China responds to tariffs by weaponizing exports of rare earth minerals and magnets to the US.
Welcome to Talking Business, a podcast produced in Melbourne Australia. The podcast is available on the Acast site, my own website, the Apple Podcast store or wherever you go to get your podcasts. Or you can get it at the Business Acumen website at www.businessacumen.biz.
For the most exclusive access to leading economists and business leaders from around the world, subscribe to Talking Business from my website leongettler.com.
I am Leon Gettler. My job is to review and monitor the week’s news in business, finance and economics. I bring it all to you, every week.
This is episode number 10 in our series for 2025 and today we present the Easter show. It’s Friday April 18, Good Friday.
First, I’ll be talking to I’ll be talking to Professor Sven Rogge from the University of NSW on The Pact for Impact, an initiative that strengthens partnerships between academics, industry, and the broader community by measuring the real-world impact of scientific research and development.
And I’ll be talking to EY Regional chief economist Cherelle Murphy about the spending promises and patterns for the government in its budget and the Opposition’s promises in terms of fiscal restraint and what the economy needs.
But first, let’s talk to Sven Rogge.
So what’s happening in the news.
Asset management company BlackRock CEO Larry Fink says the US might already be in recession. Or getting close to one as a result of President Donald Trump’s tariffs. “I think we’re very close, if not in, a recession now,” Fink said on CNBC’s “Squawk on the Street.” “I think you’re going to see, across the board, just a slowdown until there’s more certainty. And we now have a 90-day pause on the reciprocal tariffs — that means longer, more elevated uncertainty,” he said. Al this uncertainty around the U.S. plunging into a recession has accelerated after Trump implemented his far-reaching tariffs, instituting a flat 10% import tax on all goods coming into the U.S. and higher-tier reciprocal tariffs against dozens of countries. On Wednesday last week, Trump said he would halt most of the tariffs for 90 days, but would increase those targeting Chinese goods to 125% on top of the 20% one already levied earlier this year. Beijing said that it would fire back with its own 125% tariff on US goods. “This is not a pandemic. This is not a financial crisis. This is something that we’ve created. As I said, also on Monday, United States, post World War II was a global stabilizer. We are the global destabilizer,” BlackRock’s CEO said
And in an extraordinary and unexpected measure from Trump, a US customs messaging note quietly slipped out in the early hours of Saturday a series of numbers listed as exempt from the 125% tariff on goods from China. On the US customs list, the code “8517.13.00.00” represents smartphones. In other words, the number one Chinese export to America by value last year was exempted from the import taxes, alongside other electronic devices and components, including semiconductors, solar cells and memory cards. So Trump has now excluded the single biggest Chinese export, and certainly the most high-profile finished good from tariffs, without publicly announcing it at first. And it was all Trump. US Commerce Secretary Howard Lutnick just days ago announced that part of the point of escalating tariffs on China was to bring back iPhone production to the US. Trump knows that Lutnick was talking BS, that’s not going to happen while he’s president. In response, and keeping face, Lutnick said the tariff relief on electronic devices is only temporary and new tariffs on tech devices will come into effect within the next month or two. So we’ll see. According to Counterpoint, a global technology market research firm, as much as 80% of Apple’s iPhones intended for US sale are made in China. Apple’s manufacturing profit margins are estimated to be between 40-60%. Typical iPhone prices might have moved closer to $US2000 ($A3177.92) than $US1000 ($A1588.96) A very public repricing of iPhones has been avoided, but still may occur if, as the White House has said, the previously imposed 20% tariffs on China related to the powerful opioid fentanyl, remain in place.
