What on earth is Xi playing at? Upside for Albanese as Trump fumes
The American president’s tussles with China’s leader over trade are a familiar mix – but what on earth is Xi playing at? For Australia, the superpower struggle brings opportunity.
Two days after threatening to thump China with a 100 per cent tariff, Donald Trump seemed anxious to calm things down – with investors if not Xi Jinping.
“Don’t worry about China, it will all be fine! Highly respected President Xi just had a bad moment,” the American president wrote on his platform Truth Social.
“He doesn’t want Depression for his country, and neither do I. The U.S.A. wants to help China, not hurt it!!!”
The American president seemed to be much more concerned about sharemarket sentiment than the Chinese leader’s feelings.
Trump’s soothing comments came days after his latest China tariff threat triggered the biggest slump in America’s sharemarket since April. The S&P 500 fell 2.7 per cent while the Nasdaq Composite tumbled by 3.6 per cent.
Some are calling his change of tone over the weekend the “mega TACO” – proof, they argue, that “Trump Always Chickens Out”.
Australian investors may be less critical. Trump’s later comments took a lot of the sting out of Monday’s session. The ASX 200 closed down less than 1 per cent.
The American president’s threats, feints and rolling commentary as he tussles with China’s leader over trade are a familiar mix — but what on earth is Xi playing at?
Trump’s market-moving eruption was in response to a startling new regime of rare earths and critical minerals restrictions that Beijing unveiled to the world, with no warning, last Thursday.
“This was a real surprise, not only to me, but to all the Leaders of the Free World,” Trump wrote on Friday.
In response to a chorus of fury in Washington, Beijing has remained monotonously on message.
China’s commerce ministry blamed America for all the trouble, arguing Beijing’s latest restrictions were simply countermeasures to new tech restrictions imposed by Washington.
“China’s position on tariff wars has been consistent: we do not want to fight, but we are not afraid to fight,” China’s commerce ministry said on Sunday.
That will be little comfort to the rest of the world who are also caught up in Beijing’s new regime of sweeping export controls, which threaten to disrupt global supplies of critical minerals and rare earths.
European, Japanese and South Korean car makers and advanced manufacturers had already been sweating about problems sourcing rare earths after Beijing’s earlier restrictions. China’s new measures greatly expand the number of products and companies potentially in Beijing’s crosshairs.
The new regime is due to take effect on November 1, when Xi is to join Trump and other leaders at an APEC meeting in South Korea. Trump took the timing personally — as, presumably, was Xi’s plan.
“There is no way that China should be allowed to hold the World ‘captive’, but that seems to have been their plan for quite some time, starting with the ‘Magnets’ and, other Elements that they have quietly amassed into somewhat of a Monopoly position, a rather sinister and hostile move, to say the least,” he said.
America’s president is hardly the only person to share those concerns, but he is a rare world leader to speak about them so publicly.
China hawks in the Trump administration, and across much of the American foreign affairs and security establishment, hope the President’s fury will translate to measures targeted at Beijing.
But Trump has additional things on his mind right now. He doesn’t want to provoke a sharemarket collapse, which would be all but inevitable if he goes ahead with his threat to impose 100 per cent tariffs on China on November 1.
Trump also wants to get relief for American farmers, who are being squeezed by Beijing.
Last year, Chinese buyers bought almost $20bn ($US13bn) worth of American soybeans, around half of America’s exports of the crop.
This year, they have not made a single order.
Trump had hoped – and likely still does – that a meeting with Xi in South Korea on the sidelines of an APEC leaders’ summit will end China’s ban.
All sorts of genius is being credited to Xi for this latest provocation of Trump. Some argue China’s leader is revelling in Trump’s inability to counterpunch without triggering a run on American markets.
Xi, goes the argument, is using this exchange to demonstrate his country’s might to a global audience. With more than three years of Trump’s second term to go, China’s leader has placed a huge bet on himself.
For Australia, the superpower struggle brings opportunity – although Canberra is wise to not shout about it.
With such a modest domestic manufacturing sector, few rich world economies have less direct exposure to Beijing’s new restrictions.
Meanwhile, Australian farmers, particularly our beef exporters, are among the biggest beneficiaries of the China troubles of their American counterparts. Australia’s gas companies are also profiting from a blacklisting of American gas by Beijing.
Meanwhile, the latest rare earths and critical minerals restrictions are a perfect backdrop to Prime Minister Anthony Albanese’s upcoming trip to the White House as he seeks American investment in Australian suppliers.
And is Trump really going to renege on the China-focused AUKUS agreement weeks after Xi’s latest affront?
All in all, not a bad backdrop as Mr Albanese goes to Washington.
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