The US-China trade war has seen renewed tensions recently, with significant announcements from both nations impacting market sentiments and global trade dynamics.
Resurgence of Trade Conflict
As the deadline approaches for resolving the ongoing trade dispute, both countries have adopted aggressive stances. China has imposed restrictions on the export of critical minerals, specifically rare earths, citing national security concerns. This move has prompted US President Donald Trump to announce a 100% tariff on Chinese exports entering the US.
China’s Export Restrictions on Rare Earths
On September 25, China’s commerce ministry revealed enhanced controls on rare earth exports, an essential resource for various industries, including technology, automotive, and military sectors. China dominates this market, producing over 90% of the world’s processed rare earths and controlling around 70% of global mining outputs. This control has been a pivotal element in the trade war.
US Tariffs and Economic Implications
In reaction to China’s announcement, Trump labeled the action as “extremely hostile.” The average US tariffs on Chinese imports have surged to 58%, while Chinese tariffs now stand at 33%. The US has also threatened to implement tariffs reaching nearly 150%, although these are currently on hold until a negotiation deadline on November 10.
Backdrop of Diplomatic Efforts
Recent weeks showed some progress in US-China relations, notably a deal regarding the Chinese-owned TikTok app. In September, US and Chinese officials reached an agreement that would transfer control of TikTok to a US-based entity, which both sides considered a “win-win.”
Additionally, US lawmakers visited China, discussing cooperation and potential economic benefits. However, underlying tensions remained, with disagreements over supply chain issues and China’s increasing oil purchases from Russia.
Future Meetings and Market Responses
Scheduled meetings between Trump and China’s President Xi Jinping at the upcoming Apec summit in South Korea may now be doubtful. Trump expressed skepticism about the meeting on his Truth Social platform. Market reactions have been mixed, with an initial decline followed by a recovery as Trump later portrayed a more conciliatory tone towards China.
Potential for Further Escalation
Analysts are observing Beijing closely for any counter-measures, including potential retaliatory tariffs. On the same day as the tariff announcement, China’s commerce ministry indicated it would take resolute actions to protect its interests, possibly jeopardizing the recent TikTok agreement.
Conclusion
The resumption of hostilities in the US-China trade war underscores the fragility of economic negotiations. As both nations navigate their renewed confrontations, markets and industries worldwide remain on high alert for further developments.
