The US and China find themselves once again on the verge of a large-scale trade war, which could seriously impact the economies of both countries and threaten global economic growth. Recent events indicate a rise in tensions between the two largest economies in the world, as they resort to mutual tariffs and restrictions on the export of strategically important resources.
This is reported by Finway
China’s New Restrictions and the US Response
Recently, China announced a significant expansion of export restrictions on rare earth minerals and magnets, which are crucial for the production of modern electronics, electric vehicles, and the US defense industry. Beijing added five new items to the existing seven, tightening control over the export of these materials.
In response, US President Donald Trump imposed new 100% tariffs on Chinese goods and intensified restrictions on the export of critical technologies to China. Trump also threatened to cancel a planned meeting with Chinese President Xi Jinping, which was set to take place at the end of the month during a summit of Asian leaders in South Korea.
Both sides have left themselves room for maneuver: China postponed the implementation of new restrictions until December 1, while the US did so until November 1. This indicates that both parties are taking hardline negotiating positions, attempting to strengthen their stances through ultimatums.
Global Consequences and Strategic Dependence
Analysts note that the recent steps may mark the beginning of a new era of tension between the US and China – moving from competitive cooperation to open confrontation. China controls about 70% of the world’s rare earth metal production and 90% of its processing, so its influence in this market was anticipated. At the same time, China remains dependent on the US for semiconductors and software necessary for the development of artificial intelligence.
The US aims to reduce its dependence on China by seeking alternative sources of rare earth elements in resource-rich countries, including Ukraine, the Democratic Republic of Congo, Myanmar, and Venezuela. However, the extraction and processing of these materials are fraught with environmental and political challenges, and the US’s own processing infrastructure significantly lags behind China’s.
Currently, the US exports up to 95% of its rare earth materials to China for further processing, as this is more economically advantageous. Developing domestic capabilities could take more than a decade due to the complexity of permitting processes.
Prior to the escalation, both sides showed some willingness to compromise: Trump canceled a $400 million arms shipment to Taiwan and allowed the export of artificial intelligence chips to China. In response, Beijing tightened control over precursors for fentanyl production and approved a deal regarding the American consortium’s stake in TikTok.
“The harsh truth is that in the foreseeable future, the US and China will remain interdependent. A trade war is not beneficial for either side. Since a ‘divorce’ is unlikely – at least in the near term – Washington and Beijing would be better off returning to negotiations.”
However, behind this diplomacy lies a large-scale struggle for influence and military superiority in the Asia-Pacific region, which could shape the course of the 21st century. Experts emphasize that despite the growing tensions, a complete decoupling of the economies is unlikely, and both sides are compelled to seek compromise at the negotiating table.