Siegel says it’s ‘scandalous’ the U.S. doesn’t have a rare earths reserve
UNITED STATES – NOVEMBER 10: Jeremy Siegel, the Wharton School’s Russell E. Palmer Professor of Finance, addresses the Securities Industry Association at its annual meeting on Thursday, November 10, 2005 in Boca Raton, Florida.
Matt Stroshane | Bloomberg | Getty Images
Jeremy Siegel, a professor emeritus of finance at the University of Pennsylvania, told CNBC’s “Squawk Box” on Monday that China’s control of key rare earth materials has been a “long-standing threat” to Western supply chains and that the United States should build a strategic metal reserve.
“It’s a scandal that we don’t have a rare earth strategic reserve [and] “We have allowed China to monopolize 90% of the refining of rare earth materials,” Siegel said. “Where were we when we realized the importance of these?”
Siegel’s strategic reserve offer came as the US-China trade war intensified on Friday, with President Donald Trump vowing to impose “massive tariffs” on Beijing in response to limits on rare earth mineral exports to the US and threatening to cancel a planned meeting with Chinese President Xi Jinping. Trump’s announcement wiped out $2 trillion in value from the stock market.
USA Created the Strategic Petroleum Reserve in 1975 In response to the 1973 Arab Oil Embargo.
Today, nearly three-quarters of the world’s rare earth minerals, used in everything from smartphones to fighter jets, are mined in China, which processes 90% of the metals, according to Bank of America analysts.
“Export controls could create a choke point in global supply chains,” BofA global economist Claudio Irigoyen said in a note to clients Sunday.
But Siegel said he was confident the U.S. and China would resolve their latest trade dispute before Trump’s Nov. 1 deadline for more tariffs.
“This problem will be resolved and it will not be so negative for either country,” Siegel said. Trump’s words were “a prelude to saying, ‘Okay, here we have our chips, our cards.'” [and] You’ve got your cards…and let’s negotiate.'”
Siegel, author of 1994’s Long Term StocksHe said the Nov. 1 deadline was actually a sign that Trump hoped to negotiate with his Chinese counterpart.
“Trump said 100 percent” [tariffs] But he said, ‘Listen, I said November 1st, that’s a forever date for me,'” Siegel said. “That’s actually the furthest date he’s ever set for a tariff to start, which means he wants to work that out.”
Siegel added that the market will likely recover following trade talks between Washington DC and Beijing. The S&P 500 rose about 1.2% in early trading Monday after falling 2.7% on Friday.
“Given the other good things that are happening, I see no reason why we shouldn’t continue to new highs once the problem is resolved,” Siegel said.
The S&P 500 regained nearly 40% of Friday’s losses by early Monday, while the Nasdaq Composite rose nearly 2% as technology stocks rebounded from last week’s pullback.
