On Tuesday, I wrote about the trade tiff between the U.S. and China turning into a trade war and how investors don’t see that the “war” isn’t just about trade. (Read Tuesday’s issue here.)
It’s about geopolitics and a tug-of-war between the world’s great economic and military superpowers.
On Wednesday, on Fox Business News’s Varney & Company show, I said, “This is not just a trade war battle, this is a geopolitical battle of two superpowers and it’s a lot deeper than just trade.”
China mines, and, in some years of heavy use, accounts for about 90% of the world’s rare earth minerals.
The United States imports 80% of the rare earth minerals companies and the government use in the manufacturing of all kinds of products, including some with military use, from China.
There are 17 rare earth minerals: cerium (Ce), dysprosium (Dy), erbium (Er), europium (Eu), gadolinium (Gd), holmium (Ho), lanthanum (La), lutetium (Lu), neodymium (Nd), praseodymium (Pr), promethium (Pm), samarium (Sm), scandium (Sc), terbium (Tb), thulium (Tm), ytterbium (Yb), and yttrium (Y).
The table below shows which minerals are used to manufacture important products.
Source: U.S. Geological Survey, SCMP Research
China just put the United States on notice that its access to those rare earths is now a weapon they may employ. (That’s not the only weapon they’re ready and raring to employ – here’s what China’s new “carrier killer” missile looks like.)
In a very visible, made for news and theater move, China’s President Xi Jinping just visited JL Mag Rare-Earth Co. Ltd. in Jiangxi.
[UNBELIEVABLE] I’m at a loss for words (truly remarkable)
According to JL’s website, “JL MAG Rare-Earth Co., Ltd. is a high-tech enterprise specialized in rare earth permanent magnetic materials and engaged in research & development, production, and sales. It covers an area of 284 acres and has built 6,000 tons/year production…”
Xinhua News Agency, also known as New China News Agency, is the official state-run press agency of the People’s Republic of China. It’s the biggest and most influential media organization in China, as well as the largest news agency in the world in terms of correspondents worldwide.
It covered Xi’s visit to JL as if it was a State visit because, in a sense, it was.
President Trump purposely excluded China’s rare earth exports from the latest round of 25% tariffs and doesn’t plan on targeting them at all. They’re that important to the U.S.
President Xi, to make sure his theatrical loading of rare earth trade war missile was 100% clear, he was accompanied on his JL visit by none other than China’s Vice Premier Liu He, who, in case you forgot, is China’s principal trade negotiator in its dust-up with the U.S.
If the Chinese cut off rare earth mineral exports to the U.S. it will take months, maybe a lot longer, for companies to reorient supply lines to where those minerals can be found.
But you don’t have to suffer along with some of the companies that will get hit if the Chinese fire that missile at the U.S. in retaliation from President Trump’s hard nose negotiating tactics.
That’s because there’s an ETF that tracks rare earth minerals that you can buy right now that could rise at least 75% in my opinion, if China cuts off supplies of rare earths to the U.S.
That ETF is the VanEck Vectors Rare Earth/Strategic Metals ETF (NYSEArca:REMX). You should stockpile some yourself.
You’ve been warned.