Tech, AI, and Defense All at Risk. A Trump-Xi Showdown

Uncommon earth minerals are on the coronary heart of commerce discussions… why they’re so essential… are price cuts coming or not?… why studying to commerce volatility is essential

This morning, President Trump and Chinese language President Xi Jinping held a 90-minute telephone name to debate commerce.

From Trump on Reality Social:

I simply concluded an excellent telephone name with President Xi, of China, discussing a few of the intricacies of our just lately made, and agreed to, Commerce Deal.

[It] resulted in a really constructive conclusion for each International locations.

Within the President’s put up, he highlighted the important thing stumbling block in commerce negotiations…

Uncommon earth components (REEs).

In response to reviews in current days, either side have been able to roll again a lot of their respective retaliatory levies, however the sticking level is uncommon earth components.

Briefly, China has them… the West desperately wants them… and until one thing adjustments, we’re about to really feel the financial sting of their absence.

Again to Trump on Reality Social:

There ought to now not be any questions respecting the complexity of Uncommon Earth merchandise.

Let’s again up to ensure we’re all on the identical web page…

Uncommon earth components (or minerals) are a gaggle of 17 components that may be troublesome to seek out and extract

These components comprise distinctive magnetic, heat-resistant, and phosphorescent properties that make them essential for, effectively, the subsequent era of nearly every thing:

• Client merchandise: They’re wanted for all of your favourite tech-products similar to sensible telephones, computer systems, electrical automobiles, LED lights, flat display screen TVs, you identify it…
• Tomorrow’s AI developments: AI depends on highly effective {hardware} parts like GPUs and ASICs, which use uncommon earth components like neodymium for magnets in cooling methods and motors, and gadolinium for warmth resistance…
• Nationwide protection: REEs are essential for big selection of protection functions, together with plane, submarines, missiles, and radar/sonar methods. You’ll discover them in every thing from magnets that energy electrical motors and actuators in fighter jets, to lasers, to steering methods in missiles…
• Quantum computing: REEs similar to ytterbium and europium are getting used to create extra secure and environment friendly qubits, the basic models of quantum data.

Mainly, no REEs, no expertise.

The U.S. is in a bind as a result of China controls 90% of the world’s refining capability.

And, no, we will’t simply flip a change and start producing REEs. Any reliable home manufacturing (at scale) would wish at the least 5, presumably ten years to rise up and operating.

However by then, the race to AGI, humanoids, and presumably quantum computing supremacy, may have been determined.

China’s slow-walk on REE restrictions spurred President Trump’s lash-out from final week

In final Friday’s Digest, we lined how President Trump was indignant at alleged Chinese language violations of commerce agreements. Right here’s what he wrote on Reality Social:

The dangerous information is that China, maybe not surprisingly to some, HAS TOTALLY VIOLATED ITS AGREEMENT WITH US.

A lot for being Mr. NICE GUY!

On the time, the supply of this violation was unclear, however we will now level to REEs.

Right here’s The Wall Avenue Journal (it’s referencing uncommon earth “magnets” as a result of the main focus of the article is on their use within the auto trade):

China was speculated to have eased export controls on rare-earth magnets as a part of a 90-day tariff truce settlement with the White Home, however the nation has gradual walked license approvals for magnets.

Trump accused China of violating its cope with the U.S.

China has pushed again on the notion that it was responsible, alleging “discriminatory and restrictive measures” by Washington, together with proscribing exports of AI chips and revoking visas for Chinese language college students.

Except commerce talks are profitable, the worldwide auto trade is about to really feel the implications of the REE squeeze.

From Reuters:

Alarm over China’s stranglehold on essential minerals grew on Tuesday as international automakers joined their U.S. counterparts to complain that restrictions by China on exports of uncommon earth alloys, mixtures and magnets may trigger manufacturing delays and outages with out a fast answer.

German automakers turned the most recent to warn that China’s export restrictions threaten to close down manufacturing and rattle their native economies, following an identical grievance from an Indian EV maker final week.

Auto sector troubles might be only a preview of what’s to come back for different sector provide chains.

Backside line: the world’s financial neck is uncovered right here. We should negotiate loosened restrictions on REEs or else we danger harmful escalation.

We’ll dig into this potential escalation in higher element in a coming Digest.

For now, if you wish to put money into REEs, you have got a handful of Western choices. On this December Digest, we highlighted a number of. Right here’s how they’ve carried out since as I write Thursday:

• Las Vegas-based Mp Supplies Corp (MP): +9%
• Texas Mineral Assets Corp (TMRC): +94%
• Canadian-based Ucore Uncommon Metals (UURAF): +65%

To make sure, these shares are unstable. Plus, acknowledge the binary wager you’re making…

If commerce negotiations are profitable, these shares will doubtless pull again sharply. But when negotiations drag on – or fail – these gamers have moonshot potential.

We’ll preserve you up to date right here.

Does the economic system want price cuts or not?

Earlier this week, we acquired conflicting knowledge on the roles market, elevating questions concerning the Fed’s rate-cutting coverage.

We’ll begin with Tuesday’s JOLTS report.

Right here’s The Wall Avenue Journal:

US job openings unexpectedly rose in April in a reasonably broad advance and hiring picked up, indicating demand for employees stays wholesome regardless of heightened financial uncertainty…

The rise in job openings, together with regular hiring and low unemployment, assist the Federal Reserve’s assertion that the job market is in place…

To date, [labor market weakness] hasn’t proven up within the knowledge but, supporting the Fed’s posture to maintain rates of interest regular for now.

