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Tariffs

US-China Trade War Escalates as Rare Earths Announcement Sparks 100% Tariffs

Strategic Insights

— 1 min read

The US-China trade war has reignited, with China's announcement of enhanced restrictions on the export of rare earths prompting the US president, Donald Trump, to impose 100% tariffs on US-bound Chinese exports. The rare earths announcement has dealt a significant blow to hopes of averting global economic chaos. The decision has been described as "extremely hostile" by Trump, and a senior advisory firm, Hutong Research, has suggested that Beijing is reactivating its "April playbook" - escalating tensions to force a negotiation reset.

Key Takeaways:

  • China produces more than 90% of the world's processed rare earths and controls about 70% of the world's mining, making it a crucial player in the global supply chain.
  • The US and China had reached a deal on TikTok in September, but tensions have now escalated, with some analysts speculating that the stock markets could pressure Trump to walk back the latest tariffs.
  • The trade war has seen the US announce enhanced controls on the export of chipmaking equipment to China, aimed at depriving the country of advanced semiconductors.
  • The US and China have been at loggerheads over a range of issues, including China's purchases of Russian oil and declining soybean exports from the US to China.
  • Trump and Xi Jinping, China's president, were expected to meet at the Apec summit in South Korea and potentially visit Beijing in January, but these meetings now seem less likely.

Statistics:

  • The S&P 500 Index slid by more than 2% following Trump's announcement about the 100% tariffs, the biggest one-day fall since April.
  • China produces more than 90% of the world's processed rare earths.
  • China controls about 70% of the world's mining.
  • The US had previously warmed up to China with the TikTok deal, followed by a group of US lawmakers visiting China for the first time since 2019.

Sources:

  • Reuters
  • Hutong Research
  • Bytedance
  • US Commerce Ministry
  • White House Truth Social platform
  • S&P 500 Index

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