Dear Reader,
Happy Thursday, December 12th.
I had a lovely dinner with my daughter last night – a really cool sushi place to celebrate her 16th birthday.
Happy birthday again, Lila!
Today I want to talk about China – the latest in our escalating trade war, and what Trump’s going to find when he takes office…
You have to imagine that behind the scenes during a transition – Biden’s still President of course, but transitions are designed as slow handoffs…
From Secretary of Defense one to Secretary of Defense two…
Or from National Security Advisor one to National Security Advisor two.
So, they’re all sharing information.
And it wouldn’t surprise me at all if they were actually jointly communicating about big decisions that would be left on Trump’s desk when he takes office.
So last week the Biden administration really ratcheted up chip export bans to China.
Now you have to imagine this as a kind of escalation…
The Biden administration puts a ban on China’s getting, let’s say, Nvidia’s most advanced chips – their 100 series.
Then China finds a way around that.
One of the workarounds China has found is through companies not located in China…
They find these companies in other countries that have bought these chips and go to them and say, we’ll pay you even more.
Because China knows, like we know (we’ve talked about here ad infinitum) that the next war to become a great power and have a great military will be based on your capacity to use these chips.
They’ll determine the speed at which your armed forces can process information.
[We’ve talked about the company solving this trillion-dollar problem and how you can invest right here.]
The Biden administration has been ratcheting up protection against China’s workarounds, and China’s been finding new ones all the time.
So the Biden administration adds another set of sanctions and China just finds another way around it, and so on.
So China had found another pretty good way, and when last week the Biden administration closed that door, China got mad.
They blocked exports of certain rare earth minerals to the United States…
Gallium, germanium, and antimony.
These rare earths are dual use – they’re used for both civilian and military purposes.
That makes it very difficult for us as this trade war escalates in real time.
I don’t know if you’ve seen the news that Taiwanese President Lai came to visit the United States, and China exercised its largest naval war games against Taiwan…
Basically signaling to Washington, to the Trump administration, that is unacceptable.
So this trade war is really ratcheting up.
I would not be surprised if it ramps up even more.
The Chinese sent 100 ships – the most ever – right across the South China Sea, to show Taiwan, Washington, and the rest of the world that they can surround this island, and what are we going to do about it?
They’re really pushing this.
I think one of the Trump administration’s first big foreign policy challenges is going to be this relationship with China.
Remember, a few days ago we reported that the U.S. ambassador to Japan, Rahm Emanuel, said he expects China to invade and try to take Taiwan in 2025.
That’s after the National Security Establishment of this country said they expect them to take it by 2027.
So this is one of the five major fundamental cracks we see here – one of the major risks that this turns from a cold war to a hot war.
I don’t think markets are really paying attention to this…
They think this is just saber-rattling back and forth.
But any historian who understands what kind of man Chinese leader Xi Jinping is, understands this is a man who sees himself as a man of destiny…
Truly a once-in-50-years figure. A kind of second George Washington or Mao Zedong for his country.
He sees the century of humiliation China has had under the Western powers – specifically Britain vis a vis the opium wars.
He believes China won’t erase its century of humiliation until they take Taiwan.
Now, some folks will say, Taiwan’s always been a part of China.
That’s actually not true.
Taiwan has not always been part of China.
As a matter of fact, it’s never been part of the People’s Republic of China.
That’s just fake news. It’s Chinese propaganda pushed out to people who don’t know better.
So I just wanted to update you on this China situation with the latest – China blocking critical rare earths as this trade war heats up.
So our incoming administration is going to have to scramble to get supplies.
One of our special reports really talks about exactly this very issue, and recommends a couple of American and Australian companies that the Pentagon has hired and pushed to help solve this rare earth mineral issue.
We really like these companies, and believe as this situation really hits home, they have the potential to do very, very well.
Click here to read our report on rare earth metals and see how to invest in these companies.
Hindsight will be very, very clear on these – I don’t want you to regret not taking action sooner.
Just go here to read our report now.
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