The escalating trade war between the United States and China has hit a fever pitch within the last week. This has only been aggravated by China’s recent decision to restrict exports of rare earth elements. These materials are essential for nearly all U.S. technologies, from electronics to computer chips, lasers, and jet engines. The Chinese government announced that foreign companies would now be required to obtain special approval for shipping these essential resources, raising concerns about America’s technological capabilities.
This limitation comes just in time before a much-anticipated meeting between U.S. President Donald Trump and Chinese President Xi Jinping. It ramps up the dangerously charged climate around U.S.-China relations. Given the timing of this announcement, speculation was inevitable. China is said to be using the nonmarket economy designation as a bargaining chip in current trade negotiation.
One of Trump’s favorite targets has been China, on which he’s gone so far as to declare that it is “becoming very hostile.” He contends that the country is keeping the world “hostage” by restricting access to these crucial metals and magnets. This will prove particularly critical in light of the permanent ceasefire agreement just secured between Israel and Hamas in Gaza.
“This was a real surprise, not only to me, but to all the Leaders of the Free World.” – Donald Trump
These new export restrictions on rare earths are what has finally pushed Trump to act. He’s reportedly now weighing a “massive increase” in import duties on Chinese goods as a retaliatory measure. For context, earlier this year, import taxes led to a full-blown trade war between the two economic superpowers. This protracted conflict has already placed significant strain on their diplomatic relationship. Both countries had previously committed to cut tariffs following talks in Switzerland and the United Kingdom. Recent federal actions have once again pitted these two allies against each other.
Despite the upcoming meeting with Xi, Trump indicated on his Truth Social platform that there seems to be no reason for the two leaders to convene under these circumstances. He remarked, “I have not spoken to President Xi because there was no reason to do so,” reflecting his frustration with China’s actions.
As the trade talks are ongoing, the situation is still very fluid. Advocates point out that both countries have taken steps to reduce tariffs. Yet as we reported in a recent blog post, big hurdles still lie ahead. The geopolitical environment is evolving at a rapid pace. How the two countries choose to manage these tensions will undoubtedly set the tone for how they engage with each other moving forward.
