Mine craft: US-Ukraine resource deal

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The Economist.

Hello and welcome to the Intelligence from the Economist. I'm your host, Rosie Bloor. Every weekday we provide a fresh perspective on the events shaping your world. Americans have long enjoyed cheap goods made and shipped from China, but Donald Trump's new tariffs may put pay to that and disrupt the business models of Chinese companies, including some of the world's largest retailers. And a century on the glitz and glamour of art Deco still holds allure. Our correspondent examines why we continue to seek refuge in the decorations of the Gilded Age. But first, In February, Ukraine's President, Volodymyr Zelensky went to the White House to sign a deal on extracting minerals.

People are dying.

You're running low on soldiers. Listen.

Don't. You're running low on soldiers. It would be a damn good thing.

Instead, the meeting ended up in a bust up between Zelensky, Donald Trump and Vice President J.D. vance. Last night, a deal was finally signed, though with rather less fanfare, and amid a Russian drone strike on Odessa. After months of Trump blowing hot and cold, the agreement signals that America is prepared to stand by Ukraine. As U.S. treasury Secretary Scott Besant said.

Today'S agreement signals clearly to Russian leadership that the Trump administration is committed to.

A peace process centered on a free, sovereign and prosperous Ukraine over the long term.

The question now is whether peace is really any closer.

It looks as though the way that this deal got done depended pivotally on a extraordinary meeting between Donald Trump and Volodymyr Zelenskyy in St. Peter's Basilica just before the Pope's funeral.

Chris Lockwood is the Economist's Europe editor.

The two men met and there's an amazing image of them sitting there in the cathedral during that. They did say that they were very keen to get this minerals deal signed as soon as possible. And then just yesterday, Ukraine's deputy prime minister went to Washington to sign the deal. There was talk of last minute hitches over some of the details. The deal got signed late yesterday. Washington time.

Chris, what's in this deal?

Well, we don't know all the details. We've only seen some fact sheets and they are not very thorough. But the main thing is that an investment fund is being set up into which America will contribute and Ukraine will contribute. And this investment fund will be there to invest in Ukraine's critical minerals. That's hydrocarbons, but also minerals like graphite, and it includes rare earths as well. And these are the ones that Donald Trump has been so very keen on. The investment fund that's set up will be jointly owned by Ukraine and America. And America, it is understood, will have preferential access to being able to bid for licenses into this fund.

In February, there was the prospect of a deal on minerals. How does this one compare with that?

It does look as though it's really quite a lot better. The original version of the deal was pretty hostile to Ukraine in particular. It said that all the money that had been previously paid by America to Ukraine in the form of military assistance and financial assistance during the war would have to be offset by profits taken out from the exploration and extraction of minerals. Now that seems to have been taken away. It was a very large sum, though we don't know quite what the Americans were expecting. Donald Trump claimed it was 350 billion. At one point, there was even a $500 billion sum being bandied around. The real figure is probably something more like 150 billion, but still, anyway, that has been set aside. Now. Contributions will only be assessed as future contributions, contributions going forward, which is actually quite a good thing because it gives America an incentive to go on providing assistance to Ukraine.

And is that what it's about? Is this really Ukraine paying for a security guarantee?

Well, it's a bit of both. Firstly, America wants to be able to be seen to be getting something back for the money that it's putting into Ukraine. So that will be preferential access to future exploration and extraction of minerals of all these different kinds. So that's a good thing for America, a good thing, I think, for Donald Trump to be able to parade a kind of victory. And from the point of view of Ukraine, it's a kind of security guarantee. It's not anything like the sort of security guarantee they originally wanted. They wanted something really quite robust. But the hope is from the Ukrainian side that because America is now tied into investing into Ukraine, it will have an incentive to make sure that its investment is safe and that Ukraine is secure. And some of the language coming from the American side was quite encouraging. Scott Besant, the Treasury Secretary, said, very much part of a commitment to a peace process centred on a free, sovereign and prosperous Ukraine over the long term. So there's a kind of security guarantee there, even if it's not nearly as watertight as Ukraine would originally have wanted.

Chris, I'm interested in how Ukraine's allies in Europe will see this. Do you think they're going to want some kind of payment for their relationship now?

I very much doubt it. There was great hostility across Europe to Donald Trump trying to pull this trick. The fact that it's not nearly as onerous as it was before doesn't really distract from that. So, no, I don't think Europe will want anything quite so transactional. But I'm sure that the allies in Europe will be quite relieved that this terrible row, and remember, this was the row that led to Zelenskyy being thrown out of the Oval Office when he visited in February. This row seems to have been put behind us and replaced by something that is. I would only characterise it as modest progress forward, but definitely some progress forward.

And how will Russia see this deal?

From the Russian point of view, it's probably unwelcome. Anything that brings Ukraine and America closer together is something that Russia isn't really going to like. But the proof of the pudding is still what is America prepared to do to make sure that Russia now comes to the negotiating table, declares a ceasefire, sits down and has a serious this debate about how to end this war permanently? And so far, although every now and again Donald Trump says he's going to get cross with Russia and he might hit them with sanctions, he doesn't do any of that. So Russia will probably think, well, you know, not ideal, but we're still not feeling any real pressure from the American side, at least not yet.

