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TBL Thinks: US-China Trade War, France Wins on AI in Europe

TBL Thinks

May 17

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Dear Readers,

Welcome back to another week of TBL Thinks. This week we delve into the US-China trade war and how France is positioning itself as a hub for foreign investments and AI innovation in Europe.

TBL Thinks is our way to summarize the most important paywalled, longer reads relevant to global macroeconomics, helping you cut through the noise. With that in mind, please enjoy.

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What did we read this week?

Why the World Has Gone Cuckoo for Copper (WSJ)
- What does this mean? The world’s top copper producer, First Quantum Minerals—a Canadian company operating copper mines in Panama—is in jeopardy after Panama’s top court deemed the contract between the government and First Quantum Minerals unconstitutional. The Biden administration is now in talks with potential investors in the US and entities from the United Arab Emirates (UAE), Japan, and Saudi Arabia about acquiring a stake in the Canadian mining company’s mines in Zambia.
- Why is this important? Copper is a key component in electric cars, transmission lines, and data centers powering AI innovation. The Cobre Panama mine accounts for approximately 1.5% of the world’s copper production. The US, which doesn’t have a domestic mining industry or a government agency specifically dedicated to mining, is finding it essential to build up stores of materials and minerals critical to energy transition.
- Why should you know this? The Biden administration’s involvement to influence US companies and foreign entities acquiring a stake in the Canadian mining company highlights the urgency to ensure control does not fall into China’s hands, preventing it from “tightening its grip on the global supply of crucial metals and materials.” The International Development Finance Corporation, a federal agency that helps finance projects overseas, agreed to invest $740 million in the mining sector last year and is in talks to finance a multibillion-dollar copper mine in Pakistan, which would be among the world’s largest copper projects. Chinese miners, with government backing, are also rapidly snapping up assets around the world. The CEO of TechMet, an American company with stakes in lithium, cobalt, nickel, vanadium, and rare-earth miners, went on record to state we are in a second cold war, in a competition between Western values and dictatorship.
- Why are we watching this? TBL is closely watching the US-China trade war (or technology war, or cold war, depending on how one classifies it) between the two countries intensify. The Biden administration recently imposed new tariffs on Chinese clean tech exports—the US raised levies on semiconductors, batteries, solar cells, and critical minerals, in addition to previously reported increases on steel, aluminum, and electric vehicles. It is also worth noting that none of the tariffs imposed on China by Trump during his term will be reduced. Biden’s changes are set to take place over the course of the next two years and are more targeted than Trump’s proposed 60% flat tariffs, with the biggest jump for electric vehicles, as the tariff quadrupled. Another industry being targeted with increased tariffs is that of semiconductors, where the tariff will double from 25% to 50% by 2025 as the administration works to bolster US production with billions of dollars in subsidies. Remember that trade wars are inflationary, because cheap Chinese goods that undercut global prices are no longer as cheap in a trade war, preventing this deflationary force from counteracting today’s inflationary influences.

France Scores $16 billion from Microsoft, Amazon and Others at Foreign Investment Summit (WSJ)
- What does this mean? In the recently held Choose France summit, an annual flagship event launched in 2018 held at the Palace of Versailles to showcase French economic appeal and attract leaders from large multinational organizations, President Emanuel Macron announced investment commitments to the tune of $16.16 billion or EUR 15 billion from tech giants Microsoft, Amazon, Pfizer, and AstraZeneca. This large investment injection is expected to create over 10,000 new jobs and is a resounding endorsement for France as a key hub for foreign investors in Europe.
- Why is this important? Paris, though it has always lagged behind other international financial hubs such as New York or London, is very attractive in Europe for international investors. Microsoft is expected to invest close to EUR 4 billion in cloud and AI infrastructure, along with launching an AI skilling initiative to train 1 million French people by the end of 2027, while Amazon’s EUR 1.2 billion investment will go towards its logistics, AI, and cloud services. France is also positioning itself as an AI hub in Europe, and the investments will help build the data infrastructure critical to support fast-growing, home-grown start-ups like Mistral AI.
- Why should you know this? In an interview in Versailles, Macron also appealed for a consolidation of Europeans in a bid to provide a single-market approach in the name of increased efficiency. Macron further stated in an impassionate interview that in the face of Russia’s war with Ukraine and a steady deterioration of global trade, only unlocking the European bloc’s financial power and cutting back on regulation inside the single market would give the European Union a chance to go toe-to-toe with China and the US.
- Why are we watching this? TBL is watching the evolution of European politics, as Germany clearly has lost influence as the clear-cut leading voice of Europe. Too soon to start quoting French government yields instead of German yields, however. Who wins the AI race within Europe matters, and it looks like France just secured an edge.