Mon. Oct 13th, 2025

The U.S. and China have raised new tariffs and export controls on each other, but they may just be a negotiating tactic.

President Donald Trump reacted with rare reassurance Sunday night after renewed trade tensions last week threatened to unravel progress towards a U.S.-China trade deal. China last week unveiled wide-ranging global export controls on rare earths, to the dismay of European and Asian nations, as well as the U.S., which has itself imposed several restrictions on China even after the countries reached a trade-war truce in May. In immediate response, Trump threatened to raise the U.S. tariff on Chinese goods to more than 100%, place export controls on critical software, and pull out of a future meeting with Chinese President Xi Jinping.

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But on Truth Social on Sunday night, Trump posted: “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!!!”

Earlier on Sunday, Vice President J.D. Vance, in an appearance on Fox News, urged Beijing to “choose the path of reason.” Vance warned, “the President of the United States has far more cards than the People’s Republic of China.”

The flare-up comes ahead of an expected meeting between Trump and Xi in South Korea later this month and as the two countries remain in talks to reach a trade deal before their truce, which brought down escalating tit-for-tat tariffs from both sides, expires in November. 

“The recent policy moves suggest a wider range of potential outcomes than appeared to be the case ahead of the last few key U.S.-China meetings,” Goldman Sachs Group Inc. economists including Jan Hatzius and Andrew Tilton wrote in a note, according to Bloomberg. “The most likely scenario seems to be that both sides pull back on the most aggressive policies and that talks lead to a further—and possibly indefinite—extension of the tariff escalation pause reached in May.”

China and U.S. renew tit-for-tat trade moves

China’s Ministry of Commerce announced Thursday sweeping new export controls on rare earth products.

Under the new rules, overseas exporters must apply for an export license in order to export products that contain even small amounts of Chinese rare earths, as well as some technology used for processing rare earths and making magnets. These curbs come into effect on Dec. 1.

By default, license applications to export rare earth products to overseas buyers for military purposes, as well as to end-users on export control lists, will not be approved. The ministry said the move is intended “to safeguard national security and interests.” Additionally, exports of rare earth items for research and development related to certain computer chips, as well as for artificial intelligence research with potential military applications, will be approved “on a case-by-case basis.” These curbs came into effect immediately on Thursday.

The ministry also announced on Thursday curbs on more rare earths and related products, including holmium, europium, ytterbium, thulium, and erbium, effective Nov. 8.

In response, Trump on Friday announced a 100% tariff on Chinese goods, on top of existing levies on Chinese products. The President also announced restrictions on critical software exports, with both changes coming into effect on Nov. 1. Trump also initially threatened to cancel a meeting with Xi, before clarifying that he is “going to be there regardless” but that he was not sure “that we’re going to have it.”

When asked about the tensions by reporters on Sunday as he was heading to the Middle East, Trump appeared to soften his stance, leaving room for negotiations with China.

“You know for me, you know what Nov. 1 is? It’s an eternity. Nov. 1 is an eternity for me,” Trump said.

The U.S. and China’s trade truce, which lowered tariffs from a prohibitive 145% on Chinese goods to 30% (although it is effectively higher on most goods due to stacking tariffs) and from 125% on U.S. goods to 10%, is set to expire on Nov. 10.

U.S. Trade Representative Jamieson Greer told Fox News on Sunday that China’s rare earth export curbs were a “power grab” that “won’t be tolerated,” but he added, “these measures aren’t in place yet, the tariffs aren’t in place yet. It’s scheduled for Nov. 1. So I think we’ll see the markets calm this coming week, as they see things settle out, hopefully.”

China’s Ministry of Commerce said on Sunday that its export controls on rare earth items is in defense of the country’s “national security and international common security” and to limit the use of Chinese rare earths in military conflicts. China notified countries before announcing the measures, the ministry said, emphasizing that export controls are not export bans. (Greer told Fox News that the U.S. was not notified and learned of the export controls via public sources.)

The ministry accused the U.S. of operating within a “double standard,” noting that the U.S. has more than 3,000 items on its Commerce Control List, whereas China’s Export Control List of Dual-use Items covers around 900 items. The ministry also said that the U.S. has introduced new restrictions targeting China even after the two countries have met several times for trade talks. In September, the U.S. Commerce Department expanded its export controls to close loopholes and keep Beijing from buying the most advanced semiconductor chips. The U.S. also blacklisted several Chinese entities and introduced new fees beginning Oct. 14 on large Chinese ships through Section 301 measures that target China’s maritime, logistics, and shipbuilding industries.

“For a long time, the U.S. has been overstretching the concept of national security, abusing export control, taking discriminatory actions against China, and imposing unilateral long-arm jurisdiction measures on various products including semiconductor equipment and chips,” the ministry said. “The U.S. actions have severely harmed China’s interests and undermined the atmosphere of bilateral economic and trade talks, and China is resolutely opposed to them.”

China has imposed new fees on American vessels at Chinese ports at the same time that the U.S. is imposing its new port fees. China also launched an antitrust investigation into U.S. tech giant Qualcomm over its acquisition of Israeli semiconductor company Autotalks without informing China’s State Administration for Market Regulation.

“Willful threats of high tariffs are not the right way to get along with China,” the Commerce Ministry said. “China’s position on the trade war is consistent: we do not want it, but we are not afraid of it.”

Outlook for trade deal clouds

The refreshed trade tensions mark a “turning point” in U.S.-China relations, Hu Xijin, former editor-in-chief of the Chinese state-run Global Times, said in a post on X.

