The U.S.-China trade war shows no sign of slowing down.
Since it started in March 2018, the U.S. has slapped 25 percent tariffs on US$250 billion worth of Chinese exports. Another US$300 billion are at risk of being hit with 25 percent tariffs.
Meanwhile, China has imposed between 5 and 25 percent tariffs on US$110 billion worth of U.S. exports.
And with recent talks between China and the U.S. breaking down, things could be about to heat up.
The U.S. has already upped the stakes by imposing restrictions on Chinese tech companies like Huawei, preventing U.S. companies from doing business with them on the premise of national security.
Another company, Hikvision (Exchange: Shenzhen; ticker: 002145), a top global supplier of surveillance cameras, is rumoured to soon be blacklisted from acquiring U.S. components for its products.
That means China could be about to play its ace in the hole. I’m talking about rare earth elements (REEs).
A major political coup is unfolding in America that will topple Donald Trump’s presidency… Only those who prepare will be able to live in peace in a new socialist America. In this video, we lay out the simple steps you can take right now to protect your assets but survive the next recession…
China dominates the global rare earth market
REEs are a group of 17 chemical elements that are used in everything from computer memory, DVDs, rechargeable batteries and smartphones to magnets, fluorescent lighting and even in cancer treatments.
Without REEs, Samsung couldn’t make TVs, Toyota would have to close its Prius factories, and Canon would shut down camera production. U.S. military contractors couldn’t produce missiles, night-vision goggles or satellites without them, either. Your smartphone speakers wouldn’t work properly – and its screen wouldn’t be as sharp.
China is the world’s biggest producer and exporter of REEs, accounting for over 70 percent of global production.
While Australia has found commercial quantities of REEs and opened several new mines over the past five years, China remains the undisputed leader, producing over 100,000 tons of the nearly 130,000 tons of annual global production.
The U.S. buys 80 percent of its REEs from China.
So if the trade war continues, China could make it very difficult for the U.S. to get REEs.
China did something similar in 2010 when it stopped exporting REEs to Japan in retaliation against Japan arresting a Chinese fishing boat captain in the South China Sea.
China was essentially Japan’s only source of REEs, which were (and are) vital to Japan’s huge automotive and lighting industries. And because Japan is the world’s largest consumer of REEs outside of China, REE prices went through the roof.
Two REEs in particular, dysprosium and neodymium, saw their prices shoot up between 2,000 and 3,000 percent by mid-2011.
Will China use REEs to retaliate against the U.S.? I don’t know. But if the trade war continues in its current direction, I wouldn’t be surprised.
And over the weekend, Chinese President Xi Jinping made a very publicised visit to several of the country’s major REE mining and processing facilities.
Xi is sending a message to Trump that China has an ace that it can play – one that could potentially have a crippling effect on U.S. industries.
A Wall Street legend whom millions have seen on Fox Business, CNBC and Bloomberg TV just made a prediction that has stunned the business world. WARNING: What he says contradicts everything you’re hearing from Wall Street and the Main Street media. If you want to see how to make a fortune in 2019, it’s important you watch this interview right away.
How you can profit
With 17 REEs, it’s difficult to know which ones China might choose to restrict.
One of the best ways to get broad exposure to the entire REE market is through exchange-traded funds like the VanEck Vectors Rare Earth/Strategic Metals ETF (Exchange: New York; ticker: REMX).
REMX seeks to replicate the performance of an index containing the stocks of REE-related companies, which produce, refine and recycle rare earth and strategic metals and minerals.
About two-thirds of the fund’s net assets are invested in REE-related stocks based in Asia (including China and Australia).
If the trade war gets worse, it makes sense to have some REMX in your portfolio.
Editor, Stansberry Pacific Research