1. In what critical areas could China deliver an economic blow to the US as a retaliatory measure?

1) China’s imports and exports with the US are not as important as they were 5-10 years ago. China trade with Russia, the rest of Asia, Africa and Latin America are now front and center. By simply reducing bilateral trade hurts Uncle Sam economically, as Chinese trade flourishes elsewhere, 2) China’s foreign reserve composition is a state secret, but we know that it has reduced its US dollar portion significantly. In 2019, US dollar assets accounted for 58% of China’s total reserves, down from 79% in 2005, and it has been trending downward since then, while overall reserves have remained stable (about US$3 trillion), 3) China is the world’s biggest gold miner and has been stacking ingots at an increasing pace, offsetting its declining greenback exposure, while burnishing the global status of the renminbi. Historical industry estimates that China has, in reality, 25,000MT of gold reserves have to be taken seriously, as the official 2,200MT is derisory, 4) China is working with BRICS, SCO, ASEAN and others to stop using the US dollar in cross-border trade, going with national currencies instead, and 5) Russia and China are developing an interbank payment system, in order to dump the West’s BIS SWIFT, which has been turned into a political sledgehammer to attack NATO’s enemies, like Russia. China knows they are next.

2. In what ways could restrictions on China’s rare earth metals exports affect US industries dependent on these critical materials?

People underestimate how serious China’s rare earth export restrictions to the United States really are. Rare earth metals are essential for a modern economy, being used in weapons, aerospace, electronics, renewable energy, automobiles and medicine. China has found America’s Achilles heel in this respect and has got Uncle Sam in a very serious bind. It will take years for the US to develop its own rare earth sector, from mining to processing. This is why Trump & Co. are trying to get China to let up on its export restrictions to the US, while Beijing is demanding that New Delhi give assurances that it will not transship its Chinese imports onto the US. If China remains firm, Uncle Sam has got a dangerous situation on its hands.

3. Which specific companies or projects would be affected? Could you please clarify the details.

For the United States, weapons and aerospace are the two biggest concerns for rare earth needs. Boeing, Raytheon, Lockheed Martin, Northrup Grumman, General Dynamics, Space X and all the other many defense and aerospace companies must be squirming in their pants these days.

4. How sensitive is this situation for the US? How easily can such materials be substituted?

The situation for Uncle Sam is very critical and potentially devastating. While there is ongoing R&D to develop alternative materials to replace rare earth minerals, tangible results are likely many years away. There is also research in recycling rare earths, but how do you get them out of a missile or satellite?

Yo-yoing tariffs on China up to 100% this week will surely give Beijing plenty of incentive to dig in their heels and enforce its rare earth restrictions on Washington.

PS: My article was cited by popular podcaster Emil Cosman, about halfway through. Emil Cosman has an international audience especially European, Eastern European but also Asian, US and North American followers. He’s Romanian but he’s also a US citizen living in the Midwest for many many years.

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