Any hopes for a trade war resolution seem to be fading.
New 10% tariffs on $800 billion worth of Chinese imports go into effect in just weeks. China stopped buying agricultural products from the U.S.
Now comes word that President Trump is “not ready for a deal” with China. Then, he noted the U.S. will cut ties with Chinese telecom giant Huawei. But that could change if there’s a trade deal with China. That move came after China stopped buying U.S. agricultural products, which was retaliation against the new 10% tariffs.
At the moment, President Trump says he’s just not ready to strike a deal with China, adding the U.S. has “all the cards” in the negotiations, as noted by CNBC.
However, China does hold a dangerous weapon in this war.
China’s rare earth producers say they’re ready to weaponize supply, and pass any costs directly on to U.S. consumers, as reported by the South China Morning Post (SCMP).
Remember, China’s producers control a sizable share of the world’s rare earth elements – 80%. If that is cut off, we could see a monumental pullback in technology stocks, many of which depend on rare earth elements for smartphones, electric vehicles, and military equipment.
“Chinese producers will pass any tariffs on their exports to customers, in a move that would almost certainly add to the cost of the magnets, motors, light-emitting diodes and hundreds of other devices, according to an industry guild that represents almost 300 miners, processors and manufacturers of rare earth-based products,” notes the SCMP.
While it’s a wait and see at this point, things could severely escalate fast.
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