A month and a half ago China halted most rare earth shipments to Japan; today the NYT reports they have done the same to US and Europe. As I noted, all the major technological industries rely on these materials and the move is intended largely to force production to move to China/protect their burgeoning industry. If shipments are not continued you can basically kiss the bulk of basic green energy and high tech manufacturing jobs goodbye (although China seems perfectly willing to sell manufactured components).

I am very ambivalent about this move if it continues: on one hand it is a big blow to the potential for new industry. On the other hand, rare earth deposits in the entire world are only large enough to last around 50 more years, and this stoppage is forcing people to reassess their usage of rare earths as well as investigate the feasibility of recycling. Therefore it could lead to longer term benefit…but for now it is throwing industrial plans into disarray.

Andrew Leonard has a good take that didn’t immediately strike me. “It is hard to imagine a more provocative gesture,” vis a vis trade conflict. The US Treasury is set to say whether China is a “currency manipulator” (supposed to last Friday but it has been delayed) which would open up the legal possibility for tariffs and other trade actions. There is growing pressure to do so and this serves as a big, “Bring It” from China, perhaps to dissuade that designation. The question is how we will react…it could quickly turn into the major trade war that Chinese guru Michael Pettis has been foreseeing.