China has weaponised its role as a supplier of minerals to the US in response to its tariffs by suspending exports of a wide range of critical minerals and magnets, threatening to choke off supplies of components central to automakers, aerospace manufacturers, semiconductor companies and military contractors around the world. Shipments of the magnets, essential for assembling everything from cars and drones to robots and missiles, have been halted at many Chinese ports while the Chinese government drafts a new regulatory system. Once in place, the new system could permanently prevent supplies from reaching certain companies, including American military contractors. The official crackdown is part of China’s retaliation for President Trump’s sharp increase in tariffs that started on April 2. If factories in Detroit and elsewhere run out of powerful rare earth magnets, that could prevent them from assembling cars and other products with electric motors that require these magnets. Companies vary widely in the size of their emergency stockpiles for such contingencies, so the timing of production disruptions is hard to predict. The so-called heavy rare earth metals covered by the export suspension are used in magnets essential for many kinds of electric motors. These motors are crucial components of electric cars, drones, robots, missiles and spacecraft. Gasoline-powered cars also use electric motors with rare earth magnets for critical tasks like steering. The metals also go into the chemicals for manufacturing jet engines, lasers, car headlights and certain spark plugs. And these rare metals are vital ingredients in capacitors, which are electrical components of the computer chips that power artificial intelligence servers and smartphones. China’s Ministry of Commerce, which issued the new export restrictions jointly with the General Administration of Customs, has barred Chinese companies from having any dealings with an ever-lengthening list of American companies, particularly military contractors. Rare earth magnets make up a tiny share of China’s overall exports to the United States and elsewhere. So halting shipments causes minimal economic pain in China while holding the potential for big effects in the United States and elsewhere. Chinese customs officials are blocking exports of heavy rare earth metals and magnets not just to the United States but to any country, including Japan and Germany. But then, Japan and Germany are talking to China.
And with last week’s U-turn on tariffs, as a result of Trump blinking because of the bond market, the US claims other countries will turn to the US because they need its market and consumers. That’s not the way the rest of the world sees it. Ever since the November election, trade officials from Asia to Europe and South America have been seeking ways to diversify their economies away from a US with Trump determined to shred the global trading order. Those efforts have only accelerated since Donald Trump’s “liberation day” tariff package unveiled on April 2. Economic ministers from across south-east Asia met on Thursday afternoon for emergency talks. Meanwhile, the EU stepped up discussions this week with trading partners from the Middle East to the Asia-Pacific region. In recent weeks, government officials from several south-east Asian nations have visited countries as far flung as New Zealand, France, Brazil and India to discuss strengthening trade ties. These talks are building on several longer term initiatives. The aim: signing free trade agreements that cover huge geographic areas. Top trade officials and economists see a seismic shift under way. Much of the world is doubling down on globalisation while the US turns its back on the postwar trading system it played such a central part in forging. “This is the end of an era,” says Vivian Balakrishnan, Singapore’s foreign minister. “The recent developments have convinced us that we need to accelerate this process of making common cause for multilateralism, economic integration, free flow of trade and investments and technology with as wide a group as possible.”
In another extraordinary piece of news, in a second day on the stand of a landmark anti-trust trial Mark Zuckerberg, the chief executive of Meta, said on Tuesday that he bought Instagram and WhatsApp because it was difficult to build new apps and dodged questions about whether he was trying to snuff out competitive threats to his company. “Building a new app is hard,” he said when asked why, in one 2012 email that was presented, he had seemed intent on buying Instagram. “We’ve probably tried building dozens of apps over the history of the company, and the majority of them don’t go anywhere.” Mr. Zuckerberg’s testimony is central to the antitrust trial being held in the U.S. District Court for the District of Columbia. The chief executive spent several hours on Monday answering questions from lawyers as they tried to make the case that Mr. Zuckerberg saw the other apps as rivals that he needed to take out. During the questioning, which at times became contentious, Mr. Zuckerberg frequently said he didn’t remember his thought process for certain emails. The case, Federal Trade Commission v. Meta Platforms, poses a consequential threat to Mr. Zuckerberg’s business, which he co-founded as Facebook in his Harvard dorm room in 2004. The F.T.C. is asking Judge James E. Boasberg, who is presiding over the case, to find the company guilty of using a “buy or bury” strategy to kill off competition by acquiring nascent rivals like Instagram and WhatsApp. Meta bought Instagram in 2012 for $1 billion and WhatsApp in 2014 for $19 billion. If successful, the government is likely to ask the judge to break up Meta through selling off the two apps. In his testimony on Tuesday, Mr. Zuckerberg defended Meta’s acquisition of Instagram, describing the transaction as business as usual for a tech company. He said it was typical for businesses to weigh the benefits and costs of developing new products internally versus buying start-ups with products they wanted to add. “We were doing a build-vs.-buy analysis,” Mr. Zuckerberg said, referring to Instagram, which competed with Facebook’s Camera app. “I thought that Instagram was better at that, so I thought it was better to buy them.” On Tuesday, lawyers for the F.T.C. pressed Mr. Zuckerberg to explain internal communications that preceded the purchases of Instagram and WhatsApp. His notes — some of which date back 15 years — detailed fears about how his social media company, then known as Facebook, could compete on mobile devices. FTC lawyers pointed to email correspondence from 2012 between Mr. Zuckerberg and his top executives in which they traded candid thoughts on employee performance, potential and past acquisitions, and the threat of upstart competitors. In another email, in 2013, Mr. Zuckerberg told executives to block foreign competitors, including popular Asian messaging apps like Kakao and WeChat, from advertising on Facebook. “Those companies are trying to build social networks and replace us,” he wrote. “The revenue is immaterial to us compared to any risk.”
