What are the US and EU discussing about?
Discussions have started about a deal for the EU to qualify for the Inflation Reduction Act. This act impacts new spending and tax breaks to promote US manufacturing and services.
Creating a deal at this level, would allow the EU to access many raw materials like silicon and hydrogen. These raw materials are used in many new projects, like clean energy and the creation of electric vehicles and batteries.
The main reason for these discussions, is to reduce the reliance on China as the main trade partner. The European Union is a thriving area, that has worked tightly with the U.S. on many fronts and is only growing closer as global tensions rise.
What does this mean to the supply and demand for raw materials?
The Inflation Reduction Act is meant to grow the American production and trade. This means that in the upcoming decade there should be more national production as well as export to other countries.
A heightened amount of trade, better competition as well as more production, would definitely impact the price of raw materials. The price of hydrogen and silicon as mentioned, but also others like rhodium and opals will be affected by this, usually in a positive way.
Of course, the European Union is limited in its raw materials and most of them are imported rather than produced. Russia, China and the Middle East are currently some of the biggest trading partners there.
With the acceptance of this trade deal, the United States would most likely be jumping into those top spots, with a favorable way of buying and selling raw materials.
How do trade deals impact my investment strategy for raw materials?
There are many ways of creating an investment strategy. To buy and hold your investments for a longer period, is always a safer way with less input.
But when such trade deals are made, the question arises if it is time to move up your timelines. Should you buy some more, should you sell now or should you invest in new raw materials?
The answer to this question has multiple sides. With a trade deal such as this one, there should always be an eye at the underlying thoughts.
The trade with China has resulted in high margins, low costs and a lot of trade. Which made the United States eventually depending on a lot of import to keep its economy in balance.
Although a trade deal between the European Union and the United States could ramp up the production of raw materials and the export, which increases economic growth, it should not be forgotten that this might go at the cost of the trade with China.
Whether the total sum would be a positive or negative, depends on the type of investments we are looking at and whether it is a short or long-term strategy.
In this case, because the United States is adamant on growing its economy and investing in clean energy and raw materials for, for example, electric vehicles, it can be assumed that investing in these raw materials is a good future plan.
However, always do your own research and check multiple sources. Investing comes with its challenges and there is never a 100% guarantee of the outcome.