Tuesday dawned the same way every other day’s dawned since January 20 and the same way every day between now and whenever he decides to leave office will dawn: With everyone talking about Donald Trump.
The White House went ahead with new tariffs on China. Unlike Claudia Sheinbaum and Justin Trudeau, Xi Jinping didn’t rush to get on the phone with Trump. They’re still celebrating the Lunar New Year over there, and Xi’s not the sort of guy who’s going to fall all over himself to appease another word leader.
Beijing immediately retaliated with small-ish taxes on a token amount of US energy products and farm equipment. China also said it’ll initiate a monopoly investigation against Google, a symbolic move that’s not material for anyone. Xi added a few American companies to China’s infamous, but mostly harmless, “unreliable entities” list, including Calvin Klein’s parent company. Apparently, Calvin Klein’s still a going concern. I was genuinely unaware.
More consequential, at least in theory, are new export controls on metals, including tungsten, which the Chinese Commerce Ministry will now require a special license to ship, along with molybdenum powders and a hodgepodge of other products. Without delving into the details, it was another subtle reminder that China’s ready and willing to crimp the flow of defense-related metals and minerals at a time when the West needs to rearm, its stockpiles depleted after three years spent propping up Ukraine.
Broadly speaking, China’s response was described as “measured,” “muted” and so on, leaving the door wide open to compromise whenever Xi gets around to taking Trump’s calls. In all likelihood, Trump will eventually announce a new push to finish the US-China trade deal he spent the better part of two years negotiating during his first term.
If you recall, that effort (Trump’s bid to secure what he variously described as “the biggest deal in history”) ended in deadly humiliation if you make some rational assumptions about the extent to which the Party knew it had a serious problem on its hands in Wuhan when Trump welcomed then-vice premier Liu He to the White House to sign “phase one” of the arrangement.
That signing ceremony was held on January 15, 2020. No sooner was the ink dry than people all over the world started dropping like flies from a horrific viral pneumonia that crawled up out of a cave, or escaped from a lab, or leapt off the back of a caged raccoon dog, whichever COVID origin story you happen to believe.
Anyway, Tuesday’s tit-for-tat between Washington and Beijing should be shrugged off by markets as little more than a reminder of the mutual trade hostilities that exist between the world’s two largest economies. Trump has, of course, threatened new tariffs as high as 60% (or more) on China, and additional escalations are a foregone conclusion.
But with the possible exception of a well-done NY strip smothered in ketchup and served on a solid gold plate by a Hooters waitress in a MAGA hat, Trump would like nothing more than to secure an actual, real bilateral trade agreement with Xi, and all the bragging rights that’d go along with it.
For Trump, a grand US-China trade accord isn’t just the one that got away, it’s the Holy Grail of deals. As the self-declared greatest dealmaker in all human history, the fact that he hasn’t secured it yet is a perpetual source of consternation, and he’ll pursue it to the ends of the earth.
Let’s be honest, he doesn’t care about an actual deal. He cares about concepts of a deal that he can brag about, full stop.
Not sure why any country would bother even trying to negotiate a trade agreement with such an unreliable counterparty.
Because he will give up the farm to gain the optics.
Curious which origin story you believe H
I honestly don’t have an opinion on that.
Word leader indeed. I imagine that is a typo but it works all the same in context.
Tungsten, tellurium, bismuth, indium and molybdenum, my five favorite pizza toppings.
Oxford Energy just dropped a new report on the graphite market. It’s wild how much leverage China has there. One half of lithium batteries (and the biggest part by weight) is the graphite anode. At less than 10% of the cost of a Li-ion battery, people don’t give graphite too much thought, but without it, no battery. When the Clean Vehicle Credit in the IRA stipulated part sourcing from domestic/friendly countries, EV makers lobbied (successfully) for a carve-out for the graphite in their batteries because there were no other sources. If China ever decides to go to the mattresses, cutting off graphite exports will be near the top of the list. They own the graphite market.
From the Oxford Energy report, “With China hosting around 98% of the world’s graphitisation capacity, it is no exaggeration to say that without Chinese anode material, there is no Western battery industry[.]”
Link: https://www.oxfordenergy.org/wpcms/wp-content/uploads/2025/02/Insight-164-Western-Battery-Graphite-Markets.pdf
Graphite, like rare earths, is found and mined in many countries. Canada is a major source. China dominates the supply of refined graphite, like it does rare earths, partly because it dominates the refining and processing of natural graphite, and that is both because it is tolerant of the environmental damage and because it invested in the facilities to do it efficiently. And partly because China periodically increases its production and lowers its price to drive out competing producers in the West and elsewhere. I’ll call that “dumping” even though it may not meet the technical definition.
The US and Australia have been supporting domestic rare earth mining and refining investment, but haven’t to my knowledge done anything to shield domestic industry from Chinese dumping.
On graphite, I don’t know if the US is doing anything to develop its domestic graphite industry. I think the West may be more focused on developing a synthetic graphite industry, but that too will require action on Chinese dumping.
~70% of battery grade graphite is synthetic, the rest being mined. Of that, 76% is mined in China. The bulk of the remaining mining activity is in Africa, which exports effectively all of it to China for processing.
I don’t think it would be too hard for RoW to spin up synthetic production, and it’s not that dirty. It’s very energy intensive, and produces a lot of CO2, but at least CO2 won’t poison your groundwater. It would just take a very long time to build the infrastructure.
Xi will play trump like a fiddle.