Uh oh... (more from Mish on the trade wars)

I heavily excerpted a Mish Shedlock blog post in my last post, so that I wouldn't personally have to go ballistic in a full-on rant against ill-advised tariffs on Chinese goods and the trade war they will create (I might yet, stay tuned).

In a separate blog post, Mish points to a Bloomberg article that hints at a potentially insidious side effect of our posturing against China. Per Bloomberg,

A generation after Chinese leader Deng Xiaoping made mastering neodymium and 16 other elements known as rare earths a priority, China dominates the market, with far-reaching effects ranging from global trade friction to U.S. job losses and threats to national security.

The U.S. handed its main economic rival power to dictate access to these building blocks of modern weapons by ceding control of prices and supply, according to dozens of interviews with industry executives, congressional leaders and policy experts. China in July reduced rare-earth export quotas for the rest of the year by 72 percent, sending prices up more than sixfold for some elements.

Military officials are only now conducting an inventory of where and how U.S. suppliers use the obscure but essential substances -- including those that silence the whoosh of Boeing Co. helicopter blades, direct Raytheon Co. missiles and target guns in General Dynamics Corp. tanks.

“The Pentagon has been incredibly negligent,” said Peter Leitner, who was a senior strategic trade adviser at the Defense Department from 1986 to 2007. “There are plenty of early warning signs that China will use its leverage over these materials as a weapon.”

Great. Now not only does the trade war with China pose significant risks to our fragile economy, it also compromises our national security. These rare earth elements, in addition to guiding laser-guided missiles, are also critical components in solar panels and motors for hybrid cars, meaning that the impact of a trade war on our economy could be even more far-reaching than we may appreciate.

Seriously, folks, before initiating a trade war with China on shaky economic grounds, think very long and hard about the long-term consequences. We don't have NEARLY the amount of leverage with China that we think we have. Or, as "Tyler Durden" over at the Zero Hedge blog so diplomatically said,

Somehow, because [the tariffs bill] was framed as a "jobs issue", everyone in Congress went full retard and confirmed they have not the first clue about how Economics actually works. But yes, please revalue the Yuan: the next thing will be exploding prices at Wal Mart, which have so far successfully masked the fact that the US has been exporting staple product inflation. We wonder how those same "workers" on whose behalf this law was allegedly passed will feel when their bill anywhere is double what it used to be... Not to mention that their currently unemployed status will certainly not have changed.

Couldn't have ranted better myself. Posture against China, force corporations to export all our labor to the next cheapest alternative like Vietnam or Germany (because it sure as hell isn't the U.S.), create price inflation without actually creating or saving any jobs, and compromise national security in the process. That's amazing work, really it is. That's why we pay you the big bucks, D.C.

[Bloomberg]
[Zero Hedge]