May 31, 2019

China's curious trade war salvo

Earlier this week I shared a video about China's neodymium near-monopoly.  Rare earth metals are a really important strategic asset for any advanced nation. I shared that because of the growing Trade War between China and America, and what China's options might be.

Guess what - China pulled the trigger on rare earth tariffs.

Interestingly this is probably a counter-productive move for China and probably good news for president Trump as rare earth processing used to be an American industry but has mostly disappeared.   A year from now bringing facilities on line will create jobs, and also help the trade imbalance with China.  That's not to mention that as a strategic resource, recreating a domestic industry for refining and processing will facilitate more domestic production and reduce reliance on a  hostile regime for that.

This indicates to me that China is very reluctant to pull the trigger on selling it's U.S. Treasuries.  I'm not sure president Trump needs to respond to this move because it will backfire on China in the long run.  Nut it will be interesting to see if he takes the opportunity to make more moves.  He probably will as not responding will appear to China as weakness.

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