The Hammer Cracks Long Before the Anvil

The Sunday Essay ☕️

The Hammer and the Anvil

In manufacturing, it’s not the hammer that shapes the metal. It’s the resistance beneath it.

The hammer makes noise; the anvil gives form.

Every strike looks like dominance — force, intention, momentum — but the real power is stillness, density, and endurance.

And as all metalsmiths know: The hammer cracks long before the anvil.

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Last week, the market was captivated by China’s announcement that they were extending restrictions on rare earth metals — the building blocks of modern technology. The American President blustered, calling the move unprovoked and unprecedented, before responding with another 100% tariff on Chinese goods.

But although this sent the markets and media into a tailspin, none of this is news.

China’s control over the rare earth supply chain was baked into the cake more than twenty years ago, when we all decided that we wanted advanced technology. We decided that we wanted smartphones and laptops, electric vehicles and renewable power.

We wanted to design these technologies at home so we could control the interface, the features, and the applications.

But we didn’t want one specific part of the supply chain required to build that technology — the dirty part. The invasive and toxic process of refining obscure little metals that make our devices, batteries, and clean energy dreams possible.

So when China raised its hand and said, We’ll take that on. We’ll cede some environmental concessions and use our cheap labour so you can have cheap iPhones, the entire world signed the contract.

We may not like that contract today, but it was sealed decades ago.

That is how China monopolized — to the tune of over 90% — the refinement of the world’s most critical metals. And today, that means China is indispensable to every major economy and every major technology company on the planet.

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While everyone fixated on that nothing-burger headline, the world ignored the far more substantial story happening at the same time.

At the end of September, China made a very different announcement — one that had nothing to do with rare earths and everything to do with the US dollar. They informed BHP, one of the world’s largest commodity supply companies, that they were suspending U.S. dollar purchases of iron ore.

To be clear — they didn’t suspend iron ore purchases. They suspended buying iron ore in U.S. dollars.

For context, China buys 710 million tons of iron ore from BHP every year. That’s $75 billion worth of product. So when China paused orders, BHP jumped to attention.

And skeptics might say, Come on, China was bluffing — they can’t afford to stop buying iron ore - their economy relies on it.

But in a country with political will like China, when the state dictates what corporations will do, they do it. The government ordered Chinese importers to suspend all U.S. dollar purchases of iron ore from BHP, and they did it.

This, of course, brought BHP to the negotiating table. And as of last week, they agreed: moving forward, BHP will accept renminbi for 30% of its iron ore sales to China.

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Quick Context: Why This Matters

For nearly eighty years, the U.S. dollar has been the world’s default trading currency. Almost every major international deal — from oil and metals to food and machinery — clears in dollars.

That means every nation, company, and bank needs to hold U.S. dollars to do business.

This global dependence gives the United States enormous leverage: it can print the currency everyone else must earn, and it can weaponize access to it through sanctions and financial restrictions.

So when a major player like China starts convincing its trading partners to use renminbi instead of dollars, it chips away at the foundation of that power. Every non-USD trade is one small crack in the dollar’s global monopoly.

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Back to the story…

BHP’s move to accept renminbi is a bigger announcement than people realize - for three reasons.

Reason One: A New Precedent

China has already been conducting trade outside of the US Dollar system with smaller economies or BRICS nations. But this isn’t Vietnam or Indonesia — and it’s not a BRICS peer like Brazil or India. BHP is Australian.

China has just established that a Western-aligned, G7-adjacent country will transact in renminbi if required.

This becomes a template China can now take to the rest of the world - any country, any corporation and say: This is how we do business now. It’s good enough for BHP — so it’s good enough for you.

Reason Two: The Two-Way Flow

This transaction doesn’t stop with the sale — BHP will now be accumulating a treasury of renminbi and will be tasked with the question: What do we do with it?

They could, of course, convert the renminbi to USD and move forward with the rest of their business - but as any non-American business owner knows, managing currency risk is a headache. Exchange rates vary, and converting currency can be expensive. In the case of BHP, dealing with tens of billions of dollars in value, this option is highly suboptimal.

Alternatively, they can find other suppliers who are willing to accept renminbi as payment…

Which means, one of the world’s largest multinational mining and commodity trading companies is now incentivized to find other players who will join the de-dollarization movement.

The most obvious supplier, of course, is China itself. This deal encourages BHP to invest further in supplies, services, or investments in the Chinese market.

Reason Three: The Rest of the World Needed This Deal

Iron ore is the core ingredient in steel. China imports so much of it because it supplies the world with 53% of its steel.

China sells steel to virtually every major economy — over 150 import destinations, covering more than three-quarters of global GDP

So when China halted U.S. dollar purchases of iron ore and began negotiating a renminbi deal, the majority of global economies shrugged and said: We don’t care. Just get it done.

For every other economy in the world, it doesn’t matter what BHP holds in its treasury, or how China pays for its imports; all that matters is whether Chinese steel continues to arrive.

As long as the answer was yes, nothing else matters — because every country’s first priority is its own people, its own prosperity, and its own survival.

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Let’s get back to the relationship between the hammer and the anvil.

When the U.S. demanded global sanctions on Russian energy, that energy didn’t disappear — it just changed direction. Russian oil now flows east. China became Moscow’s largest buyer, and together with India, they replaced nearly all of Russia’s lost Western market share.

When the U.S. exiled Iran from the global economy — a nation sitting on one of the largest oil and gas reserves on earth — Beijing stepped in again. Iran is now exporting record volumes of crude to China, often settled outside the dollar system.

Even U.S. allies have begun hedging. Saudi Arabia has sold oil to China in renminbi. France completed its first yuan-settled LNG trade earlier this year. And more than a dozen nations — from Indonesia to Brazil — have signed agreements to deepen yuan-based trade with Beijing.

As the United States continues to swing - through trade demands, export controls, import restrictions, and sanctions - the rest of the world is quietly adjusting. The supply chains, the energy flows, and the capital flows are bending around the anvil.

The harder the hammer swings, the more the world forms to its shape.

And the hammer cracks long before the anvil.

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That’s all for today.

Let me know what you think in the comments.

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