phrases, it doesn’t need China’s provide!

Plus, it has already diversified its provide chains for the opposite 4 commodities listed on China’s export hit listing.

So, what offers?

Why is China going comparatively straightforward on the US?

Mining Memo’s Take

If China actually needs to play hardball in opposition to US tariffs, it should place an export ban on a mineral wherein it does have supply-chain dominance.

On the prime of that listing sits Uncommon Earths (REEs).

In response to the US Geological Survey, China controls 70% of international manufacturing and 90% of processing.

Producers don’t have a viable various to REEs, so any export ban would severely impression parts throughout tech, defence and renewables.

So, what does China’s latest transfer signal?

Given the considerably benign response, I consider the CCP is seeking to deflate tensions with the US.

On the one hand, it’s displaying some motion with its ‘export controls’, however not outright bans.

It’s saving face by doing ‘something.’

On the opposite, it’s minimising any impression on the US financial system.

So, again, what’s the important thing takeaway from this response?

Why volatility Would possibly NOT Reign in 2025

With Trump’s return to the Whitehouse this yr, markets and commentators have been unanimous about one factor:

2025 can be a yr of wild volatility!

However right here’s a completely different take…

What if 2025 seems to be probably the most benign yr in an in any other case tumultuous decade?

How so?

Properly, Trump and Xi Jinping are identified to have mutual respect for one another.

In my thoughts, China’s comparatively tame retaliation to US tariffs final week speaks to Xi’s intention to construct relations, not elevate hostilities.

Trump has additionally mentioned the need for elevated dialogue between the world’s two largest economies.

A backflip from final yr’s aggressive stance in opposition to China.

In actual fact, you can argue that Canada’s latest retaliatory threats in opposition to the US have been far more hostile… America’s closest ally!

These are all the reason why I consider volatility in 2025 may very well be unexpectedly delicate… Led by a de-escalation within the geopolitical wrangling that’s dominated during the last 5 years.

Plus, throw in a potential finish to the battle in Gaza, in addition to Trump’s want to broker peace with Russia and Ukraine…

And We may very well be residing in a a lot completely different world in a few months.

Maybe that’s wishful considering.

However I don’t suppose anticipating at the very least some of these outcomes in 2025 is unreasonable.

And that would have a main impression on markets…

You see, volatility is the enemy of hypothesis.

A minimum of some restoration in China/US relations can be very bullish for base metals like iron ore, copper, and aluminium—commodities pegged to growth.

It may also dimmish the circulate of capital into safe-haven US-dollar-dominated belongings, a function that’s dominated markets this decade.

That may ease the US greenback’s energy and push more traders into rising markets like Asia.

There’s nonetheless a lot to untangle right here, and for now, volatility reigns.

Nonetheless, China’s motion final week speaks to the potential easing between China and US relations.

I’ll be shifting full-time to Mining Memo
from subsequent week

Now, earlier than I depart you as we speak, simply a short observe that I’ll be writing full-time for our latest publication, Mining Memo from subsequent week.

Meaning you’ll be getting my devoted ‘free’ useful resource letter thrice every week… Monday, Wednesday and Friday.

The place I’ll cowl important developments taking place throughout mining with personal insights on why they matter for traders.

By the way in which, when you’ve loved my Mining Memo, thus far, or have any particular topics you’d like me to cowl in a future replace, please let me know!

You’ll be able to attain me instantly at [email protected]

Till then, have a great weekend!

Regards,

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