And so where does that leave prospects for peace?

Well, it's a modest step forward and we have to hope that there will be now another determined effort to try and get both parties to sit down and negotiate, preferably agree with a ceasefire in place first. But really, all the onus is on the Russians here. Ukraine's already said it's willing to have an unconditional ceasefire anytime it signed up to Donald Trump's original plan for a 30 day ceasefire. Russia didn't. Russia's simply offering a three day ceasefire. And it's just one that suits it because they want to have a big military parade in Moscow on May 9 to celebrate victory in Europe Day. That's all they're offering so far. And there are signs that Donald Trump's getting pretty fed up with this. But until America starts to put real pressure on Russia, I don't think a lasting ceasefire, let alone a peace deal, is on the cards. But, of course, America might start to shift its position. We have to hope.

Chris, great to talk to you. Thank you so much.

Thank you.

From a win with a minerals deal in Ukraine to a rather less enticing picture at home, the Commerce Department reported Wednesday that U.S. gross domestic product declined at an annual rate of 0.3% from January to March. Economic uncertainty was not part of Trump's plan.

This is Biden's economy, because we took over on January 20th, and I think you have to get us a little.

Bit of time to get moving.

And though he's playing for time, consumer confidence is at its lowest level since 1990. And there's a lot more to come. As Trump's new tariffs with China come into effect, many of the cheap goods Americans have been enjoying are about to get much more expensive.

So for years, American customers have been buying really, really cheap Chinese. And part of what made them so cheap is they don't pay any tariffs or any taxes when they import them into America.

Don Wineland is our China Business and Finance editor.

All this is going to change on May 2. The Trump administration has gotten rid of a rule that allowed them to come into the country duty free. And this has big implications for some Chinese companies that have been making a killing on selling American consumers cheap Chinese goods. And those companies are Shein and Temu.

So, Don, just lay this out for us. Explain to me why Shein and Temu are so important in China and to ordinary consumers.

Well, they're some of the biggest retailers in the world. Now, just to put this into perspective, seven years ago thereabouts, no one had really heard of Shein, and then by 2022, it had become the biggest fast fashion retailer in the world. Temu, on the other hand, launched in late 2022, and now it is caught up with Shein in terms of its revenues. So, yeah, we're talking about very, very large companies. At one point, Shein was valued at about $100 billion. That valuation, of course, has fallen as the trade war has picked up, and it's faced more geopolitical problems. The way they operate is they sell that people use on their phones. They're kind of gamified, so they keep people hooked and scrolling, and they are incredibly cheap as well. So people end up buying lots of stuff as they shop. So this is why they're important in America. If you look at China, a lot of Chinese people haven't even heard of these companies, and that's because they don't sell in China, but they manufacture in China, and essentially here they are a big employer. So these companies are very important on both sides of the Pacific.

So explain to me, Don, exactly how these Chinese retailers are able to sell so much to American consumers.

First of all, these Chinese retailers, they have very low costs in China, they're very efficient, and they produce things that end up being really cheap. But another key part of this is when they come into the US there's no tariffs paid on these American consumers open up their phones, they open up the Shein or Temu app, they buy something, and these goods are shipped via air cargo directly to their homes. So they don't go into warehouses in the US they don't need to be shipped on boats that cross the Pacific. And this keeps costs down. And it has been incredibly efficient for everyone involved. US Customers have been able to buy things that, you know, should cost a lot more if you're shopping even at Walmart, where prices are already low. And for the Chinese companies, they've made a lot of money off of this over the past five years.

And why are Trump's tariffs so affecting these sorts of Chinese companies?

The actions that the Trump administration have taken home in on these specific companies and this specific channel, which is called the de minimis exemption. So what these de minimis exemptions relate to are goods entering the US through the postal service that are worth less than $800. Up until May 2, there wouldn't be any tariffs, taxes applied to them after May 2nd. This is going to have a big impact on super cheap products that compete on price. Consumers will really have to foot the cost for a lot of these tariffs when the goods come into the country.

So what's the answer? Can these Chinese companies simply sell to consumers elsewhere in the world?

They can, and they've been trying to do this for a while. So the idea of getting rid of this exemption has been out there for a long time. There's been a lot of interest groups that have been pushing for it. It's not like Shein and Temu didn't know that there was a threat to their business model in America. So they have been trying to sell to Europe. But it's thought that Shein probably sells about 30% of its products in the U.S. temu sells about 40% in the U.S. so, yeah, it's not easy to suddenly diversify away from America.

So if Shein and Temu aren't actually selling to Chinese consumers, couldn't they just base themselves outside China and get around these tariffs?

