U.S. China Trade War Escalation and Possible Calming
Last week, the U.S.–China trade war, which has seemed pretty tranquil of late, escalated.
China Expands Export Controls on Rare Earths
On Thursday (October 9th), Beijing announced new measures to go into effect on December 1st, expanding its export controls of rare earths to include any products that contain at least 0.1% of Chinese rare earth content or use Chinese technology in the process of production.
China made this move “loudly,” sending letters to major countries throughout the world. However, experts are saying these export controls on rare earths aren’t really that significant of a change, in practical terms, from the measures China previously had in place. An Epoch Times article cited “China expert Alexander Liao, who grew up in China’s military system and later became a seasoned journalist and Hong Kong bureau chief,” as saying it’s not a significant change in practical terms because “the new 0.1 percent measures are very difficult to enforce.”
Particularly with the June trade deal between China and the U.S. including magnets and rare earths to be supplied to the U.S. by China, this power move by China appears to be aimed at the U.S. Several experts point out that President Xi needs to show strength to reinforce his authority inside the Chinese Communist Party (CCP), especially with recent economic challenges. Liao points to the U.S. government shutdown as a perceived weakness for U.S., causing China to choose this timing for its announcement of expanding export controls.
The export controls require shippers to apply for an export license through China’s Ministry of Commerce, which could take up to 45 business days to review the application and still decide to reject it, especially if it’s for items China deems have military applications. AI or semiconductor uses would be especially scrutinized as well.
The control extends beyond China’s borders for any products produced using Chinese rare earths or technologies, trying to control the ability of foreign companies to export their own goods. Obviously, 0.1% is an incredibly low threshold for the amount of rare earths or so-called Chinese technologies in products. Also, paperwork, including notices of compliance, would significantly increase for companies that ship goods internationally under China’s expansion of export controls.
President Trump’s Reaction
President Trump did not take China’s power move lying down.
He immediately took to Truth Social with a pretty long post, saying China is “becoming very hostile” and pronouncing that his administration is calculating countermeasures, including a “massive” tariff hike on China:
Some very strange things are happening in China! They are becoming very hostile, and sending letters to Countries throughout the World, that they want to impose Export Controls on each and every element of production having to do with Rare Earths, and virtually anything else they can think of, even if it’s not manufactured in China. Nobody has ever seen anything like this but, essentially, it would “clog” the Markets, and make life difficult for virtually every Country in the World, especially for China. We have been contacted by other Countries who are extremely angry at this great Trade hostility, which came out of nowhere. 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. I have always felt that they’ve been lying in wait, and now, as usual, I have been proven right! There is no way that China should be allowed to hold the World “captive,” but that seems to have been their plan for quite some time, starting with the “Magnets” and, other Elements that they have quietly amassed into somewhat of a Monopoly position, a rather sinister and hostile move, to say the least. But the U.S. has Monopoly positions also, much stronger and more far reaching than China’s. I have just not chosen to use them, there was never a reason for me to do so — UNTIL NOW! The letter they sent is many pages long, and details, with great specificity, each and every Element that they want to withhold from other Nations. Things that were routine are no longer routine at all. I have not spoken to President Xi because there was no reason to do so. This was a real surprise, not only to me, but to all the Leaders of the Free World. I was to meet President Xi in two weeks, at APEC, in South Korea, but now there seems to be no reason to do so. The Chinese letters were especially inappropriate in that this was the Day that, after three thousand years of bedlam and fighting, there is PEACE IN THE MIDDLE EAST. I wonder if that timing was coincidental? Dependent on what China says about the hostile “order” that they have just put out, I will be forced, as President of the United States of America, to financially counter their move. For every Element that they have been able to monopolize, we have two. I never thought it would come to this but perhaps, as with all things, the time has come. Ultimately, though potentially painful, it will be a very good thing, in the end, for the U.S.A. One of the Policies that we are calculating at this moment is a massive increase of Tariffs on Chinese products coming into the United States of America. There are many other countermeasures that are, likewise, under serious consideration. Thank you for your attention to this matter!
DONALD J. TRUMP, PRESIDENT OF THE UNITED STATES OF AMERICA
President Trump did not bring up that this move from China is happening during the government shutdown, but he did criticize its timing of coinciding with the peace deal he brokered between Israel and Hamas.