In the lead-up to the Australian election on May 3, PM Anthony Albanese and Opposition leader Peter Dutton have thrown caution to the wind with big spending promises. For his part, Peter Dutton has promised tax-deductible mortgage interest payments and a one-off $10 billion tax cut. Anthony Albanese has pledged another $12 billion in competing cost-of-living and housing measures with a promise that all first home buyers will be able to enter the property market with just a 5% deposit from next year. Both leaders unveiled these at their campaign launches on Sunday night. All these promises come on top of a budget mired in debt and deficit. Neither Albanese or Dutton announced any savings measures to offset this spending. And economists have condemned both parties for what they call as reckless spending. They say these housing measures won’t do much to approve affordability. They say Dutton’s mortgage affordability policy and Labor’s 5% home deposit policy would worsen Australia’s housing affordability problems. Former Reserve Bank of Australia governor Ian Macfarlane said both Labor and the Coalition’s policies would push up demand for housing and cause prices to rise.
From January 1 to April 15, the Labor party has spent $3.97 million on digital advertising across all Google and Meta platforms, which include Google search, Youtube, Instagram, and Facebook. This also includes a modest $6,300 spend on Snapchat, a platform with a largely underage userbase. The Liberal Party has been more modest with its advertising spend, shelling out $2.08 million across the same platform, avoiding any Snap spend. Clive Palmer’s Trumpet of Patriots party, however, has leapt into Snap advertising, spending $610,680 on the platform. The party has also spent $3.48 million on Google platforms, and just $218,964 on Meta properties. This is a total digital spend, to date, of $4.31 million. In addition, Palmer has spent over $4.1 million on television advertising in the metro markets, and a further $123,000 in metro radio ads, with pricing based on average rates. For comparison’s sake, Labor has spent $1.71 million on metro TV advertising, and approximately $824,000 on metro radio, while the Libs have spent a relatively modest $622,500 on metro TV, and $522,650 on radio ads.
The Trump administration’s trade war has created many losers; the list of winners is somewhat shorter. One of the more surprising? Australia’s almond industry, which is stepping in to fill the void left by steep barriers on imports from California, the source of 80% of global production. Sales of Australian almonds to China have been growing for years. Now their biggest rival, the United States, has been locked out of a growing market amid a trade war between the world’s two largest economies. American almonds face not only Chinese tariffs but have been singled out by the European Union as one of the most likely industries to be targeted should Trump proceed with proposed tariffs on their goods. The chief executive of the Almond Board of Australia, Tim Jackson, said prices for Australian almonds have climed 20% in the past five weeks and could head even higher. That’s great news for the country’s 160 growers.
And finding someone to fix your EV is hard, and will get harder. Delays repairing electric vehicles are a symptom of a shortage of qualified technicians. Collin Jennings, the head of government relations at the Motor Traders’ Association of NSW, said around the country there is an estimated shortage of 7000 EV technicians. Australian Automotive Aftermarket Association chief executive Stuart Charity said there is a “big gap in the demand and supply of skilled technicians”, with only about 10% of mechanics able to service and repair electric vehicles and only 40% of advertised jobs for the EV roles filled. “We know there is a lack of charging infrastructure and issues around upskilling existing technicians to work on EVs,” he said. “That’s having knock-on effects on the waiting times to have EVs repaired, with the potential for insurers to write off vehicles that could have been repaired because it can’t be done in an appropriate period of time.”
And that’s it for this week.
And next week, I’ll be talking to Margot Faraci, a senior executive and global leadership expert with over two decades of experience in the corporate world. We will discuss all things about toxic leadership, work culture, bad managers, and psychologically unsafe work environments.
And I’ll be talking to independent economist Saul Eslake about the government and opposition platforms in the lead up to the election and their spending.
For the most exclusive access to leading economists and business leaders from around the world, subscribe to Talking Business from my website leongettler.com
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