Following Beijing’s imposition of stringent export controls on rare earths, Donald Trump imposed 100% tariffs on China starting November 1st. The meeting between the two leaders in Korea is cancelled
In what we could define as a “twist”, on Friday evening the American President Donald Trump ha carried out “a massive increase in tariffs on goods imported from China”. The reasons for this flashback of the “trade war” are the controls imposed by Beijing for the export of rare earthscritical materials of which China has a virtual monopoly on refining, used in many hi-tech sectors of American industry, including the war industry.
Trump’s message
The American President took to his Truth Social account to provide a harsh reaction to the new control measures on rare earth exports announced by Beijing on Thursday 9 October. In what he defined as a «sinister and hostile act», Trump accused China of wanting to hold “the world hostage” through the control of critical materials. The leader of the White House denounced how these controls will “clog up the markets” and create difficulties “for almost all countries in the world, especially for China itself”.
Trump’s reaction also seems to have canceled the planned meeting with Chinese President Xi Jinping during the APEC summit in South Korea, which will be held in two weeks: «I was supposed to meet President Xi in two weeks at APEC in South Korea, but now there seems to be no reason to do so anymore», wrote the American President, adding that he did not even feel the need to speak to Xi since «this development took me by surprise, as did all the leaders of the free world».
Trump promised decisive economic countermeasures, announcing that the United States will impose “100% duties on China from November 1st in addition to the duties already in force”thus bringing the tariff on goods imported from Beijing to 130%, in addition to this, the tycoon imposed “export controls on all critical software.”
The President wanted to underline that America also has strategic monopolistic positions, declaring that «for every element that they have managed to monopolize, we have two» and that the United States «also has monopoly positions, much stronger and more far-reaching than those of China».
The message immediately caused a negative reaction on the financial marketswith the Dow Jones losing 400 points, the S&P 500 down 1.3% and the Nasdaq down 1.9%.
The controls imposed by Beijing
But what are the measures imposed by Beijing that have infuriated the American President? The new export control measures were announced by China’s Ministry of Commerce on October 9. China has extended controls to five additional elements: holmium, erbium, thulium, europium and ytterbium, bringing the total number of rare earths subject to restrictions out of the existing seventeen elements to twelve.
The real innovation of these measures lies in the application for the first time of the “foreign derivative product rule”, a mechanism very similar to the one implemented by the United States to limit semiconductor exports to China.
According to this rule, Foreign companies will now have to get Chinese government approval to re-export magnets that contain even minimal amounts of materials of Chinese origin or were produced using Chinese magnet mining, processing or manufacturing technologies.
The new controls extend well beyond raw materials, also covering refining technologiesspecialized equipment and even the maintenance and upgrading of production lines.
The ministry specified that exports to “foreign military users” and to importers included in the control lists will not be authorized in principle (including therefore the US Armed Forces). The measures will come into force on November 8, with additional regulations for foreign companies starting from December 1. It is therefore not excluded that the measure is a negotiating tool to extract concessions from Washington
Finally, it is worth remembering that Chinese dominance in the sector is overwhelming: Beijing controls nearly 90% of global rare earth refining capacity and has a virtual monopoly on heavy elements such as dysprosium and terbium, essential for the defense industry and electric vehicles. The “trade war” between Washington and Beijing may have just started again.