However then yesterday, the ADP jobs report confirmed that personal payrolls elevated simply 37,000 in Could, miles beneath the forecast for 110,000.

Right here’s CNBC:

Personal sector job creation slowed to a close to standstill in Could, hitting its lowest degree in additional than two years as indicators emerged of a weakening labor market, payrolls processing agency ADP reported Wednesday…

“After a robust begin to the 12 months, hiring is shedding momentum,” mentioned Nela Richardson, chief economist for ADP.

So, which economic system are we ?

One which’s “in place” that doesn’t want price cuts? Or one which’s “shedding momentum” with “indicators [of] weakening” that desperately wants the Fed to come back to the rescue?

This morning might need introduced a tiebreaker…

The roles placement group Challenger, Grey & Christmas launched its Could jobs report, titled:

Could 2025 Job Cuts Up 47% Over Identical Month Final Yr; Cuts Unfold to Different Sectors Than Gov’t for Different Causes Than DOGE

Right here’s Senior Vice President Andrew Challenger with the short sum-up:

Tariffs, funding cuts, shopper spending, and general financial pessimism are placing intense strain on corporations’ workforces.

Firms are spending much less, slowing hiring, and sending layoff notices.

Digging into the info, by way of Could, employers have introduced 696,309 job cuts. That’s an 80% soar from the quantity introduced on the identical time final 12 months.

Futures merchants are upping their bets on extra price cuts

During the last two days, merchants have assessed the incoming knowledge and elevated their bets on extra cuts.

Merchants now put the heaviest odds on two quarter-point cuts this 12 months. These odds clock in at virtually 39%, forward of the second-heaviest 31% likelihood of three quarter-point cuts.

I don’t assume there’s any confusion about what President Trump needs…

From Trump on Reality Social yesterday:

ADP NUMBER OUT!!! ‘Too Late’ Powell should now LOWER THE RATE.

He’s unbelievable!!! Europe has lowered NINE TIMES!”

Tomorrow brings probably the most important labor market report that the Fed might be watching to navigate this complexity – the Could jobs report.

Forecasters predict a slower tempo of job development but a secure unemployment price.

If the numbers shock in both course, the report may have market-moving potential.

The way to revenue if the market strikes south

In yesterday’s Digest, we profiled evaluation from grasp dealer Jeff Clark. He believes we’re on the sting of bear market, with a possible backside round 4,150 on the S&P this fall – after which, we’ll have a “generational shopping for alternative.”

However even when Jeff is improper, his technique continues to be working in immediately’s “up” market.

Right here he’s explaining how one can be improper and but worthwhile together with his buying and selling type:

Could was an excellent month for the inventory market. However I used to be bearish.

I’ll have been improper, however my readers nonetheless made 129% in a month. That’s as a result of the inventory market rallies are totally different this 12 months than they’ve been prior to now.

There’s a lot of intraday volatility, a lot of back-and-forth motion, and plenty of methods to commerce profitably, regardless of the general course.

I really helpful 4 separate put choice suggestions on the S&P 500 to my subscribers in the course of the month of Could. And, regardless of the broad inventory market notching its finest Could achieve in since 1990, we had been worthwhile on all 4 trades.

The cumulative return was 129%, and the typical time within the trades was simply 5 days.

These weren’t one-off wins.

Since April 2 Liberation Day, Jeff has closed 25 trades:

• 19 winners
• 15 for double-digit features
• 3 for triple-digit features

We’d all be smart to discover ways to commerce volatility

Candidly, you could not have the time or psychological bandwidth to commerce volatility. Life will get busy, and for a lot of, a buy-and-hold strategy is just extra practical.

If that’s you, be sure to’re holding high-conviction shares – and that you’ve got the abdomen for a possible 30% drawdown, which Jeff sees as an actual risk.

However for those who’re prepared to sharpen your buying and selling expertise, unstable or bear markets change into much less of a risk and extra of a possibility.

By buying and selling as markets decline, you can generate profits that you later reinvest into your long-term positions at the bottom – when costs are deeply discounted.

Sure, your lengthy positions will nonetheless replicate the downturn after the selloff. However for those who’ve been reserving buying and selling features alongside the best way, you’ll have recent capital to deploy into your finest concepts – at fire-sale costs.

For those who haven’t been buying and selling, you’re merely using the rollercoaster with nothing to point out for it however the experience down.

One of the best half about it’s that Jeff’s buying and selling technique is straightforward and dependable.

Right here’s Jeff:

Mainly, we simply wait till a inventory or an index will get stretched too far in a single course or the opposite. Then we wager on the proverbial rubber-band snapping again. We glance to purchase shares which might be deeply oversold, and we glance to promote/quick shares which have pushed too far into overbought territory.

Then, we exit the trades when circumstances return to impartial.

This technique paid off fairly effectively throughout President Trump’s first time period in workplace. It has been paying off once more because the President has returned. And, I think it would proceed to work effectively for the subsequent 3.5 years – at the least – it doesn’t matter what the inventory market does.

Subsequent Wednesday June 11 at 10 a.m. ET, Jeff will get into extra particulars. To reserve your seat, just click here.

We’ll preserve you up to date on all these tales right here within the Digest.

Have night,

Jeff Remsburg