Asian Dragon Is Ready for a Trade War

XTI/USD

Key zone: 60.50 - 62.50

Buy: 63.00 (after a retest of 62.00); target 65.50-67.00; StopLoss 62.30

Sell: 60.00 (on strong negative fundamentals); target 58.50; StopLoss 60.70

The day after tomorrow, they will finally meet. The outcome of the U.S.–China negotiations will be superficial victories: there is still no talk of a global or mutually beneficial agreement. Nevertheless, the increase in Trump’s harsh tariffs will likely be postponed for several more months — until new local arrangements are reached.

China began building defenses against supply disruptions of fuel, food, and metals back during Trump’s first presidential term. Since early 2024, when it became clear that Donny might return to the White House, Beijing has accelerated the accumulation of strategic reserves to reduce dependence on external sources. After the new spring tariffs on Chinese goods, the pace of purchases increased.

A striking example is the Dongjiakou oil storage facility, which is almost never empty. Since January 2025, about 10 million barrels of oil have been pumped there, bringing total reserves to over 24 million barrels. This policy makes China more resilient to external pressure but simultaneously increases risks and new dependencies.

A bet on domestic production

Despite the development of the electric vehicle sector, China still consumes about 16 million barrels of oil per day, of which 75% is imported. Since 2019, under Xi Jinping’s strategy for developing domestic extraction, local oil production has risen from 3.8 to 4.4 million barrels per day, while gas output has increased 1.5 times. Coal mining is being expanded, and active exploration is underway for ten types of metals — from copper to lithium and cobalt.

Building reserves

Preliminary estimates indicate that China’s oil reserves have reached 1.2 billion barrels — three times the U.S. strategic reserve. The law obliges energy companies to maintain their own stockpiles. China continues to buy raw materials from Iran, Russia, and Venezuela despite sanctions. Storage utilization stands at only 58%, so construction of new facilities continues. By the end of 2025, total reserves may reach 1.5 billion barrels, equivalent to 150 days of imports.

Gas reserves are smaller — 30–40 billion cubic meters, about 10% of annual consumption. Metal data are undisclosed, but according to Panmure Liberum estimates, over the past 20 months China has stockpiled copper — 20% of annual demand, zinc — 50%, nickel — over 100%.

Diversifying supplies

When storage is impossible, Beijing actively seeks alternative sources. Gas imports from Russia, Qatar, and Malaysia are expanding. Chinese corporations are acquiring foreign assets: since 2024, nine copper projects have been purchased, a coal railway from Mongolia is under construction, and talks are underway to buy part of Chile’s power grid.

Special attention is paid to agricultural supplies. The share of U.S. soybeans — previously about 25% of imports — has sharply decreased after a 20% tariff was imposed. Now Brazilian farmers are expanding plantings, while American ones are cutting back. China has become a “swing supplier” of gas, reselling LNG during price surges. However, the opacity of reserves makes the market less predictable, while gray import schemes sustain the shadow fleet and unofficial financing flows.

The “price” of such a strategy is gradually rising. If oil falls by $10 per barrel, the overpayment will reach billions of yuan per month. Metallurgists are already recording losses, copper refining has turned negative, and Brazil sells soybeans at a high premium.

Of course, the accumulation strategy makes China more confident but does not eliminate risks. Reserves provide time for maneuver but do not guarantee stability. Yet even if the leaders fail to reach an agreement on Thursday, Beijing is far better prepared for a trade war than Washington.Trump just doesn’t know it yet.

So we act wisely and avoid unnecessary risks.

Profits to y’all!