In a significant escalation of the ongoing trade dispute, U.S. President Donald Trump has declared his intention to implement an additional 100% tariff on all goods imported from China, set to take effect next month. This bold move was announced via social media, where the President also indicated that the U.S. would be imposing export controls on critical software.
Earlier on Friday, Trump directed sharp criticism towards Beijing’s recent decision to tighten export regulations on rare earth minerals. He accused China of adopting an “extremely hostile” stance and attempting to hold the world “captive” by controlling these essential materials. These minerals are vital for the production of numerous modern technologies, including cars and smartphones.
The President’s escalating rhetoric also extended to his planned meeting with Chinese President Xi Jinping, with Trump initially threatening to withdraw from the engagement. He later clarified that the meeting had not been definitively cancelled but expressed uncertainty about its occurrence, stating, “I don’t know that we’re going to have it.” He made these comments to reporters at the White House, emphasizing his commitment to attending regardless of the meeting’s final status.
The immediate impact of Trump’s statements was evident in financial markets, with the S&P 500 experiencing its steepest decline since April, closing down by 2.7%. This sharp fall underscores the global economic anxiety surrounding the escalating U.S.-China trade tensions.
China’s control over the production of rare earth minerals and other key components gives it significant leverage. Historically, when China has previously tightened these export controls, particularly in response to U.S. tariff increases, it has caused considerable disruption for American companies reliant on these materials, even leading to temporary production halts, such as that experienced by Ford.
Beyond the rare earth mineral export rules, China has also initiated a monopoly investigation into the U.S. technology giant Qualcomm. This investigation could potentially impede Qualcomm’s planned acquisition of another chip manufacturer, further complicating the tech and trade landscape.
Although Qualcomm is a U.S.-based company, a substantial portion of its operations and market presence is in China.
Furthermore, Beijing has announced new port fees for vessels associated with U.S. companies, including those owned or operated by American firms. Trump reacted to these developments by posting on social media, “Some very strange things are happening in China! They are becoming very hostile.”
The U.S. and China had been maintaining a delicate trade truce since May, when they agreed to de-escalate by removing the high tariffs that had severely restricted trade between the two nations. However, the current situation sees U.S. tariffs on Chinese goods facing an additional 30% levy compared to the beginning of the year, while Chinese tariffs on U.S. goods have increased by 10%.
Recent talks between the two countries have covered a range of critical issues, including the social media app TikTok, U.S. agricultural purchases from China, and the trade of rare earths and advanced technologies like semiconductors. A meeting was anticipated later this month at a summit in South Korea.
Experts suggest that China’s strategic timing of these actions, particularly the rare earths directive which doesn’t take immediate effect, is intended to influence upcoming negotiations. Jonathan Czin, a fellow at the Brookings Institution, commented, “He’s looking for ways to seize the initiative… The Trump administration is having to play a game of whack-a-mole.” Czin also noted that China likely doesn’t perceive a significant threat of U.S. retaliation, believing the U.S. administration has previously shown a willingness to compromise.
In previous trade discussions, China has sought more lenient U.S. restrictions on semiconductors and desires more predictable tariff policies to facilitate its exports to the U.S. China’s dominance in rare earths has been a key bargaining chip for President Xi.
Gracelin Baskaran, director of the critical minerals security program at the Center for Strategic and International Studies, highlighted the seriousness of the new export rules, especially their targeting of overseas defense manufacturers. She stated, “Nothing makes America move like targeting our defence industry. The US is going to have to negotiate because we have limited options…”
While a Trump-Xi meeting appears uncertain, Baskaran believes it is not entirely off the table, noting that there is still room and time for negotiations, especially as China’s new rules are not effective until December. “Negotiations are likely imminent,” she predicted, adding that the specifics of who will negotiate and where will become clearer over time.