Trump and China

http://www.forbes.com/sites/chuckjo...houldnt-impose-tariffs-on-china/#6d294f7d2802

One Overlooked Reason Trump Shouldn't Impose Tariffs On China

Chuck Jones ,  

CONTRIBUTOR

I cover technology companies, worldwide economies and the stock market


From a New York Times article early this year Donald Trump said he would be in favor of a 45% tariff on Chinese exports to the United States. This is one of the reasons that Apple’s shares dropped over $12 from the day after he won the Presidential election to two days ago but have since rebounded by $4 to $110. There have been a number of articles written about why tariffs would have bad economic consequences to the US but I believe there is another reason that Trump won’t impose tariffs on China, Rare Earth Elements. (Note that I own Apple shares).


A Chinese newspaper with the headline ‘Outsider strikes back’, featuring Donald Trump. (Greg Baker/AFP/Getty Images)

From Wikipedia Rare Earth Elements are described as “despite their name, rare earth elements are, with the exception of the radioactive promethium, relatively plentiful in Earth’s crust. They are not especially rare, but they tend to occur together in nature and are difficult to separate from one another. However, because of their geochemical properties, rare earth elements are typically dispersed and not often found concentrated as rare earth minerals in economically exploitable ore deposits.”They are important to the US Defense and technology products

From the website geology.com it describes some of their uses.

“Rare earth elements play an essential role in our national defense. The military uses night-vision goggles, precision-guided weapons, communications equipment, GPS equipment, batteries and other defense electronics. These give the United States military an enormous advantage. Rare earth metals are key ingredients for making the very hard alloys used in armored vehicles and projectiles that shatter upon impact. Substitutes can be used for rare earth elements in some defense applications; however, those substitutes are usually not as effective and that diminishes military superiority.”

The website adds that “Many rechargeable batteries are made with rare earth compounds. Demand for the batteries is being driven by demand for portable electronic devices such as cell phones, readers, portable computers, and cameras. Several pounds of rare earth compounds are in batteries that power every electric vehicle and hybrid-electric vehicle. As concerns for energy independence, climate change and other issues drive the sale of electric and hybrid vehicles, the demand for batteries made with rare earth compounds will climb even faster.”

China controls the mining of Rare Earth Elements

China produced over 95% of last years Rare Earth Elements (105 thousand metric tons vs. the US at 4.1 thousand) in 2015 and it is estimated that it has over one-third of their reserves at 55 million metric tons. Brazil has the second largest reserves at 44 million metric tons and the US is barely on the radar screen at 1.8 million metric tons.


Source: Geology.com

While the Chinese President brought up some retaliatory threats in his recent phone call with Donald Trump the ability of China to cut or stop exporting Rare Earth Elements would be devastating to US manufacturing and its overall economy. Hopefully when Trump understands that complexity of trade relationships beyond his campaign rhetoric he will come to his senses.