| In response to U.S. tariffs, China is threatening to restrict its exports of rare earth elements. Many analysts consider this move to be China's "trump card," pun intended. If America's access to rare earth metals is restricted, how serious would it affect our economy? Or is China bluffing? China controls less than 40% of the world's reserves of rare earth elements (REE). However, where China has the stranglehold on supply is processing. It controls nearly all of the world's REE processing capacity. Every non-Chinese REE producer (including America's only REE mine, in California) has to ship what they produce to China for refining into consumable and high-value forms. Processing REE is an expensive and dangerous endeavor that produces radioactive and chemical byproducts harmful to the environment, which is why the U.S. has been happy to let China do the work. Some 80% of U.S. REE imports come from China. So clearly China has the ability to cut off supply and force REE prices to soar, disrupting many industries and threatening national security (most, if not all, advanced U.S. weaponry uses some components made using REE). Although the U.S. government has known about the vulnerability for many years, it hasn't been able to develop any solution. The government does have some stockpiles, but most of it isn't in usable form. It's unknown how long stockpiles could meet demand if the China tap is turned off. If there's a silver lining to this, it's that China probably wants to dangle the threat more as a negotiation tactic than to actually carry the threat through. To restrict supply for a significant amount of time would light a fire under other countries and accelerate the development of more processing plants, which in the long run would reduce China's grip on REE and cost them a valuable bargaining chip. China has been punishing U.S. farmers in Trump-supporting "red states" by finding alternative sources for key agricultural products, such as soybeans. Will the damage to U.S. agricultural exports prove long-lasting or can it be quickly reversed? If we get a resolution to the trade dispute, the agricultural market should recover without too much trouble. I expect an eventual trade agreement (assuming there will be one) would include a commitment from China to buy certain amounts of agriculture products from the U.S. If the trade war continues indefinitely though, then the pain will persist because the Chinese market is so huge. Many analysts are sounding the alarm about China's so-called "debt bomb." Is this a threat to the world's second-largest economy and could it trigger a global financial crisis? Or are concerns about Chinese debt overwrought? Although we shouldn't just dismiss China's elevated debt level, I doubt China's debt will trigger anything close to the financial crisis of about 10 years ago. Unlike, say, America's debt, most of China's debt is owed to itself. China's foreign debt is only about 13% of GDP, very low by world standards. China also has a high domestic savings rate hovering near 50% of GDP, roughly twice the world average. In addition, unlike the U.S., China's one-party authoritarian government gives Beijing more control over its economy. China will do everything necessary to avoid a financial crisis. The best way for the Communist Party to stay in power and avoid social unrest is to keep a stable economy and its people's wallets and bellies full. If China just let its debt—and most importantly high-risk debt—continue to balloon unabated, eventually events would spiral out of control despite the mitigating factors I've just mentioned. However, Beijing has actively taken steps to curb risky lending practices. It's a challenge to balance risk with growth, but the one-party system allows China to make decisive moves. Editor's Note: It's also a challenge for individual investors, like you, to find profitable opportunities. But one of our top investment strategists has developed a trading approach that helps more than a thousand people each week pocket an extra $565 in less than seven minutes of "work." Then, the following Wednesday, they can collect another $565 in instant income once again. To be clear, that's just an average. Some weeks they make more, some weeks they make less… but over time, it works out to exactly $565.25. Want to see how my colleague's system works? Click here to find out. | 
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