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- China and the US has reignited trade tensions due to dispute on rare earth element exports.
- Trump’s newly announced tariff on Chinese goods has wiped out $2 trillion from the global stock market.
- The newly escalated tension threatens an upcoming meeting with Trump and Xi Jinping in South Korea, adding more uncertainty to global trade.
The United States and China re-ignited their trade conflicts, with both nations imposing new tariffs on each other. China has stated that the latest tariff on Chinese goods as unjustified, defending its export controls on rare earth elements. The escalation between the two nations has threatened global markets and could delay an upcoming summit between Trump and Chinese President Xi Jinping in late October.
Rare Earth Export Dispute and China’s Response
President Donald Trump announced on Friday that he imposed a tariff increase of 100% on Chinese products imported into the United States to financially counter new export controls that China imposed on rare earth elements. China controls around 70% of the global supply of rare earths minerals, which are very important for big tech companies including semiconductors and defense companies. ⁽¹⁾
The newly imposed tariffs are effective on November 1. China’s commerce ministry has described the US’s actions harmful to China’s interests and accused the US of undermining bilateral trade talks. However, China refrained from imposing new tariffs on US imports, unlike the earlier tariff hike dispute between the two nations. ⁽²⁾
Rare Earth Export Controls
China has defended its plan to tighten export controls on rare earth elements, after describing it as a legitimate strategy under international law. These export controls don’t just cover rare earth elements, but also intellectual property and technologies requiring foreign entities to obtain licenses for operating and exporting. China’s commerce ministry also stated that these measures are made to protect global peace and stability in the region and not intending to ban exports. ⁽³⁾
Market Reactions and Economic Impact
After Trump’s announcement of the tariff dispute on Friday combined with new US export controls, financial markets globally sold-off. Trump’s post on Truth Social accused China of hold the world captive with its rare earth elements, leading to a $2 trillion loss in the global stock market. The Nasdaq 100 declined by 4.6%, while the Dow Jones dropped 1,240 points.
Big tech like Nvidia, AMD, Apple, and Tesla were the main losers of the session due to their reliance on Chinese supply chains. The revived trade tensions have shook global markets and raised concerns for foreign companies dependent on China’s rare earth production, which accounts for 70% of the global supply. ⁽⁴⁾
Uncertainty Over Future Talks
After Friday’s sell-off, global stocks rebounded on Monday following a Truth Social post from President Trump on Sunday, suggesting he may not follow through on his threat to impose a massive tariff increase on China.
Trump and Xi are set to meet in South Korea in late October, with possibilities that the summit could be called off if Trump’s threats continue as recent trade negotiations in Madrid produced progress on problems like TikTok’s US operations. The world economy prepares for possible disruptions as the two countries continue their trade conflict.