He questioned if that timing was coincidental.
President Trump Announces 100% Tariff Addition on Chinese Goods
It didn’t take long for President Trump and his administration to make a decision on how to respond to China’s export controls expansion.
Just hours after President Trump’s initial social media announcement about China’s power move, he published a new Truth Social post that gave a quick recap of China announcing its export controls expansion and announced that the U.S. will impose a new 100% tariff on goods from China.
This tariff is to go into effect on November 1st and be “over and above” any tariffs already in place.
Here’s the full text of the post:
It has just been learned that China has taken an extraordinarily aggressive position on Trade in sending an extremely hostile letter to the World, stating that they were going to, effective November 1st, 2025, impose large scale Export Controls on virtually every product they make, and some not even made by them. This affects ALL Countries, without exception, and was obviously a plan devised by them years ago. It is absolutely unheard of in International Trade, and a moral disgrace in dealing with other Nations.
Based on the fact that China has taken this unprecedented position, and speaking only for the U.S.A., and not other Nations who were similarly threatened, starting November 1st, 2025 (or sooner, depending on any further actions or changes taken by China), the United States of America will impose a Tariff of 100% on China, over and above any Tariff that they are currently paying. Also on November 1st, we will impose Export Controls on any and all critical software.
It is impossible to believe that China would have taken such an action, but they have, and the rest is History. Thank you for your attention to this matter!
DONALD J. TRUMP
PRESIDENT OF THE UNITED STATES OF AMERICA
At the beginning of the post, President Trump also gave the November 1st date for when China would impose its new export controls. He likely meant December 1st there. However, December 1st is only when the third phase of China’s export controls expansion goes into place.
The December date is when the most significant amount of the expansions occur, including the extraterritorial expansion and de minimis 0.1% figure on rare-earth materials. But there is also a November 8th date that expands China’s export control laws to cover the rare earths holmium, europium, ytterbium, thulium, and erbium, among processing equipment as well.
Even on the day of the announcement, October 9th, some immediate export controls went into effect on some specific rare earth technologies.
Signs of Calming Hostility Amongst Mixed Messages
Immediately after receiving reports about the export controls expansion from China, which didn’t inform the U.S. before making its announcement, the Trump Administration reached out to China. This according to U.S. Trade Representative Jamieson Greer in a Fox News interview yesterday. Greer said, “… as soon as we found out from public sources, we reached out to the Chinese to have a phone call, and they’ve deferred.”
It’s unclear whether the phone reach-out happened before or after President Trump made his initial Truth Social post about the situation. If China was deferring until Presidents Trump and Xi were to meet in a couple weeks, President Trump could have written “now there seems to be no reason to [meet with President Xi at OPEC]” in order to show he wasn’t going to respond to China’s “power grab” on President Xi’s terms.
However, that’s a bit speculative, and Trade Representative Greer did say that the meeting could still happen. “If there’s interest in talking, the president is famously always willing to talk.”
After President Trump’s announced that the U.S. would impose a 100% tariff on China because of China’s rare-earth move, China’s Ministry of Commerce called for “addressing concerns through dialogue,” as reported by the Epoch Times, but the very next words of the article were “and said [China] would retaliate if Trump follows through on his promise.”
In the Fox interview, Greer did have calming words in saying that the November 1st 100% tariff hasn’t gone in place yet, and China’s December 1st export controls haven’t been put into effect yet either. Clearly, he believes a deal could be reached to avoid both.
Likewise, President Trump’s most recent Truth Social post on the situation (at the time of this writing) was one that felt like a deescalation of rhetoric between the countries:
Don’t worry about China, it will all be fine! Highly respected President Xi just had a bad moment. He doesn’t want Depression for his country, and neither do I. The U.S.A. wants to help China, not hurt it!!! President DJT
Of course, there could be a veiled threat in that post. If President Xi doesn’t relent on this export controls expansion for rare earths, the U.S. would take actions that would hurt China and possibly cause it to suffer a depression. But that’s something President Trump doesn’t want to do and doesn’t believe he’ll have to do.
The “it will all be fine” statement did at least calm markets that initially reacted negatively to the Chinese and American trade announcements.
