I don’t want to scare you…
But America hasn’t been under such threat since the days of the Cold War.
Today, China possesses the necessary tools to cripple both the U.S. military and its economy.
Meaning that, in a single swoop, China could topple the United States as the world’s dominating superpower.
Nearly All U.S. Weapons Are “Made In China”
Most Americans are unaware that, without China, the U.S. military can’t function properly.
That’s because nearly every piece of military hardware is built from rare-earth metals… and there are no such mines in the United States.
I am talking about Tomahawk missiles, radars, night vision goggles, laser guidance systems, and armored vehicles…
They all depend on rare-earth minerals, 80% of which the United States sources from China.
If President Xi decides to play it tough, he could very well cut off the supply… and cripple the U.S. military.
Xi knows he can use this as a threat. He recently visited a rare-earth metal mine in the Jiangxi province under the pretense of an innocent “inspection tour.” But given the number of journalists that accompanied him, I’d say that the message was clear—Trump, I know your vulnerabilities.
Should Xi follow through on such a threat, Washington would have to start looking elsewhere for supply and quick… in which case, prices for rare-earth metals will skyrocket.
I recommend, therefore, that you consider adding rare-earth metals miners to your portfolio. I suggest specifically that you look at Largo Resources, Cobalt 27 Capital, and Ferbasa.
The U.S. Government Owes China More Than $1.12 Trillion
A second vulnerability for the United States in this context right now is that China holds more U.S. government debt than any other country in the world—more than $1.12 trillion in Treasury bonds, bills, and notes.
Moreover, the United States counts on China to continue buying this debt, because that’s how it finances its trillions of dollars of deficit (that, under the Trump administration, has increased significantly).
China can’t match the United States dollar for dollar when it comes to tariffs. The disparity between imports and exports is too big. However, it could cause far more hurt for the U.S. economy by selling the U.S. Treasuries that it holds.
Selling bonds drives prices down and interest rates up because price and yield are inversely related.
Because the Federal Reserve closely tracks its rates to U.S. Treasuries, China selling U.S. debt would force the Fed to hike, which would be detrimental for the U.S. economy.
How can you play this?
Such an event would push investors toward safe-haven assets like precious metals. So, in addition to rare-earth metals, I recommend that you consider adding precious metals to your portfolio, as well. Look at companies like Wheaton Precious Metals, Barrick Gold, and Newmont Mining.
For now, though, I expect President Xi to use these drastic measures merely for leverage in the ongoing trade negotiations.
And, even if he were to decide to deploy them, he wouldn’t sell all the U.S. Treasuries his country holds at once… or block the sale of rare-earth metals completely overnight.
I’d say he’d pursue those tactics in a controlled way and just enough to achieve the desired effect.
In any case, prepare yourself.