Daily Commentary

MarketMinder’s View: Here is a thorough look into one portion of the “critical mineral” supply chain showing why trade restrictions are generally more bark than bite. To set the stage: “China dominates the supply of antimony as well as gallium and germanium, used in telecommunications, semiconductors and military technology. Beijing banned exports of these minerals to the U.S. on December 3 following Washington’s crackdown on China’s chip sector.” Despite the ban, “U.S. imports of antimony, gallium and germanium this year are on track to equal or exceed levels before the ban, albeit at higher prices.” How did this occur? As the article details, companies are using creative workarounds (e.g., transshipment) to move product. “Specifically, trade data illustrate a re-routing of U.S. shipments via third countries—an issue Chinese officials have acknowledged. ... The U.S. imported 3,834 metric tons of antimony oxides from Thailand and Mexico between December and April, U.S. customs data show. That was more than almost the previous three years combined. Thailand and Mexico, meanwhile, shot into the top three export markets for Chinese antimony this year, according to Chinese customs data through May. Neither made the top 10 in 2023, the last full year before Beijing restricted exports.” Though this is only one small aspect of global commerce, it underscores the lengths businesses will go to trade (and take the risk for big potential profits). Don’t underestimate corporate adaptability and resilience: It is a big reason why export bans, tariffs, sanctions and the like are usually less onerous than feared.

MarketMinder’s View: Please note, MarketMinder is nonpartisan and assesses politics only for its potential market and personal finance ramifications. We also don’t make individual security recommendations; specific securities and funds mentioned are incidental to the broader theme we wish to discuss: Letting your personal politics guide your investment decisions can blind you from important details—namely, what exactly do you own? As this article points out, “principles-based investing” has become more popular, as evidenced by the uptick in funds claiming to invest based on certain political beliefs or values. Options span the political spectrum, but a closer look indicates many funds are “... either dressing up broad-based investing in ideological terms, or sacrificing returns in the name of ideological purity. A look under the hood of the American Conservative Values fund, for instance, reveals something a lot like an S&P 500 index fund with higher fees. Of roughly 370 holdings, some 335 also belong in the S&P 500, according to Dow Jones Market Data.” There can also be higher fees for various products peddling certain viewpoints: “The conservative ETF has an expense ratio of 0.75%, compared with under 0.1% for a fund that owns the broader market, such as the Vanguard S&P 500 ETF.” We aren’t picking on them here—the same holds for ESG ETFs, which may carry steeper fees. Again, we aren’t for or against any of the funds mentioned here. But it behooves interested investors to be aware of all the associated costs—both in terms of expense ratios and potential lag—and cut through potential sales spin before diving in. Make sure that, if such beliefs are important to you, that you know what you own and what is actually in said portfolio before you dive in.

MarketMinder’s View: With the administration’s reciprocal tariff pause previously scheduled to end today, President Donald Trump revealed a new set of tariff rates that will supposedly take effect in August. The headliner: a 50% tariff rate on Brazil, along with “a 30% rate on Algeria, Libya, Iraq and Sri Lanka, with 25% duties on products from Brunei and Moldova and a 20% rate on goods from the Philippines. The levies were largely in line with rates Trump had initially announced in April against those countries, though Iraq’s duties are down from 39% and Sri Lanka’s reduced from 44%.” This may not be quite the end of the matter, though. Alongside the 25% to 40% rates he levied on other Asian nations Monday, trade negotiators will likely keep talking leading up to the new August 1 deadline, when reciprocal tariffs are set to go into effect. Maybe even afterward, given deadlines seem to be written in shifting sands thus far. Now, this doesn’t do much for US trade policy clarity, a headwind for American markets. Higher tariffs than before—and the uncertainty surrounding them (like potential ones floated for copper and pharmaceuticals)—aren’t great. But they also shouldn’t hinder the global bull market. As more becomes known and reality turns out less dramatic than first feared, stocks likely climb the proverbial wall of worry.