Relations between China and the US have been tense ever since Trump started his mercurial behavior with tariffs, raising and lowering and raising them again so frequently that I gave up trying to keep track. Trade relations between the US and the rest of the world seem more and more like a poker game in which the US starts out with a huge pile of chips and keeps raising the stakes, forcing out the smaller players, the countries that cannot afford to go toe-to-toe with the economic giant, so that they fold. The one exception is China which does have the resources to stay in the game. Up until now, they seem to have been content to be in a reactive mode, matching the US as it raises the ante.

But in a surprising development, China took the lead in raising the stakes, imposing new measures that would enable them to restrict the export of rare earth materials that are crucial for electronics.

China’s Ministry of Commerce on Thursday unveiled its most expansive rare earth export controls to date, allowing Beijing not only to restrict shipments of raw materials and magnets — as it has in the past — but also any devices that incorporate those elements. Because Chinese rare earths are embedded in everything from iPhones and electric vehicle motors to fighter-jet sensors, the rules effectively give Beijing potential veto power over vast swaths of global manufacturing.

The vast potential reach of China’s action, and the U.S.’s counteraction, was on display Friday: Trump’s tariff announcement sent stocks tumbling, with the S&P 500 dropping more than 2 percent, its worst day since April.

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The new export rules go well beyond previous restrictions, requiring government approval for technologies used in rare earth processing — including mining, smelting and separation — and bar Chinese citizens from providing “substantive assistance or support” for those operations abroad.

Former officials who’ve worked on U.S.-China policy say the point is to remind the U.S. of how easily Beijing can turn economic interdependence into leverage.

“This is a gun to the head coming into these negotiations,” said Geoffrey Gertz, former director of international economics on the National Security Council during the Biden administration. “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.”

Trump is of course furious that another country is using his trademark moves of bullying and using tariffs and import-export restrictions to cow other countries and that now he is the one who is in reaction mode.

An irate President Donald Trump is threatening to retaliate with 100 percent tariffs and new restrictions on exports of critical software — and said there’s “no reason” to meet with Chinese leader Xi Jinping later this month.

So who exactly has the leverage here? Trump is used to using the economic power of the US to coerce other countries. Does China have the clout to do that to the US? One thing is clear is that China’s actions tend to be carefully thought out and long-term in its scope, unlike Trump careening from one policy to another with seemingly no long-term strategy in mind. It is hard for outsiders to know what strategy is driving China’s latest move. It may be that it is just a weapon that it wants to have in reserve in the event that they need to use it in any contentious trade talks that they have with the US.

Former Trump officials say China’s latest salvo is a particularly sophisticated show of force — one that underscores a growing mismatch between China’s long-term strategy and the Trump administration’s more improvisational approach.

“We’re playing 2-D chess while Beijing is playing 4-D chess,” said Liza Tobin, who served as National Security Council director for China during the first Trump administration and the start of the Biden administration.
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China, after months of feeling it had the upper hand, may be testing how far it can push a White House that prizes dealmaking — and discovering even this one has its limits.
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Beijing’s pressure campaign has hit politically sensitive corners of the U.S. economy, including its boycott of American soybeans and other farm goods from Trump-friendly states, a redux of the approach it took during the president’s first term. It’s also shown its willingness to go tit for tat with the U.S. on port fees, with countries planning to charge the other’s ships for docking at their ports starting Oct. 14.

Meanwhile Trump officials are defending their performance on trade issues.

White House aides acknowledge that their approach to foreign policy has been more top-down than bottom-up than in administrations past. But they rebuff the notion that paring down the National Security Council has complicated their ability to execute a cohesive foreign policy strategy on China or elsewhere. In fact, they argue that streamlining their approach has made it stronger.

“The president, who was elected to implement his foreign policy, leads our foreign policy, which makes sense. Everything is dictated by the president and then executed by others,” said one White House official, granted anonymity to speak candidly about the administration’s strategy. “History would tell you that more people doesn’t mean better outcomes.”

Such statement might inspire more confidence if the president were thought to be minimally competent.