Fortescue's Forrest on Tariffs, Copper, Climate Change

00:00 Speaker A

Talk to me about this threat of secondary tariffs sort of a made up term from the president here. What is the potential impact of that on the tit for tat and pending trade war that we are seeing?

00:17 Speaker B

Well, you’re right, it is a bit of a new term. I mean, he might be borrowing it from the idea of secondary sanctions which is something we’ve used in Venezuela and also in the oil industry. Um the largest importer of Venezuelan oil right now is the PRC. Uh much of the oil that’s being exported by Venezuela is using the exact same shadow fleet that is developed to circumvent the oil price cap in Russia. So basically anybody who’s importing Russian oil right now, they’re also probably importing a decent amount of uh Venezuelan oil. So this would increase tariffs on the PRC which we’ve already put on universal tariffs of 20%. So that would probably result in some retaliation and furthering of this trade war.

01:26 Speaker A

And as someone who has worked in international trade, the economics of international trade, how do you rate this idea that April 2nd is going to give investors more clarity on tariffs and that maybe April 2nd we will get clarity on negotiations that make these tariffs not so bad for markets.

02:01 Speaker B

I’m the only thing I’m sure about of April 2nd is there’ll be remaining uncertainty afterwards. I mean, you know, as your previous speaker just mentioned, you know, there it may not come in every single way that they’ve talked about, it kind of can’t possibly do so. A full reciprocal tariff regime would be a change of 2.6 million new tariff codes which is not going to happen. Um but we’ll probably see some increases in tariffs. Um and I don’t think they’ll be fully imposed, so it’ll increase uncertainty. Um and I think this is a really key point because to the degree to which we’re trying to give our partners incentives to respond to us, if we’re trying to give industry incentives to invest in the United States, uncertainty does the exact opposite of that. So um this uncertainty is a high cost with really no reward.

03:36 Speaker C

Right, but uh let me ask you a question. If if if everybody wants to play and try to come to the table, the uncertainty then I think there’s a chance that maybe they delay them if they if there’s an honest attempt to have the conversation. That’s number one. But number two, let me ask you a question about this additional tariffs on China based on the Venezuelan oil story. If they impose 25% more tariffs on China on top of what’s already there, then what do you think happens?

04:39 Speaker B

I mean, then you’re coming to almost a 50% tariff on all things from the PRC. That’s massive. Um and those will be paid by US consumers. Um so I mean that’ll be huge supply chain disruptions at that point. Um, you know, so I think that that I I find that to be unlikely uh to happen. Um, you know, it’s entirely possible that they don’t even uh have a full accounting of where all this Venezuelan oil is going before they made this policy suggestion. So you know, again, that would be really economically harmful. So your first point about people coming to the table, I mean, that’s entirely possible. The only thing I will say is, you know, being here in Washington and talking to our partners at embassy, they’ve been coming to the table. They’ve been coming, they’re asking what they need to do to stop this from happening and they’re not getting answers. Um so from that sense, I really don’t think there’s much more our partners can do right now because they’re not getting clear instruction about what this administration is going to do and what the administration wants them to do.