They can. In fact, Shein and Timu have been trying to make themselves much less Chinese, so to speak. Shein has moved its headquarters to Singapore. Temu says that it's a Boston based company. But it's very hard to move your entire supply chain outside of China, especially when manufacturing in China is one of the things that keeps prices down in the first place. So if you want to move to Vietnam or to Cambodia and try manufacturing your goods there, you're going to face higher costs, higher logistics costs, higher input costs. So it's not easy just to uproot from southern China, where these companies are based. And the Chinese government is not happy when they see some of the suppliers of these companies moving to places like Vietnam. And, you know, they've signaled that they're not happy with this. There was a report out recently that the Ministry of Commerce was telling Sheehan not to let its suppliers move to other countries. The government of Guangzhou, where a lot of Sheehan activity takes place, has come out and said publicly that a diversification and a relocation isn't happening. So they're very sensitive to this and they don't want to see more jobs disappear from China to other places in Asia.

And, of course, these are only 2 of the companies that are facing these huge tariffs which are affecting all of Chinese trade. How is the Chinese government now responding to the kind of wavering of Trump's tariffs elsewhere?

Well, they're not happy to see what appears like a ganging up on China. So, of course, now the Trump administration's tariffs are focused on China, and Trump is trying to strike deals with all these other countries. Part of the deal making has to be putting up walls and keeping Chinese products out. If the Trump administration can't do that, then products can simply be rerouted through third countries or sold to third countries and then sold to America. So China's not happy to see what looks like a trade war focused directly at it.

And will companies like Shein and Temu survive this?

I think these companies will survive. I think they will be forced to diversify more, and that means doing more sourcing, doing more manufacturing outside of China and selling to other places like Europe, South America, Southeast Asia. But in the end, I think this will actually make the companies more like multinationals and less Chinese, which is what they've been saying they want to do all along so Trump may actually push them into becoming more like multinationals.

Fascinating stuff, Don. Thank you so much for talking to me.

Thank you.

And you can hear more on China's defiance in the trade war with America on this week's episode of Drum Tower, a podcast on China. You'll need to be a subscriber to listen. I may have mentioned a few times already this week that you can listen to the Intelligence on the Economist app. You'll find this and all our other magnificent shows in the podcast tab, where you can download episodes to listen offline and without ads. You'll need to be a subscriber to do so. Please get on with that by searching Economist Podcast plus for the best offer.

A hundred years ago, the International Exhibition of Modern Decorative and Industrial Arts opened in Paris.

Cassia St. Clair writes about culture.

This new style that was flaunted by the French government at the exhibition that opened opened had actually been around for a little while. There were seeds of it from before the First World War, but this new exhibition in 1925 really flaunted and made the most of what was seen as a new wave in architecture, furniture, jewelry and other decorative arts. It drew on lots of different things, everything from ancient Egyptian and Byzantine art to Cubism, futurism, ballet and emerging technologies. What really is important to note, however, is that some 16 million people visited this exhibition in 1925 and this disseminated the new style, which would become known many decades later as Art Deco, around the globe. Art Deco really defies easy categorisation. The term itself was not widely adopted until after 1968 when it was used by a historian called Bevis Hellyer, based on the name of the 1925 exhibition. It's the kind of thing that you know when you see it in architecture. It's often defined by angular shapes and arcs, chevrons, triangles. The classic example is the Kreisler Building. If you think of the very top of the building, you see these amazing almost feather like shapes. In things like jewellery, you think of much finer geometric shapes. And in interior design, it's often characterised, particularly in Europe, by the use of very fine materials such as bur, walnut, ivory, lacquer and precious metals. Something that really pulls it all together is this essence of glamour and energy which people often associate with classic Art Deco. We're now a century on from Art Deco's high watermark, and that feeling of opulence and glamour that characterized Art Deco is coming back into fashion searches for art Deco items on a website called Vinteria, which specializes in secondhand furniture, are up by 50% year on year. And sales for Art Deco items tripled in the second half of 2024. So why might people be choosing to deck out their living rooms with Art Deco pieces? For a start, this is cyclical. Minimalism, and particularly the minimal mid century modern look, has been dominant for well over a decade now. Post Covid with people choosing to spend more time at home, they want things that feel unusual and unique rather than utilitarian. The plurality that you can see in Art Deco is really being welcomed in the digital era. Funnily enough, algorithms are helping to flatten aesthetic differences and are pushing users towards the most popular content. And a result, people are going against this by looking for things that are really unique and different and set them apart. And because Art Deco has both this unifying aesthetic, but also allows for great variation, this is something that is really dovetailing with this new movement in the digital era. Glamour and escapism have always been a real key part of Art Deco's allure to ordinary people. The style was particularly popular in the 1920s and early 1930s, as the global economy crashed and fascism was on the rise. And this idea of a glamorous escape really appealed to people. Rather than face the sad reality through which they were living, people often preferred to retreat to gilded fantasy spaces such as cinemas and speakeasies that were often decorated in particularly opulent Art Deco style. Today, as the stock market chaos and darkening political mood make headlines, and people may be looking for glitz and glamour to take their minds off the grim.

That's all for this episode of the Intelligence. We'll see you back here tomorrow.

Sam.