Donald Trump, tariffs and China: interesting times

Opinion

Hey there, time traveller!
This article was published 09/12/2024 (286 days ago), so information in it may no longer be current.

It’s about the long game.

In 1990, Donald John Trump had this to say about himself during a Playboy magazine interview: “The show is Trump, and it is sold-out performances everywhere.” He believed it was true then, and almost certainly believes it’s true now.

Also in 1990, China made the decision to issue a declaration making rare earth minerals protected and strategic minerals — meaning that control of mining and producing the minerals required state approval. The alphabet soup of rare earth minerals — lanthanum, cerium, praseodymium, neodymium, promethium, samarium, europium, gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, lutetium, scandium and yttrium — are key elements in defence production and clean energy technology.

As the U.S. Geological Survey pointed out in 2011, that move saw China become the supplier of 95 per cent of the world’s rare earth minerals by 2008, rising from just 27 per cent in 1990.

China also began strict export controls over the materials, stressing the sale of finished products over raw materials.

It’s a long-game strategic effort that China is following in many minerals, when it can: gain control of supply.

Fast forward to today. U.S. President Joe Biden has brought in tariffs against a series of Chinese products — with Trump promising larger and broader tariffs after he is sworn in as the next U.S. president — and Biden recently ordered restrictions on sales of semiconductors used in AI systems to China.

China’s response came from, shall we say, the ground up. The Chinese government has said it will ban the export of gallium, germanium and antimony to the U.S., and may restrict graphite sales as well. All are raw materials used in the military and high-tech industries.

Like rare earth minerals, China has developed dominance in that supply chain. The U.S. currently imports 21 per cent of its gallium, 35 per cent of its antimony, and 54 per cent of its germanium from China. The materials are used in the manufacture of everything from semiconductors to LCD displays, from fibre-optic systems to solar panels.

Some observers point out that the export ban may not work, because there are ways for American buyers to get around the ban by using importers from other countries.

The ban might even produce some advantages for mining in Canada, to the extent that we have developed supplies of some materials.

The federal government has had to take action to halt Chinese interests from buying stockpiles of rare earth minerals in this country, and to halt the purchase of parts of, or investment in, the Canadian critical minerals sector. Chinese government-backed companies haven’t just been investing in mining ventures in Canada, but in many other countries as well.

And that’s what a true long game looks like.

Now, have a look at that Chinese long game in relation to Donald Trump’s recent threat to bring in substantial new tariffs on virtually any product from China — an across-the-board 10-per-cent expansion of tariffs on that country as soon as he’s sworn in, and suggestions at other times of tariff hikes of up to 60 per cent on goods from China.

Ask yourself what the reaction from China might look like. It could be tit-for-tat tariffs, something that in the end will drive up prices and damage economies everywhere, or it could be much more finely tuned. It might not be turning up the tariffs: it might be turning off the taps.

The long-term sold-out performance stretching all the way from 1990 may indeed be Trump.

But what might end up being more telling is how a vertically integrated, decades-long strategic cornering of many mineral markets can be brought into play in response to that particular show.