I guess that sort of depends on how close you are to your SIL. Do you have any sense of how she feels about LGB people, the transgender movement, or the existence of "gender identity"? Might be helpful to try and sound her out a little bit first before going for a full-fledged conversation.

It could really help your niece to have this conversation sooner rather than later, though. The biggest things to emphasize, IMO:

• If a girl likes to wear "boy clothes" or is interested in "boy activities" (or vice versa), that doesn't mean she's trans, it doesn't mean she's "questioning her gender identity" and it doesn't even mean she's lesbian/gay/bisexual or that she's going to grow up to be LGB.

• Medical interventions for "transgender children," such as puberty blockers, testosterone, and surgeries, are not backed up by scientific evidence. You could cite the UK court ruling for Keira Bell's case-- I'm forgetting the wording but basically, they said that children under 16 could not sufficiently consent to medical transition. Even if, say, your SIL supported her child socially transitioning at a young age, it would still be worth emphasizing that medical transition at such a young age is dangerous and has serious harmful effects that many psychiatrists and doctors prescribing them don't mention (or sometimes don't even know about).