The Context Behind US-China Trade Tensions

Calvin James

The current trade war between the US and China has reached a new level with both the nations firing up threats, policies, and retaliations at each other. The most recent wave of tension is associated with a threat of the imposition of a 100 % tariff on Chinese products by the U.S. President Donald Trump, which only aggravated the already deteriorated trade relationship. As the significant problems with rare earth minerals, tariffs, and sanctions become central, the world economy prepares in case of the disruption.

The declaration of President Trump on October 10 to introduce a 100 % tariff on Chinese imports is a major progression to the current trade war between the two biggest economies in the globe. This tariff threat was in reaction to China putting export restrictions on rare earth minerals, which is an essential commodity to the electric vehicle industry as well as the high-tech electronics.

In his speech on his Truth Social, Trump directly attributed the Chinese export ban to what he termed as an act of economic hostility. He stated that the Chinese decision not to purchase American soybean was an act of trying to destroy the American agricultural market, he accused Beijing of seeking to destroy American interests. The 100% tariff threat by Trump will be in effect as early as November 1, 2025, which will further worsen the already strained trade relations.

The Chinese action to limit the exportation of rare earth minerals was done when the United States had taken sanctions and export controls against Chinese technology and defense firms. The Ministry of Commerce in China reacted to the words of Trump by claiming that the United States was employing double standards, and Washington was stretching the issue of national security to justify its actions. Beijing also threatens to retaliate with more and more measures should it step up any further, especially the proposed tariffs, which has led to the ongoing tit-for-tat between the two nations.

The Broader Context: Trade War History and Economic Implications

The current state of affairs is a continuation of a pre-existing trade war, which started with the Trump administration. The U.S. and China have been involved in exchanging tariffs on billions of dollars of goods with the U.S. initially levying tariffs on Chinese goods valued at approximately $60 billion in 2018. China responded by levying tariffs of its own and the dispute escalated into a global trade war that has impacted industries across the world. This tariff on Chinese products has been up and down since then, both of these countries initially agreed to a temporary ceasefire in 2019, but the trade war was rekindled by actions of China concerning rare earths, as well as U.S. sanctions on Chinese technology firms.

A major finding in this continuing trade war is the export controls on Rare Earth Minerals by China, which will take effect on December 1, 2025. China controls the majority of the rare earth market in the world and its move to enhance its control would have far reaching impacts in the industries worldwide. Smartphones, electric vehicles, semiconductors and military technologies are products that require these minerals. America, which depends on these resources to make its defence industry and hi-tech industries, has now found it very difficult to access these resources without the cooperation of China.

In response to the measures of China, Trump has threatened to continue increasing the situation, even with the prospect of introducing tariffs on more Chinese products. China on the other hand has reacted with a combination of defensive rhetoric and economic retaliation. The Commerce Ministry of China has indicated clearly that the nation is willing to adopt tough actions which will protect its interests in case the U.S. proceeds along this route. The result of this dynamic may be another trade war that takes much longer and which might have more significant effects on global trade.

China’s Rare Earth Restrictions: A Strategic Move

The most recent source of tensions is the conflict over the rare earths. On October 9, China declared that it would introduce new export regulations on 12 in 17 rare earth metals which it already supplies to the world market. The new laws will actually come into force on December 1, 2025, and are considered to be the continuation of the actions by China to protect its interests in the sphere of national security. This has been regarded as a direct retaliation to the U.S. policies against the Chinese technology companies and industries.

China has become a monopoly of rare earths, which has put it in a strategic position. Most of the rare earth imports that are critical to the U.S. industries like defense, telecommunication and consumer electronics are obtained in China. These export limitations are especially troublesome to the U.S. manufacturers and technological firms who utilize these materials to produce semiconductors, electric cars, as well as other emerging technologies.

In the efforts of China to limit the export of the rare earths, their interests have been put into perspective in terms of national security. Beijing asserts that it is the actions of the U.S. that has compelled China to undertake the actions, including imposition of sanctions and export controls. Chinese leaders have also indicated that America is trying to get an unjust edge by sabotaging the accessibility of China to vital technologies. Beijing also mirrors that Washington has been misusing national security issues to justify itself and the accusation is that the U.S is using economic policy to suppress the rise of China as an international economic powerhouse.

The U.S. Response: A Calculated Leverage Play

The Trump administration has increased its rhetoric in reaction to the rare earths embargo by China and has threatened to counter the measures by placing tariffs on Chinese commodities as a way of retaliation. The choice of the president to impose a 100% tariff on Chinese imports is a part of a larger plan which is to use the economic strength of the U.S. economy to bully Beijing into compromising. Nevertheless, analysts have also noted that the U.S. economy is much more resistant to the impacts of tariffs than that of China that highly depends on exports to the U.S. and other nations.

U.S Treasury Secretary, Scott Bessent has been very critical of the China economic policies and he described the move by the country as a sign of economic weakness. According to the remarks of Bessent, there is increasing anger in the U.S. government due to the reluctance of China to adhere to the trade agreements and the increasingly aggressive behavior in the world markets. The U.S. considers the actions of China to be a challenge to its world leadership, and the threats of the tariff are the attempts to restore the balance in the relations in trade.

With the situation getting out of hand, both parties could take an area of revenge which would be massive. Besides the export of rare earths, China has already resorted to some other trade restrictions in recent weeks such as introduction of new port charges on American vessels and antitrust inquiry against U.S. based Qualcomm. The moves made by China have caused shock waves in the international markets and the stock prices have dropped in the aftermath of such moves.

The effects of such increasing trade actions have been experienced in the global arena. This has caused a reaction of financial markets in more volatility and uncertainty of future prospects facing the businesses that have had an exposure to China. China has severely affected U.S. farmers especially after the latter decided to stop buying U.S. soybeans. These practices have brought about a lot of havoc in the agricultural industry with most farmers struggling to sell their produce to new customers.

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