Another spat between the leaders of the world’s two largest economies has quickly escalated, and if President Donald Trump and Chinese President Xi Jinping don’t lower the temperature soon, both nations stand to pay an exorbitant price.
Sky-high tariffs had brought trade between the two countries to a screeching halt earlier this year, before they reached a monthslong truce and substantially lowered levies on one another.
But trade tensions have reignited, with Trump threatening to impose tariffs starting at 130% on Chinese exports by November 1, up from the 30% minimum rate currently in effect. Trump also said he’s prepared to impose export controls on what he referred to as “any and all critical software” to China. Beijing has signaled it would retaliate to all these actions.
On Friday, Trump sounded confident he and Xi could resolve matters amicably, telling reporters that he intends to still meet with the Chinese leader on the sidelines of the Asia-Pacific Economic Cooperation summit in South Korea later this month. And US Treasury Secretary Scott Bessent, who helps lead trade negotiations with China, said Friday that “things have deescalated” recently.
But that was Friday. At any second, the tide could turn.
So, how did we get here?
Earlier this month, Beijing announced plans to restrict exports of rare-earth minerals, critical materials needed to power a wide range of electronics. Under the new rules set to take effect later this year, five rare-earth elements were added to China’s existing list of seven other highly restricted rare-earth exports.
Furthermore, China’s plan calls for mandated licenses for technology needed to mine, smelt and process rare earths, and to make magnets. Foreign governments and businesses would also need licenses to exchange Chinese-sourced rare earths or technology containing them.
The country’s Ministry of Commerce said the restrictions aim to prevent materials from “being used, directly or indirectly, in military and other sensitive fields.”
A day after Beijing announced those measures, Trump took to Truth Social, saying, “Our relationship with China over the past six months has been a very good one, thereby making this move on Trade an even more surprising one.”
He went on to say that China has “quietly amassed into somewhat of a Monopoly position” with rare earths and called the new restrictions “a rather sinister and hostile move, to say the least.”
US Trade Representative Jamieson Greer, who has worked on trade agreements with China alongside Bessent, said last week: “It’s a clear repudiation of everything we’ve been working towards for the last six months, which was a stable tariff situation and a continued flow of rare earths.”
Beijing’s actions came after a series of moves Washington took that drew the ire of Chinese counterparts.
Among them were ramped-up restrictions on worldwide exports to Chinese tech giants, including Huawei, of any parts of products manufactured using American equipment or software.
A spokesperson for China’s Ministry of Commerce called the move announced last month “extremely malicious,” adding that the country would “take necessary measures” to protect the rights and interests of its companies.
The Trump administration earlier this month also started taxing Chinese ships docked at American ports as well as products transported on Chinese-made ships. Beijing responded with a tit-for-tat fee at its ports.
Washington, meanwhile, up until recently, kept extremely tight restrictions on exports of highly advanced chips, aiming to prevent Beijing from making more advancements in artificial intelligence.
A meeting between Trump and Xi at APEC could be an opportunity to hash out their differences face to face as opposed to through American and Chinese officials. But things could just as easily devolve, pushing the two nations even further apart.
Source: edition.cnn.com