Beijing’s increase in export controls angered the president of the United States, who has already reacted
United States President Donald Trump has announced that he will impose an additional 100% tariff on products from China, on top of the 30% tariffs already in place, starting November 1 or earlier. The threat is a massive escalation after months of trade truce between the two nations.
“The United States of America will impose a 100% tariff on China, in addition to any tariffs they are currently paying,” Trump said in a post on Truth Social this Friday afternoon. “Also on November 1st, we will impose export controls on any and all critical software.”
Trump’s announcement is linked to Beijing’s increased export controls on its critical rare earths, which are needed to produce many electronics. As a result, Trump appeared to cancel a meeting with Chinese President Xi Jinping that was scheduled for later this month in South Korea.
Trump’s initial message, conveyed through a publication in Truth Social, in which he threatened “massive” new tariffs, was poorly received by investors, with fears of spring déjà vu, when tariffs on Chinese products rose to an impressive 145%. Markets closed sharply lower after Trump’s initial comments, with the Dow falling 878 points, or 1.9%. The S&P 500 fell 2.7%, and the tech-heavy Nasdaq fell 3.5%.
Although Trump does not always follow through on his threats, investors, consumers and businesses continue to have reason to worry.
The two largest economies depend on each other
The United States and China are the two largest economies in the world. Although Mexico has recently replaced China as the top source of foreign goods shipped to the United States, America depends on China for hundreds of billions of dollars worth of goods. However, China is one of the main export markets for the United States.
In particular, electronics, clothing and furniture are among the main products that the United States receives from China. Trump has been pushing CEOs, especially in the technology sector, to move production to the United States, but he has softened his approach in recent months as business leaders have pleased the president with announcements of hundreds of billions of dollars in investment in U.S. manufacturing — even as they continue to manufacture most of their products abroad.
Shortly after imposing minimum tariffs of 145% on Chinese products – an effective embargo on trade – Trump granted an exemption for electronic products, subjecting them to 20% tariffs. The move was, in many ways, a recognition that the Trump administration understood the pain it was inflicting on the US economy through its sky-high tariffs.
Then, in May, US and Chinese officials further established trade interdependence by agreeing to lower customs duties between each other. China lowered tariffs on American exports from 125% to 10% and the United States from 145% to 30%.
The stock markets of both countries rose as a result.
It was just a matter of time
On Friday, Trump said China’s trade hostility “came out of nowhere.” But in reality, it has been bubbling for months.
For the United States, a key part of trade agreements has been ensuring that China increases its supply of rare earth magnets. However, despite several apparent advances, in recent months Trump has repeatedly accused China of violating the terms.
Trump began by imposing restrictions on sales of American technologies to China, including an artificial intelligence chip from Nvidia. Many of these restrictions were later lifted.
Then came the Trump administration’s announcement that it would soon impose duties on goods transported on ships owned or operated by China. China countered with a similar plan for American ships, which took effect on Friday.
In short: Trump has already demonstrated that there are no limits to the level of tariffs he can impose on China, and Xi has shown no mercy in how he chooses to retaliate.
But Trump’s ability to continue imposing tariffs on a whim may soon end, pending the verdict in a landmark case that will begin at the Supreme Court next month. Xi, however, faces no such restrictions.
