Our damaging, self-inflicted trade war just took a turn for the worse. In retaliation against China’s theft of US intellectual property, President Trump floated a ludicrous 100 percent tariff on all Chinese imports. This announcement comes at a moment of escalating tensions between the United States and China. Yet both countries face deeply intertwined economic and political crises. Providing context to this latest threat are the last several months’ dramatic developments in the ongoing trade negotiations, with the most recent round of talks held in Madrid, Spain.
China has been the fieriest critic of Trump’s tariff threat, calling it an act of “trade bullyism.” The Chinese government recently announced these same export controls on rare-earth metals, which are essential to many high-tech industries. These actions are a direct retaliatory answer to the US’s highly protectionist trade barriers. In particular, they go after limits on Chinese telecommunications firms such as Huawei. The two nations are now at each other’s throats more than ever. In response, they are expanding their interpretations of national security to cover all sorts of economic activities.
Trump’s Tariff Threat
During recent remarks, Trump stated, “Based on the fact that China has taken this unprecedented position … the United States of America will impose a Tariff of 100 percent on China, over and above any Tariff that they are currently paying.” Whether or not you like his comments, they certainly align with a hardline approach meant to counter China’s increasing economic clout.
This new threat comes on the heels of the U.S. imposing a massive 34 percent tariff on certain Chinese goods. This action represents a huge step up in trade hostilities between the two countries. The move is part of a broader strategy that Trump has employed throughout his presidency, often invoking tariffs as leverage in negotiations with foreign powers.
In response to rising tensions, a spokesperson from the Chinese Commerce Ministry articulated the country’s stance: “Willful threats of high tariffs are not the right way to get along with China. China’s position on the trade war is consistent: we do not want it, but we are not afraid of it.”
China’s Countermeasures
The US-China trade war continues to get hotter, and China has retaliated by widening its export embargo. Today, 12 of the 17 rare-earth metals and certain refining apparatus are covered by these restrictions. This savvy political tactic aims squarely at the U.S. by exerting pressure where it hurts. These materials are essential for other advanced technologies such as electric vehicles and smartphones.
In addition, the World Trade Organization (WTO) just ruled that China’s export restraints were illegal under international trade rules. Despite this ruling, China is still committed to business as usual. A representative suggested that should the U.S. persist with its aggressive tactics, “China will resolutely take corresponding measures to safeguard its legitimate rights and interests.”
JD Vance, a prominent political figure, emphasized the U.S.’s strong position in this conflict: “If they respond in a highly aggressive manner, I guarantee you, the president of the United States has far more cards than the People’s Republic of China.” He cautioned that the two countries are developing economically interdependent. Neither side has clean hands, morally or legally, in this multifaceted trade dispute.
Continued Diplomatic Efforts
Despite these tensions, diplomatic efforts continue. Trump and Chinese President Xi Jinping are expected to meet in South Korea during the Asia-Pacific Economic Cooperation (APEC) summit. This meeting may provide an opportunity for both leaders to address their differences directly and seek common ground amid mounting economic pressures.
The mood for these highly anticipated bilateral economic and trade talks is still steeped in hostility. Both nations wield a significant amount of power. Economists sounded the alarm that rising tensions might drag down both countries’ economies. Kewalramani remarked, “That said, it has overreached with the latest round of export controls. US policy, meanwhile, has lacked strategic coherence.”
Given such changes, the economic relationship between the two countries presents a minefield that both countries need to tread cautiously. The risk of tit-for-tat responses is ever present, and cooperation on common interests can be drowned out by hawkish threats.
