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Xi Sends Trump A Message: Rare-Earth Export Ban Is Coming

Xi Sends Trump A Message: Rare-Earth Export Ban Is Coming

  • Why does China have a clear advantage in this area? Simple: the U.S. relies on China, the dominant global supplier, for about 80% of its rare earths imports.

Via Zerohedge


Back in April of 2018, when the trade war with China was still in its early stages, we explained that among the five “nuclear” options Beijing has to retaliate against the US, one was the block of rare-earth exports to the US, potentially crippling countless US supply chains that rely on these rare commodities, and forcing painful and costly delays in US production as alternative supply pathways had to be implemented.

As a result, for many months China watchers expected Beijing to respond to Trump’s tariff hikes by blocking the exports of one or more rare-earths, although fast forwarding one year later this still hasn’t happened. But that doesn’t mean it won’t happen, and overnight President Xi Jinping’s visit to a rare earths facility fueled speculation that the strategic materials will soon be weaponized in China’s tit-for-tat war the US.

As Bloomberg reported overnight, shares in JL MAG Rare-Earth surged by the daily limit on Monday after Xinhua said the Chinese president had stopped by the company in Jiangxi, a scripted move designed to telegraph what China could do next.

The reason for the dramatic market response is that the presidential visit flags policy priorities, and “rare earths have featured in the escalating trade spat between the U.S. and China.” Specifically, as Bloomberg notes, China raised tariffs to 25% from 10% on American imports, while the U.S. excluded rare earths from its own list of prospective tariffs on roughly $300 billion worth of Chinese goods to be targeted in the next wave of measures. And just in case the White House missed the message, Xi was accompanied on the trip to JL MAG by Liu He, the vice premier who has led the Chinese side in the trade negotiations.

Why does China have a clear advantage in this area? Simple: the U.S. relies on China, the dominant global supplier, for about 80% of its rare earths imports.

The visit “sends a warning signal to the U.S. that China may use rare earths as a retaliation measure as the trade war heats up,” said Pacific Securities analyst Yang Kunhe. That could include curbs on rare earth exports to the U.S., he said.

Xi’s visit came just hours after the Trump administration on Friday blacklisted Huawei and threatened to cut it off from the U.S. software and semiconductors it needs to make its products. A spokesman for China’s foreign ministry told reporters Monday to “please wait and see” how the government and companies respond.

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Of course, a Chinese export curb, or ban, would also cripple domestic producers, as domestic rare earth miners would be hurt, and likely need state subsidies, similar to US soybean farmers. But curbs could potentially help companies like JL MAG, which makes magnets containing rare earths that are used in products including electric vehicles and wind turbines.

Finally, to those looking to trade a potential rare-earth export ban, one place would be to go long the REMX rare earth ETF, which after hitting an all time high of $114 in 2011 during the first rare-earth “scare” during the China-Japan trade war, is trading some 90% lower as the market has all but discounted any possibility of a price spike.

Needless to say, should China lock out the US, the price of rare earths could soar orders of magnitude higher.

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I thought Yttrium was a Crypto
Guest
I thought Yttrium was a Crypto

Ouch, that’s going to sting.

MIke
Guest
MIke

Just call Canada, they have plenty of that rare earth!

Sorry to bust your bubble
Guest
Sorry to bust your bubble

They have plenty of those not so rare kidnappings, ehr – renditions too.

PS: Canada isn’t even in the top ten producers. https://www.statista.com/statistics/268011/top-countries-in-rare-earth-mine-production/

Wiliam Crain
Guest
Wiliam Crain

Is it mined in Canaduh or is it something the cheeseheads are siphoning off some other 3rd wrld cntry ?

tracy
Guest
tracy

Rare earths come mostly from Africa if I remember correctly and is a cruel industry to the native peoples.

padre
Guest
padre

I suppose you are joking with “plenty of that rare earth”!

Salt of the Earth
Guest
Salt of the Earth

If all else fails, exporting monuments to Ukrainian war criminals could be a real boost in trade for Trudeau.

IllyaK
Guest
IllyaK

Canada is feces way-station.

Timothy Seeger
Guest
Timothy Seeger

Like fuck they do, so keep telling yourself that 🤣🤣🤣🤣🤣🤣 and the TALIBAN aren’t going to let the United States of trailer parks steal it from them 🤣🤣🤣🤣🤣🤣🤣

Ronny Verhoeven
Guest
Ronny Verhoeven

There is a simple trick: they have to move a considerable chunk of JL MAG shares into the possession of Huawei. In that case, Americans are not allowed to buy anymore by their own regulations, as long as Huawei will remain blacklisted.

You Ain't Seen Nothin' Yet
Guest
You Ain't Seen Nothin' Yet

….and here I thought that 10% inflation under Jimmy Carter was a milestone.

George A. Wrigley jr
Guest
George A. Wrigley jr

Please China, please shut the US off. Let them find their own rare earth and while they are at it, let them build their own products.

Cap960
Guest
Cap960

Why do you think the Yanks aren’t leaving Afghanistan? The Yanks are still trying to liberate Rare earth and other resources from the Taliban.

IllyaK
Guest
IllyaK

Without rare-earth metals you can’t make ANYTHING high tech.

Fe is not rare in irony
Guest
Fe is not rare in irony

Simple solution. America just needs to start taking all of China’s phone scrap and recycling it. Sort of a reverse-garbage flow, like Ukrainian reverse gas.

Guy
Member
Guy

Get the popcorn out folks .It will be very interesting.Trump must be tired of winning.LOL
Your move Trump.

Caddy Shack
Guest
Caddy Shack

His outstanding IQ will solve all problems and still have time left over for 16 holes on the green..

Ralph Conner
Guest
Ralph Conner

Assisting US manufacturers to obtain rare earths from China was my job. If China wants they can paralyze a great deal of the US high tech industry. And especially, defense and aerospace. There are no alternatives for most of these minerals. China even made it a point to secure the alternate sources for many of these minerals. As if they planned strategically to use the monopolies in negotiation. That would work if they were negotiating with rational players. But the B Teams just knows how to Double Down, LOL.

Cap960
Guest
Cap960

Tit for tat… Will China dare?

Olivia Kroth
Guest

I hope so, it would be a very clever move by China.

Vera Gottlieb
Guest
Vera Gottlieb

This is going to be very interesting. The US is not accustomed to being stood up against.

tracy
Guest
tracy

Awesome! Let the whole stinking house of cards fall and burn it. Rare earths should be banned and farmers need to start feeding cows grass and stop growing nasty Monsanto/Bayer garbage crops.

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