Executive Summary
- Trade tensions have significantly escalated, with President Donald Trump threatening substantial new tariffs and export controls, and Beijing retaliating by restricting rare-earth mineral exports.
- China has implemented new rules to restrict exports of critical rare-earth minerals and associated technology, which President Trump criticized as a “sinister and hostile move.”
- Beijing’s retaliatory measures, including rare-earth restrictions, were a direct response to Washington’s actions, such as increased restrictions on exports to Chinese tech giants like Huawei and advanced chip exports.
The Story So Far
- The current escalation in trade tensions between the United States and China is driven by recent actions from Washington, including ramped-up restrictions on exports to Chinese tech giants, new taxes on Chinese shipping, and limits on advanced chip exports. These measures have prompted Beijing to retaliate by restricting exports of rare-earth minerals, which are crucial for electronics, ahead of a planned meeting between President Donald Trump and President Xi Jinping to address the deepening economic disputes.
Why This Matters
- The escalating trade tensions, underscored by President Donald Trump’s threats of increased tariffs and export controls alongside China’s retaliatory restrictions on rare-earth minerals, pose significant risks to global supply chains and consumer prices. This deepening economic conflict could severely impact tech and electronics industries worldwide and further exacerbate geopolitical friction over strategic resources, making the upcoming meeting between Trump and Chinese President Xi Jinping crucial for de-escalation.
Who Thinks What?
- President Trump and his administration are prepared to impose substantial new tariffs and export controls on China, criticize China’s rare-earth restrictions as “sinister and hostile,” and have already implemented measures against Chinese tech giants and shipping, while still expressing confidence in an amicable resolution at the upcoming summit.
- China views US restrictions as “extremely malicious” and has retaliated by implementing restrictions on rare-earth mineral exports, stating these measures aim to prevent materials from being used in military and sensitive fields, and has imposed reciprocal fees on US shipping.
Trade tensions between the United States and China have escalated significantly, with President Donald Trump threatening substantial new tariffs and export controls, and Beijing retaliating with restrictions on rare-earth mineral exports. The renewed friction comes ahead of a planned meeting between President Trump and Chinese President Xi Jinping later this month in South Korea, where both leaders are expected to address the mounting economic disputes.
Renewed Tariff Threats and Export Controls
President Trump has indicated he is prepared to impose tariffs starting at 130% on Chinese exports by November 1, a sharp increase from the current minimum rate of 30%. He also stated intentions to implement export controls on “any and all critical software” directed to China. Beijing has signaled it will retaliate against these potential measures.
Despite the heightened rhetoric, President Trump expressed confidence on Friday that he and President Xi could resolve matters amicably during their meeting on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit. US Treasury Secretary Scott Bessent, a key figure in trade negotiations with China, also noted a recent de-escalation in the situation.
China’s Rare-Earth Restrictions
The latest surge in tensions follows Beijing’s announcement earlier this month of plans to restrict exports of rare-earth minerals, which are essential for a wide array of electronics. Under new rules set to take effect later this year, China added five rare-earth elements to an existing list of seven highly restricted exports.
China’s plan also mandates licenses for technology required to mine, smelt, process rare earths, and manufacture magnets. Foreign entities would similarly need licenses to exchange Chinese-sourced rare earths or related technology. The Ministry of Commerce stated these restrictions aim to prevent materials from “being used, directly or indirectly, in military and other sensitive fields.”
President Trump criticized China’s move on Truth Social, calling it “a rather sinister and hostile move” and accusing China of having “quietly amassed into somewhat of a Monopoly position” with rare earths. US Trade Representative Jamieson Greer echoed this sentiment, describing it as “a clear repudiation of everything we’ve been working towards for the last six months.”
US Actions Provoking Beijing
Beijing’s actions were reportedly a response to a series of recent moves by Washington. Among these were ramped-up restrictions on worldwide exports to Chinese tech giants, including Huawei, targeting any parts or products manufactured using American equipment or software.
A spokesperson for China’s Ministry of Commerce called the US restrictions “extremely malicious” and vowed that China would “take necessary measures” to protect its companies. Additionally, the Trump administration recently began taxing Chinese ships docked at American ports and products transported on Chinese-made ships, prompting a reciprocal fee from Beijing at its ports. Washington had also maintained tight restrictions on exports of advanced chips, aiming to limit China’s advancements in artificial intelligence.
Outlook for the APEC Summit
The upcoming meeting between President Trump and President Xi at the APEC summit presents a critical opportunity for direct dialogue to address the escalating trade disputes. The outcome of these discussions could either lead to a resolution of differences or further exacerbate the economic rift between the world’s two largest economies.
