I’d set myself a challenge of not writing about Donald Trump in this month’s column. Unfortunately, as you are about to read, I failed miserably.
The velocity with which the US President is enacting his goals has taken the world by surprise and the sense of disorientation spans geopolitics, business and markets.
I wrote last month that the optimists will see Trump’s arrival as generally good for business and markets but traditional thinking must now be abandoned. His quest to cut red tape and lower taxes may well provide benefit but the ramifications of his protectionist policies and disruptive moves could be more damaging.
These are the sectors most under scrutiny:
Ukraine and rare earths
Rumours abound that Trump will demand access to Ukraine’s critical mineral reserves or revenues as compensation for assisting the country in its war against Russia.
While a mineral-rich country, there are no defined rare earths reserves in the country and certainly no commercial-scale mines.
If anything, the US would find it easier to access material from elsewhere – particularly Australia. And, unlike the oil sector where its companies are industry leaders, the US boasts few genuine mining companies, most are domiciled in Canada or elsewhere.
So, even if Washington does gain access to Ukrainian minerals, there is currently no framework to do anything with them.
Battery minerals
The worry for battery minerals miners is that Trump’s anti-climate change stance will lead to a retreat from EVs and renewables and therefore a drastic reduction in demand for lithium and other materials.
Again, there are confusing signals coming out of Washington. There was an assumption that Trump would only intensify the push for mineral supply chain independence taken up by Biden. The fact that many of the Inflation Reduction Act (IRA) facilities are being built in Republican states was thought to be a bonus with senators desperate to retain these programme.
So far, Trump hasn’t had time to sign any executive orders over the supply chain funding from IRA so perhaps he’ll forget about it and leave it in place. Elon Musk, however may, through his Department of Government Efficiency role, take it on, betting that Tesla is well enough established to manage the removal of the incentives while its rivals cannot.
Australia and international trade
Away from the geopolitics of critical minerals, it is still difficult to assess what Trump will mean for commodities in general, but the early signs are not good.
Tariffs on steel and aluminium will have a direct impact unless Prime Minister Anthony Albanese can find a carve-out, while China’s fragile economic recovery could be blown off course by the tariff situation, affecting iron ore prices.
For metals which rely on global economic growth (most of them) Trump’s disruption could cause demand slumps as inflation hits and global markets go into retreat.
It had been assumed that Trump’s trade war with China would force Australia into an awkward choice, but it already appears Trump is willing to work with Xi Jinpeng and Vladimir Putin.
In a worst-case scenario, Trump’s appeasement of Russia and apparent eagerness to cosy up to Putin and Xi could imperil Australian mineral sovereignty. Where Australia currently knows it has US support from the more extreme avarice of China, a return to the great powers era and imperial spheres of influence could see the Americans abandon the Asia-Pacific, leaving Australia and its vast mineral wealth more vulnerable to Chinese influence.
Africa and USAid
That may be an extreme reading but having been in Cape Town with more than 10,000 other delegates for the Mining Indaba last month, assumed threats to Australian mining interests in Africa are not outlandish.
The trashing of USAID could extinguish the West’s tenuous hold of African governments’ attention. There has long been mistrust of the US, a feeling it doesn’t really care for the continent and rarely puts its money where its mouth is, but the significant donations through USAID helped keep the US relevant and Australian government and business has often partnered with USAID on the continent in various programmes.
The withdrawal of that funding will severely hamper such programmes and make it even more difficult for Australian mining to compete with rivals for major projects in Africa.
China is already the prevailing superpower on the continent and continues to use its influence to win mineral concessions, while Russia is an emerging player in West Africa. In the last two years we have seen control of Africa’s two largest lithium projects wrested from Australian hands and placed under the stewardship of Chinese companies.
It is a trend which will only increase with a US retreat from the continent and Australian companies in Africa should be very concerned by the developments.