"Don't say we didn't warn you"

THU, MAY 30, 2019

YOUR AFTERNOON NEWS UPDATE AND MARKET ACTION FROM CNBC

AS OF THU, MAY 30, 2019 • 12:27 ET

DJIA		25155.44
		+0.12%	+29.03

S&P 500		2786.94
		+0.14%	+3.92

NASDAQ		7565.19
		+0.24%	+17.89

EDITOR'S NOTE

This editorial in The People's Daily--the biggest newspaper in China and the official one of the Communist party--is still being talked about today, and here's why:

The headline warned, "United States, don't underestimate China's ability to strike back" in a trade war. The piece then went on to say "We advise the U.S. side not to underestimate the Chinese side's ability to safeguard its development rights and interests. Don't say we didn't warn you!"

It's that last phrase that caught everybody's attention. As Nicholas Glinsmann of EvoCapital put it in a client note this morning, that exact wording was also used by the paper in 1962 before China went to war with India; before conflict broke out between China and Vietnam in 1979; and before a skirmish with the U.S.S.R. in 1969.

In this piece, the paper also more explicitly warned about rare earth metals becoming "a counter weapon" for China to hit back. China's Global Times newspaper is also saying such a move is likely.

We'll have more on the show today on the potential fallout if China hikes rare earth metal prices or blocks access--after all, they produce 90% of these metals, used in everything from smartphones to electric cars to defense equipment.

We've actually seen this before--China cut off exports and sent prices up tenfold about a decade ago in a spat with Japan. It turns out Chinese smugglers still wound up getting a lot of that product in the hands of buyers, though. And if you're wondering, like I was, why the U.S. hasn't scurried since then to secure its own supply of rare earth metals, it turns out they're not eco-friendly to mine.

That doesn't mean it wouldn't be disruptive if China does follow through on its threat. We'll look at how disruptive in the next hour.

See you then!

Kelly

Kelly Evans

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