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Commodities

Rare Earths: China’s Unused Trump Card

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By James Cooper, Friday, 14 February 2025

James Cooper dissects the latest US-China trade moves from tariffs to mineral exports. Discover why China’s restrained approach could herald a calmer 2025 and how this shift might boost commodity prices over the coming months.

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 Signature

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

All advice is general advice and has not taken into account your personal circumstances.

Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

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James Cooper

James Cooper has been a working geologist in mines across Australia, Canada, and Africa since the early 2000s. He’s led the operations of tiny explorers through to huge producer outfits. He’s seen booms and busts firsthand and he also understands the cyclical nature of individual commodities. For example, James was right there when Barrick Gold launched an enormous $7.5 billion takeover bid for Equinox. That was the peak of the last cycle.

With his background as a geo and finance professional, he brings a unique insight and experience to Fat Tail Investment Research. He writes the broader resource-focused investing letter Diggers and Drillers and the ultra-speculative explorer-focused trading service Mining: Phase One.

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All advice is general in nature and has not taken into account your personal circumstances. Please seek independent financial advice regarding your own situation, or if in doubt about the suitability of an investment.

The value of any investment and the income derived from it can go down as well as up. Never invest more than you can afford to lose and keep in mind the ultimate risk is that you can lose whatever you’ve invested. While useful for detecting patterns, the past is not a guide to future performance. Some figures contained in our reports are forecasts and may not be a reliable indicator of future results. Any actual or potential gains in these reports may not include taxes, brokerage commissions, or associated fees.

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