Our rare earth elements play, the VanEck Vectors Rare Earth/Strategic Metals ETF (New York Stock Exchange; ticker: REMX) is up 52 percent over the past six months. But we think it still has a ways to go…

Last month, the United States Trade Representative (USTR) began its “301” investigation into whether China’s intellectual property rules and practices are unfairly disadvantaging U.S. firms.

The investigation is all about discovering – and rectifying – the damage done to U.S. companies from Chinese practices… which include the use of Chinese government funds to invest in or acquire U.S. companies and assets to obtain technologies… the theft of intellectual properties from U.S. companies… and the forced transfer of technology and intellectual property from U.S. firms to Chinese firms.

This investigation is likely just the start of a U.S.-China trade war. It’s widely assumed the investigation will find China at fault in several areas. It’s also likely that China will not make major concessions to the U.S. Some of the targets of the 301 investigation include Chinese President Xi Jinping’s key initiatives to modernise China’s economy.

When China and the U.S. fail to reach an agreement, Trump will likely launch major tariffs against Chinese imports next year. And you can bet China’s government will fight back.

The rare earth elements sector is completely dominated by the Chinese. (And remember, these elements are critical to modern civilisation.) And it would be easy for China to restrict the export of these key commodities to manufactures in the U.S. If that happens (or there’s even a whiff of a trade war) rare earth element prices will soar.

ACTION: BUY the VanEck Vectors Rare Earth/Strategic Metals ETF (New York Stock Exchange; ticker: REMX) with a 25 percent trailing stop loss.