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Trump’s bravado fails to spook minerals market – so far

The minerals and metals sector dipped slightly on Donald Trump's presidential election victory but has remained largely resilient to talk of tariffs Unsplash/Pedro Henrique Santos
The minerals and metals markets dipped slightly on Donald Trump's presidential election victory but have remained largely resilient to talk of tariffs
  • Market down since Trump’s election
  • Unaffected by tariff plans
  • China role looms large

Ordinarily, commodity markets tend to react strongly when leaders of major global economies announce plans for war and conquest.

If those plans involve disrupting one of the world’s most important sea lanes and reversing centuries of peace with two major allies, you might even expect a certain panic.

Yet, when US President-elect Donald Trump declined to rule out the use of military force to take control of the Panama Canal and Greenland – and “economic force” to take over Canada – the reaction was muted. 

The day Trump made his statements, the benchmark Bloomberg Industrial Metals Index began at $140.94. At the end of the following day, it stood at $140.98.

Bloomberg reported that on January 7, traders were more concerned with slight changes in US service sector activity than with Trump’s incendiary comments.

Similarly, President Trump’s threats of 60 percent or even 100 percent tariffs – and the potential for retaliatory action – have led to a “more muted reaction than might be expected”, Ionut Lazar, principal consultant at market analyst CRU, tells AGBI.

So what does Trump’s second term as president mean for the Gulf and its minerals and metals markets in particular? 

Is there really no cause for alarm?

Damage already done

One assessment of muted market reactions is that what Trump says is just “Donald being Donald”. 

“Trump’s controversial statements will create an increased amount of volatility until the market gets used to bombastic statements that often lead to no change,” says Ole Hansen, head of commodity strategy at Saxo Bank.

For minerals and metals, that muted response may also be because some of the damage has already been priced in. In the period from Trump’s election on November 5, 2024 to January 16, the Bloomberg Industrial Metals Index showed base metals down 4 percent, while gold and silver fell 1.25 percent and 5.5 percent respectively. 

This was “in anticipation of a stronger dollar and hawkish Trump policies on China”, Vijay Valecha, chief financial officer of Century Financial, tells AGBI

“For the metals markets, one of the significant risk factors is the complete deterioration in US and China ties,” Valecha says.

That relationship has been deteriorating for some time, however, and markets are becoming used to a more fortress-like USA. 

“The drawbridges have been inching up since Trump’s first time,” says Lazar, “and were not lowered meaningfully when Trump was out of office.”  

Nonetheless, changes so far may be insignificant compared with what lies ahead. 

Trump has threatened 60 percent or even 100 percent tariffs on Chinese and Brics imports respectively. China is, of course, also part of Brics. 

This “could be disastrous for the entire commodity supply chain”, warns Valecha. “China is a major exporter and refiner of key commodities, including steel, aluminium and others. Imposing tariffs would mean a higher input cost for global economies.”

A recent German Economic Institute report suggested Trump’s proposed tariffs could knock 0.6 percent off global GDP in 2025, and 1.1 percent by 2028.

For the GCC, this growing protectionism and slowing global growth is also a major concern.

“Mainland China is the bloc’s largest trading partner,” says Valecha. “The impact of China-based events would profoundly impact the metals and minerals markets over here, owing to the overall exposure to Chinese space.”

Yet, the Gulf’s good relations with China have also enabled it to become a central location for some “ex-China” industries – Chinese-financed, but locally incorporated businesses.

These include manufacturers of solar panels, batteries and other energy transition-related trades, all with a big need for minerals and metals. 

“The Gulf is well positioned to develop into a major hub for the metals processing trade,” CRU’s Lazar says.

As the Gulf states typically enjoy good relations with the US, too, these ex-China businesses may prove essential workarounds for US-China tariff barriers.

South-South growth

The Gulf’s growing intermediary role also highlights the potential of new bilateral and multilateral trading arrangements emerging from the Trump tariff wars. 

“Free trade agreements (FTAs) will be a key mitigant for the risk of value chain disruption,” Lazar says. 

The GCC and the EU rebooted their talks on an FTA late in 2024, while the UK and Australia are both strengthening their ties with Saudi Arabian mining. 

Elsewhere, in December 2024 the giant South American Mercosur-EU free trade deal in which critical minerals form a major part, was finally signed.

India, meanwhile, is currently in FTA negotiations with the UK, EU and the Eurasian Economic Union. 

“Ultimately, the market cannot go fully insular,” says Lazar. “The opportunity is there to create trade and value chain enablers for material to continue to move; not freely, but reliably.”

The Gulf may turn out to be the reliable partner all sides in the coming trade wars will need.