We will be the biggest losers in the trade war
The latest shot in the trade war isn’t a tariff…but perhaps a ban on a select group of minerals.
As Jim writes today, China may be toying with the idea of cutting off the supply of rare earths to the US.
There’s no guarantees that it will happen. Should China go ahead and ban them, there would be a ‘short-term’ supply interruption.
The only difference is that this time, we know what it looks like.
Back in 2010, China cut off the supply of rare earths to Japan over a shipping lane dispute.
The result? The price of rare earths as a group quickly soared 850%… However, individually, some of the rare earths gained as much as 4,000% in just under a year.
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Could that happen again?
If China did cut off rare earths, there is no doubt prices would creep higher once again.
The difference this time is that companies such as Blue Line in the US and Lynas Corp in Australia may be able to increase their rare earths production inside six months.
A rare earths ban may drive prices higher in the short term, but China may not be holding the trump card it thinks it has.
The people who ultimately lose from the trade war are you and I. Aussies rely on China for trade, and the US to protect us.
Until next time,