The trade truce between the US and China is under fresh strain after President Donald Trump announced plans to impose an additional 100% tariff on imports from China starting next month. He also revealed the US will introduce export controls on key software.
Trump’s move came in response to China tightening export rules on rare earth materials, which are essential in the production of smartphones, electric vehicles, military equipment, and other high-tech products. He accused Beijing of growing hostility and attempting to “hold the world captive.”
Market Reaction & Diplomatic Fallout
Trump hinted he might pull out of a planned meeting with President Xi Jinping, casting uncertainty over expected talks in South Korea. He later softened his tone, saying he would still attend but was unsure whether the meeting would happen.
Following his comments, US financial markets plunged, with the S&P 500 dropping 2.7%, marking its sharpest decline since April.
China’s Countermoves
China has not remained passive. Its latest measures include:
- Tighter export restrictions on rare earths
- A monopoly investigation into US-based tech giant Qualcomm, threatening its acquisition plans
- New port fees targeting ships tied to US companies
These policies echo earlier retaliation when the US raised tariffs earlier in the year—an episode that forced companies like Ford to temporarily halt production due to material shortages.
Rare Earths: China’s Strategic Leverage
China dominates global production of rare earth minerals. In previous trade clashes, Beijing’s restrictions caused supply chain disruptions in multiple US industries.
Experts believe the new rules are designed to pressure Washington ahead of negotiations rather than create immediate disruptions, since the restrictions haven’t yet taken effect.
Analysts Weigh In
Policy observers say Xi Jinping’s actions are meant to gain leverage before talks resume. Analysts note:
- China believes the US will eventually concede due to its reliance on critical materials
- The US defense sector may be forced to negotiate due to limited supply alternatives
- Despite threats, talks are still possible before December, when China’s new rules take effect
Current Trade Landscape
Earlier this year, the US and China agreed to ease their tariff war, but both sides kept significant barriers in place:
- US imports from China still carry 30% more in tariffs than at the start of the year
- US goods entering China face a new 10% tariff
Talks have focused on TikTok, agriculture, semiconductors, rare earths, and export controls.
What’s Next?
While a face-to-face meeting between Trump and Xi now seems doubtful, analysts say room for negotiation remains. With rising geopolitical competition, each side is escalating pressure in different ways.
Both countries are expected to maneuver intensely in the coming weeks, especially with China’s export rules set to kick in later this year.
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