“This year, the Trump Administration imposed tariffs on Chinese products several times without even consulting us. Sanctioning our companies was done just as casually,” he wrote. “The U.S. isn’t entirely out of cards to play; it still has some. But when it comes to a trump card like rare earths, that’s something the U.S. can’t pull out of its sleeve anytime soon.”

“What matters now is that the U.S. knows China has that capability,” he added.

China has sought to strengthen its position at the negotiating table not only by withholding its exports but also by demonstrating its leverage as an importer of U.S. agricultural products. China has effectively frozen new orders of U.S. soybeans, leading U.S. exports to China, which was once its biggest buyer, to tumble by more than 50% in value this year and crippling farms across the U.S. Also, in March, China did not renew approvals for hundreds of U.S. meat exports, effectively banning imports of American beef.

Analysts warned that another round of tit-for-tat tariff hikes could have dire effects on global trade. “Bloomberg Economics estimates that a 100% US tariff hike would push effective rates on Chinese goods to around 140%—a level that shuts down trade, not just raises costs,” Chang Shu, Chief Asia Economist at Bloomberg Economics, wrote in a research note. “While the current 40% rate—25 percentage points above the world average—is challenging, China’s manufacturing edge has kept exports flowing. Tariffs above 100% would sever most flows.”

But analysts also noted that Chinese manufacturing has thus far been able to withstand U.S. tariffs and shift exports to other countries. Last month, China’s exports rose 8.3% during the month from a year earlier, up from 4.4% growth in August and above analyst forecasts of 6%, according to Reuters. China’s imports in September also rose 7.4% compared to analyst forecasts of 1.5%.

Chinese exports intended for the U.S. have shifted to the U.K. and Europe, where they are flooding the market with relatively cheap goods. U.K.-based chemical company Ineos said last week that it would close two production units in Rheinberg, Germany, and cut 20% of its workforce in Hull, England, as it blamed “dirt-cheap carbon heavy” Chinese products pricing out European producers.

Goldman Sachs economists suggested that China’s recent more aggressive moves could also force the U.S. to lower its tariffs further during trade negotiations, which would be a “market-positive outcome.”

Rare earths have become China’s strongest bargaining chip in negotiations with the U.S. The Asian country accounts for around 70% of the world’s supply of rare earth minerals. In April, Beijing introduced export restrictions for seven rare earth magnets after Trump rolled out sweeping tariffs on the rest of the world and tit-for-tat hikes brought U.S. tariffs on China to a staggering level.

“The new measures mark a sharp escalation in Beijing’s long-running strategy to weaponize its dominance in rare earths,” Gracelin Baskaran, director of the Critical Minerals Security Program at the Center for Strategic and International Studies, wrote in an article on Thursday. While the U.S. Department of War, renamed recently from the Department of Defense, has ramped up investments into American rare-earth mining company MP Materials in an effort to reduce reliance on Chinese rare earths, any plan to increase sourcing and processing of such minerals in the U.S. will take time. “Until then, China retains a significant amount of leverage over supply chains crucial for national and economic security,” Baskaran wrote.

“Washington’s fear of China is strategic, not economic,” analysts at Hutong Research, an independent analysis firm, reportedly said. “A disruption in rare earth flows threatens defense production capacity, a core pillar of U.S. global power projection and, by extension, dollar stability.” Rare earth minerals are critical to military applications, as well as to semiconductor and auto industries.

Beijing has also moved to reduce its reliance on U.S. semiconductors after the Trump Administration first restricted exports of Nvidia’s H20 chips to China, then lifted some restrictions after a massive investment from Nvidia.

“China can last longer without U.S. chips than the U.S. can last without Chinese rare earths,” Brian Tycangco, an analyst at financial research firm Stansberry Research, posted on X.

It’s not clear how far along the U.S. and China are towards a trade deal ahead of the Nov. 10 deadline. China has reportedly offered a huge investment package to the U.S., but U.S. national security controls could end up blocking a large amount of that investment.

Washington and Beijing recently reached a deal for the Chinese-owned app TikTok to continue operating in the U.S. When asked if trade tensions could jeopardize the TikTok deal, Greer told Fox News that “that has not been part of the discussions,” but “if things escalate to a different point, who knows what is going to happen.”

“The U.S. is less able to withstand the impact of a full-scale escalation of trade frictions than China,” CF40, a Beijing-based economic think tank, wrote in an article published Saturday. “The Trump Administration’s reliance on TikTok to attract young voters, with the political pressure of the 2026 mid-term elections, has limited the U.S.’s room for extreme measures.”

Some experts, however, have pointed to the fact that most of the measures from both China and Trump don’t kick in before next month, leaving enough time for both sides to de-escalate and reach a deal or an extended truce.

“Trump’s knee-jerk additional tariffs of 100% don’t come into effect until November … a deliberate delay which gives time for the parties to sit down and do a deal,” Lyall Taylor, a portfolio manager at Singapore-based Wealth Management Alliance, posted on X.

Geoffrey Gertz, a Biden-era National Security Council official, told Politico, “China’s not saying they are absolutely cutting off all exports right now, but they are saying they have the ability to do so if they want to and that will be the background condition for U.S.-China negotiations.”

“It’s going to be a delicate dance, and a lot of it is going to depend on how the Chinese respond,” Vance said on Sunday. “We’re going to find out a lot in the weeks to come about whether China wants to start a trade war with us, or whether they actually want to be reasonable. I hope they choose the path of reason.”

“We have a lot of leverage,” Vance said. “And my hope, and I know the President’s hope, is that we don’t have to use that leverage.” But he said, “if the Chinese go down this pathway of cutting off the entire world from access to some of the goods that they produce,” then any positive relationship between the U.S. and China would be jeopardized.

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