Panic. But Quietly.

China ready to hit back at U.S. with rare earths – newspapers

China is ready to use rare earths to strike back in a trade war with the United States, Chinese newspapers warned on Wednesday in strongly worded commentaries on a move that would escalate tensions between the world’s two largest economies.

President Xi Jinping’s visit to a rare earths plant last week had sparked speculation that China would use its dominant position as an exporter of rare earths to the United States as leverage in the trade war.

Rare earths are a group of 17 chemical elements used in everything from high-tech consumer electronics to military equipment. The prospect that their value could soar as a result of the trade war caused sharp increases in the share prices of producers, including the company visited by Xi.

China Gears Up to Weaponize Rare Earths in Trade War

Beijing is gearing up to use its dominance of rare earths to hit back in its deepening trade war with Washington.

A flurry of Chinese media reports on Wednesday, including an editorial in the flagship newspaper of the Communist Party, raised the prospect of Beijing cutting exports of the commodities that are critical in defense, energy, electronics and automobile sectors. The world’s biggest producer, China supplies about 80% of U.S. imports of rare earths, which are used in a host of applications from smartphones to electric vehicles and wind turbines.

Thus could be the other shoe I couldn’t see when I wrote this: 2020 Is Coming. Be An Ant. Not A Grasshopper.

In that earlier post, I wrote:

Do you have an old iPhone sitting in a drawer, unused? Hang onto it. It will be worth a multiple of what you paid for it, as long as it’s modern enough to run iOS 13.

It’s time for me to take that one step further: If you can afford to do so, buy an extra unlocked phone — iOS or Android — and keep it unused. If China uses rare earths as leverage, the supply of new phones will plummet and their value will skyrocket. I’m not advocating buying a bunch of phones, however. It’s too early to tell how this will play out.

To all the CIA analysts screaming “We told you so!” in frustration, I feel your pain. But always remember this: Things work out in the end. Just remember the panic over Japan in the 1980s and how that worked out.

China is today’s Japan.

And hello to China’s intelligence agents. I know you’re reading this blog.