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.
…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.
…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.
…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.
China has a noticeably large portion of our foreign debt. Which we did issue because of massive cuts to those that never needed them, and not because we have a bad hand. We were already playing in our underwear.
So who exactly has the leverage here?
China, because they’re competent and focused. And because their leaders don’t have an undisciplined radical ignorant loony-reactionary base to appease. Next question…?
This has all the hallmarks of someone getting their excuses in early. “It wasn’t us, it was the (duly elected) utter fuckwit at the top who’s at fault for this massive failure.”
And yes, China has the leverage, on every level except military. In a shooting war, the US wins, hands down, every time. In literally every other scenario, the US going up against China look like the UK going up against the US militarily. It’s not even close. The only reason the US even exists economically at this point is because they’re still a large (but becoming less important) market for China. The long term plan is to make markets in Africa, South America and Asia more important than the US market. At that point China can sink the US (and Europe) relatively painlessly (to them…) without much fuss and certainly without ever firing a shot.
the prob with trade barriers with the US is that we’re the biggest consumers in the world. you’ve gotta get your new clients prosperous enough to shit disposable income down the planned obsolescence hole.
If it comes to it, China inevitably has the upper hand. Without those metals, modern civilization would grind to a halt. They are more than important, that’s what the world runs on now. And, up till recently, 90% of the world’s supply was mined in China.
The US had one mine, which has been closed these couple decades, and which is now trying to re-open. Other countries are desperately trying to get their mining, ore processing and separation (there are 17 metal ores and one heavier ore, found all mixed together), purification, and mine waste disposal (the waste is radioactive) industries going. But, that’ll take a decade or so. It’s extremely expensive.
It takes nine of the seventeen metals just to make an iPhone, let alone the chips for a guided missile or other military device. Apple and Google are not going to like drastic reduction in supply, or all supplies cut off.
China’s just got the whip-hand here over the entire world, they own most all of what civilization in running on now, nothing anyone can do about it.
Tangling with the sons of the dragon is possibly the worst idea anyone can come up with, except maybe “drill baby drill.” Unlike the US’ leadership, they actually think about strategy and plan, they don’t bounce around between pseudo-parties for a quadrennial popularity contest. It’s a shocking indication of how poorly the US strategizes that our political leaders think China wants Taiwan. I mean, of course they do, but they are massively unconcerned with having to build more territory into their system right now. Besides, Taiwan will be rapidly becoming worthless thanks to global warming. And there’s a good chance the US will have no ability to project power once its agriculture finishes collapsing. In 40 years the remaining Taiwanese will sell themselves to China for rice.
China will be better off in negotiations just because their position is sure to be coherent and they will have a plan. The US position is a random jumble of ideas with no planning of how different rules and tariffs overlap.
China doesn’t have as strong a hand as some people make it out to be. They have never recovered from the housing collapse they had some years ago and it’s still hurting their internal economy. They are working on diversifying away from trade with the US but it’s causing a chain reaction of of trade issues. Other countries don’t want to buy a lot of stuff from China when China blocks them from selling in China and they don’t want the big subsidized industries dominating entire markets.
They own a lot of US debt but selling that and refusing to buy more would do more damage to China then to the US. China needs to buy US debt to force their currency value to be stable and low, making their export prices better.
China is really facing a big fundamental problem. They are trying to build one of the top 5 economies on the planet based on exports. Exports they keep cheap by keeping their internal population poor. At that point though, who are they going to sell too? There are not any other economies large enough to buy all that stuff. They can’t transition to an internal or service economy because their kept their population poor. They need the US to be buying to keep their own economy profitable.
The Twitter/Bluesky account UnusualWhales tracks stock markets and activity.
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It’s a game of “who can screw over their own population for longer?”
Trump’s bet is that everyone can see he’s already started that and that he’s simply too stupid to care. He’ll just go all the way until even his allies band together and chuck him unceremoniously out on his ass. This may or may not be simply an appearance, we have yet to plumb the depths of Trump’s stupidity. There’s no bottom visible there yet.
Xi’s bet is that with careful planning his people can struggle through some amount of hardship. The exact amount he’s betting on is of course not advertised, that’s part of the bet and everyone knows there is a limit to this.
See? Our precious little snowflake is clearly going to win because he’s an unpredictable imbecile who’s already destroying our economy so it’s entirely believable that he’ll be willing to accelerate that. China’s best strategy might be pushing him to accelerate the process then giving him the win his childish vanity wants so badly.
Here is a rather different take on China`s rare earth restrictions. The presenter points out that US weapons, etc. stockpiles are very low and ….
Shocking U.S. Defeat: China’s Rare Earth Checkmate Is NOT What Media Pretends
jrkrideau @#10,
Thanks! That was very interesting.