Wharton's Jeremy Siegel says it's 'scandalous' the U.S. doesn't have a rare earths reserve

China's control over crucial rare earth materials has been a "threat for a long time" to Western supply chains and the U.S. should create a strategic reserve of the metals, University of Pennsylvania professor emeritus of finance Jeremy Siegel told CNBC's "Squawk Box" Monday.

"It's scandalous that we don't have a rare earth strategic reserve [and] that we let China monopolize 90% of refining rare earth materials," Siegel said. "Where were we, realizing the importance of these?"

Siegel's strategic reserve proposal comes as the U.S.-China trade war intensified Friday, with President Donald Trump vowing to impose "massive tariffs" on Beijing in response to its limits on rare earth mineral exports to the U.S., and threatening to cancel a planned meeting with Chinese President Xi Jinping. Trump's announcement erased $2 trillion in value from the stock market.

The U.S. created the Strategic Petroleum Reserve in 1975 in response to the 1973 Arab Oil Embargo.

Today, almost 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 wrote Sunday in a note to clients.

But Siegel said he's confident the U.S. and China will resolve their latest trade conflict before Trump's Nov. 1 deadline for more tariffs.   

"It'll be worked out, and it won't be too negative for either country," Siegel said. Trump's remarks were "just a prelude to saying, 'All right there are our chips, we've got cards [and] you've got cards...and let's negotiate.'"

Siegel, author of 1994's Stocks for the Long Run, said the November 1 deadline is actually a sign that Trump hopes to negotiate with his Chinese counterpart.

 "Trump said 100% [tariffs] but he said, 'Listen, I said the November 1 date, which for me is like forever,'" Siegel said. "It's actually the farthest date he's ever set for the start of a tariff, which means he wants to have that solved." 

Siegel added that the market will likely snap back following trade talks between Washington D.C. and Beijing. The S&P 500 is about 1.2% higher in early trading Monday after crumbling 2.7% on Friday.

"Once it's resolved, given all the other good things that are happening, I see no reason why we can't continue on to new highs," Siegel said.

The S&P 500 is regaining some 40% of its Friday losses early Monday, while the Nasdaq Composite has climbed about 2% as technology stocks rebound from last week's retreat.