Economy

How U.S.-China Trade War Escalation Could Derail Economic Growth, According to the Fed

Fed’s Miran: US economic growth hinges on resolving trade tensions with China over minerals.

byAndres Castro

October 16, 2025, 10:24 AM

Seven US $100 bills are arranged in a rising staircase pattern on a solid light yellow background, suggesting growth.

A visual metaphor showing a rising trend, representing financial success or United States economic growth. By MDL.

Executive Summary

U.S. economic growth for the upcoming year is contingent on the resolution or realization of escalating trade tensions between the United States and China, according to Federal Reserve Governor Stephen Miran.

The uncertainty in trade relations is driven by China’s new restrictions on rare earth minerals and President Donald Trump’s retaliatory threats.

A de-escalation of these trade disputes would create a favorable scenario for economic growth, while prolonged issues could introduce significant headwinds.

The Story So Far

The current uncertainty in the U.S. economic outlook, as noted by Federal Reserve Governor Stephen Miran, stems directly from escalating trade tensions between the United States and China. Specifically, China’s recent implementation of restrictions on rare earth minerals has prompted retaliatory threats from President Donald Trump, creating significant instability that could either favor or hinder economic growth depending on its resolution.

Why This Matters

The U.S. economic outlook for the upcoming year is heavily dependent on the resolution or intensification of trade tensions between the United States and China, particularly concerning China’s rare earth mineral restrictions and President Trump’s retaliatory threats. Federal Reserve Governor Stephen Miran highlighted that a de-escalation would foster economic growth, whereas prolonged disputes pose significant headwinds and introduce considerable uncertainty for economic planners and market stability.

Who Thinks What?

Federal Reserve Governor Stephen Miran believes that the trajectory of U.S. economic growth for the upcoming year is contingent on the resolution or realization of escalating trade tensions with China, with de-escalation presenting a favorable scenario.

China has implemented new restrictions on rare earth minerals, a move that contributes to escalating trade tensions with the U.S.

President Donald Trump has threatened retaliatory measures in response to China’s restrictions, further contributing to the uncertainty surrounding trade relations.

U.S. Federal Reserve Governor Stephen Miran indicated on October 16, 2025, that the trajectory of economic growth for the upcoming year is contingent on the resolution or realization of escalating trade tensions between the United States and China. Miran highlighted the uncertainty surrounding China’s new restrictions on rare earth minerals and President Donald Trump’s retaliatory threats.

Trade Tensions and Economic Outlook

Speaking on Fox Business’s Mornings with Maria, Governor Miran stated that the economic outlook could shift significantly based on developments in the coming weeks. He noted that if the trade disputes de-escalate, it would present a favorable scenario for economic growth.

The remarks come amidst China’s implementation of new restrictions on the export of critical rare earth minerals, which are essential for various advanced technologies. This move has prompted a strong reaction from the U.S., with President Trump threatening retaliatory measures.

Miran’s comments underscore the interconnectedness of global trade policies and domestic economic performance. The potential for a quick resolution or an intensification of these trade issues remains a key factor for economic planners.

Context of Global Economic Factors

The Federal Reserve’s assessment of economic growth is influenced by a range of global and domestic factors. While trade relations with China are a primary concern, other elements such as labor market conditions and international economic activity also play a role.

For instance, recent data indicates ongoing labor weakness, which could bolster arguments for potential rate cuts. Simultaneously, international developments, such as Brazil’s lower-than-expected economic activity in August and Canada’s rise in housing starts, reflect a mixed global economic landscape.

The interplay of these factors creates a complex environment for policymakers aiming to maintain stable economic growth. The resolution of U.S.-China trade issues would remove a significant layer of uncertainty.

Key Takeaways

The immediate future of U.S. economic growth is closely tied to the evolving trade relationship with China. Federal Reserve Governor Miran emphasized that the realization or defusion of current trade risks will be a determining factor. A swift resolution to these tensions would create a positive environment for growth, while prolonged disputes could introduce significant headwinds.