In the global trade poker game, President Xi appears to have overplayed his hand with last week’s unprecedented export controls on China’s rare-earth supply chain. The move has quickly galvanized Western reaction. Japanese Finance Minister Katsunobu Kato said G7 countries “must work together and respond strongly against China,” while German Finance Minister Lars Klingbeil stated G7 nations will develop a joint response to discourage China’s rare-earth controls.
U.S. responses were even sharper, with Treasury Secretary Bessent stating discussions are ongoing with “our European allies, with Australia, with Canada, with India and the Asian democracies…to have a fulsome group response to this.” Bessent also accused top Chinese trade official Li Chenggang of being “very disrespectful” and an “unhinged wolf warrior.” U.S. trade representative Jamieson Greer called the rare-earth controls a “global supply chain power grab” which the U.S. and its allies will not accept.
Japan, Spain and South Korea issued a rare joint statement on Wednesday expressing concern over tumbling copper treatment and refining charges (TC/RCs), warning both smelters and miners cannot develop sustainably under current conditions. Copper smelters worldwide are grappling with falling processing fees and shrinking margins amid tight concentrate supply and expanding smelting capacity in China.
Even with Fed’s balance sheet at $6.6T, systemic liquidity continues to ebb. On Wednesday, U.S. banks borrowed $6.5B from the Fed’s Standing Repo Facility (largest since Covid outside quarter-ends), and the general collateral repo rate touched an intraday high of 4.36% (from Tuesday’s 4.16% close).
IMF Fiscal Affairs Head Vitor Gaspar projected global public debt to exceed 100% of GDP by 2029 (highest since 1948), and in an “adverse but plausible scenario” reaching 123% of GDP by decade-end (just shy of all-time high of 132% just after WWII).
French Prime Minister Sebastien Lecornu survived two no-confidence votes Thursday after announcing plans to suspend a contentious pension law in order to win support in the National Assembly. The French-German 10-year yield spread held at 78bps (down from 89bps last week).
DXY dollar index -0.15%, spot gold +0.9% and spot silver +0.25%.
