Rare Earths: China’s Unused Trump Card – Fat Tail Daily

According to Trump, it’s his favourite word in the English dictionary, but I’ll be glad when the ‘T-word’ starts to fade from the press… Tariffs.

But before we shelve this topic (for a while at least), I want to bring your attention to one of China’s key retaliation efforts against US tariffs last week…

As detailed in this article from Mining.Com:

China hits back at US tariffs with mineral export curbs

So, here’s a quick run-down…

Beijing has placed export controls on tungsten, tellurium, bismuth, indium, and molybdenum, key minerals used in US defence, tech, and other high-end manufacturing.

However, as the article points out, export controls fall short of having any real impact on the US economy.

For instance, the US is already a major producer of molybdenum.

In other words, it doesn’t need China’s supply!

Plus, it has already diversified its supply chains for the other four commodities listed on China’s export hit list.

So, what gives?

Why is China going relatively easy on the US?

Mining Memo’s Take

If China really wants to play hardball against US tariffs, it will place an export ban on a mineral in which it does have supply-chain dominance.

At the top of that list sits Rare Earths (REEs).

According to the US Geological Survey, China controls 70% of global production and 90% of processing.

Manufacturers don’t have a viable alternative to REEs, so any export ban would severely impact components across tech, defence and renewables.

So, what does China’s latest move signal?

Given the somewhat benign response, I believe the CCP is looking to deflate tensions with the US.

On the one hand, it’s showing some action with its ‘export controls’, but not outright bans.

It’s saving face by doing ‘something.’

On the other, it’s minimising any impact on the US economy.

So, again, what’s the key takeaway from this reaction?

Why volatility Might NOT Reign in 2025

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

2025 will be a year of wild volatility!

But here’s a different take…

What if 2025 turns out to be the most benign year in an otherwise tumultuous decade?

How so?

Well, Trump and Xi Jinping are known to have mutual respect for each other.

In my mind, China’s relatively tame retaliation to US tariffs last week speaks to Xi’s intention to build relations, not elevate hostilities.

Trump has also discussed the need for increased dialogue between the world’s two largest economies.

A backflip from last year’s aggressive stance against China.

In fact, you could argue that Canada’s recent retaliatory threats against the US were far more hostile… America’s closest ally!

These are all reasons why I believe volatility in 2025 could be unexpectedly mild… Led by a de-escalation in the geopolitical wrangling that’s dominated over the last five years.

Plus, throw in a potential end to the conflict in Gaza, as well as Trump’s desire to broker peace with Russia and Ukraine…

And We could be living in a much different world in a few months.

Perhaps that’s wishful thinking.

But I don’t think expecting at least some of these outcomes in 2025 is unreasonable.

And that could have a major impact on markets…

You see, volatility is the enemy of speculation.

At least some restoration in China/US relations would be very bullish for base metals like iron ore, copper, and aluminium—commodities pegged to growth.

It might also dimmish the flow of capital into safe-haven US-dollar-dominated assets, a feature that’s dominated markets this decade.

That would ease the US dollar’s strength and push more investors into emerging markets like Asia.

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

However, China’s action last week speaks to the potential easing between China and US relations.

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

Now, before I leave you today, just a short note that I’ll be writing full-time for our newest newsletter, Mining Memo from next week.

That means you’ll be getting my dedicated ‘free’ resource letter three times each week… Monday, Wednesday and Friday.

Where I’ll cover important developments happening across mining with personal insights on why they matter for investors.

By the way, if you’ve enjoyed my Mining Memo, so far, or have any specific topics you’d like me to cover in a future update, please let me know!

You can reach me directly at DD@fattail.com.au

Until then, have a great weekend!

Regards,

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