Tariffs reignite US-China economic decoupling fears – Petroleum Australia

Report on US-China Trade Tensions and Implications for Sustainable Development Goals

Executive Summary: Geopolitical Tensions Threaten Global Economic Stability and SDG 8

Recent escalations in the US-China trade dispute, marked by new tariffs and retaliatory controls on critical materials, pose a significant threat to global economic stability and the achievement of Sustainable Development Goal 8 (Decent Work and Economic Growth). The resulting market volatility undermines the stable economic environment necessary for sustainable development.

• A 100 per cent tariff on Chinese imports announced by the US President triggered a sharp decline in oil prices.
• Financial markets reacted with significant instability, including a sharp slide in US equities and a surge in gold prices past US$4,200 per ounce, indicating a flight to safety amid rising fiscal and geopolitical risk.
• Analysts warn that the deepening rift is accelerating a “strategic decoupling,” which could severely hamper global economic growth and international cooperation.

Impact on Sustainable Industry, Innovation, and Clean Energy (SDG 9 & SDG 7)

The trade conflict directly jeopardizes progress towards SDG 9 (Industry, Innovation, and Infrastructure) and SDG 7 (Affordable and Clean Energy) by disrupting supply chains for materials essential to modern and green technologies.

1. Critical Material Control: Beijing has expanded its import controls on rare-earth elements, leveraging its global dominance in refining capacity (70-80 per cent).
2. Vulnerable Supply Chains: The US is heavily exposed, importing approximately 80 per cent of its rare-earth elements from China. This dependency highlights a lack of resilient infrastructure and sustainable industrialization.
3. Threat to Green Technology: The new controls specifically target advanced magnet and semiconductor-grade materials vital for key sustainable technologies, including electric-vehicle production and other clean energy applications. This action risks stalling the global transition to affordable and clean energy.

Challenges to Global Partnerships and Responsible Production (SDG 17 & SDG 12)

The escalating trade war undermines the principles of SDG 17 (Partnerships for the Goals) and calls into question the sustainability of current global production models as outlined in SDG 12 (Responsible Consumption and Production).

• The move towards economic decoupling is the antithesis of the global partnership required to address complex challenges like climate change and economic inequality.
• The heavy reliance on a single source for critical minerals demonstrates an unsustainable production and consumption pattern, exposing global industries to severe disruption.
• The use of trade controls as a strategic weapon erodes international trust and cooperation, which are foundational to achieving all Sustainable Development Goals.

1. SDGs Addressed or Connected to the Article

• SDG 8: Decent Work and Economic Growth

  The article directly addresses threats to global economic stability and growth. The trade dispute, described as a “deepening rift” and “economic decoupling between the world’s two largest economies,” leads to market volatility. This is evidenced by the sharp fall in oil prices, the slide in US equities, the weakening of Asian currencies, and the surge in gold prices, all of which are indicators of economic instability that threaten sustained economic growth.

• SDG 9: Industry, Innovation, and Infrastructure

  The article highlights the vulnerability of industrial supply chains, which is a core concern of SDG 9. The focus on China’s control over “rare-earth” minerals, which are “vital to defence and electric-vehicle production,” underscores the lack of resilient infrastructure and industrial capacity in the US. The text explicitly notes that the US “lacks major refining capacity, leaving domestic industries heavily exposed to Chinese processing capabilities,” pointing to a failure in fostering self-sufficient and resilient industrialization.

• SDG 12: Responsible Consumption and Production

  This goal is relevant through the discussion of natural resources, specifically “rare-earth” minerals. SDG 12 promotes the sustainable management and efficient use of natural resources. The article illustrates the opposite: these critical minerals are being used as leverage in a trade war (“China’s decision to leverage rare-earth exports”). This strategic control, where one nation dominates “70 to 80 per cent of global refining capacity,” works against the principles of sustainable and equitable resource management.

• SDG 17: Partnerships for the Goals

  The entire article is a case study on the breakdown of global partnerships. The implementation of a “100 per cent tariff on Chinese imports” and China’s expansion of “rare-earth import controls” are direct contradictions to the spirit of international cooperation and trade partnerships that SDG 17 aims to foster. The narrative of “trade brinkmanship” and a potential “breakup” between the two powers signifies a significant setback for global partnerships for sustainable development.

2. Specific Targets Identified

1. Target 8.1: Sustain per capita economic growth

   The trade war described in the article directly threatens this target. The “fears of an economic decoupling” and the resulting financial market instability (“US equities slid sharply,” “oil prices fell sharply”) are significant risks to sustained economic growth on a global scale.

2. Target 9.b: Support domestic technology development, research and innovation in developing countries, including by ensuring a conducive policy environment

   While the article focuses on the US, the principle of building domestic industrial capability is central. The US’s lack of “major refining capacity” for rare-earths demonstrates a critical industrial vulnerability. The trade dispute creates a hostile, rather than “conducive,” policy environment for developing secure and innovative industrial supply chains.

3. Target 12.2: By 2030, achieve the sustainable management and efficient use of natural resources

   The article shows how critical natural resources (rare-earths) are being managed for strategic geopolitical leverage rather than for sustainable and efficient use. China’s control over the supply chain is used to “inflict greater damage on the other,” which is antithetical to the collaborative and sustainable management ethos of this target.

4. Target 17.16: Enhance the global partnership for sustainable development

   The actions described, such as imposing tariffs and export controls, represent a direct deterioration of the global partnership between the US and China. The “deepening rift” and “structural separation” are the opposite of enhancing partnerships and undermine the stable, rules-based trading system necessary for achieving sustainable development.

3. Indicators Mentioned or Implied

1. Implied Indicator for Target 8.1: Volatility in global financial and commodity markets

   The article provides several data points that can serve as indicators of economic instability. These include the sharp fall in oil prices, the slide in US equities, the weakening of Asian currencies, and the surge in gold prices past “US$4,200 per ounce.” These metrics directly measure the economic disruption caused by the trade dispute.

2. Implied Indicator for Target 9.b: Concentration of global processing capacity for critical raw materials

   The article provides specific figures that can be used as an indicator of industrial vulnerability. It states that China “controls around 70 to 80 per cent of global refining capacity” for rare-earths and “supplies around 80 per cent of total US rare-earth imports.” This high concentration is a measurable indicator of a lack of diversified and resilient industrial infrastructure globally.

3. Implied Indicator for Target 17.16: Use of trade-restrictive measures

   The article explicitly mentions indicators of a failing partnership. The “100 per cent tariff on Chinese imports” and Beijing’s expansion of its “rare-earth import controls” are concrete, measurable actions that signify a breakdown in international trade cooperation and partnership.

4. Summary Table of Findings

Source: petroleumaustralia.com.au