In a high-risk game for , but also for the balances on the planet, which looks like a “cold one” that includes tactical moves, measures, countermeasures, threats and negotiations are getting more and more involved and, with the possible meeting between and at the end of October being a milestone of developments, even though no critical decisions are expected to be made in it.
Rare earth restrictions are the ‘tip of the iceberg’
The new restrictions on the export of rare earths imposed by Beijing may be in the center of attention as – as the US government also emphasizes – they pose a challenge to the technology industry, electric mobility, supply chains and so many other sectors as a whole, but the two sides are making moves that, although less “impressive” than the restrictions and tariffs, have a significant impact on international trade, energy but also in geopolitics.
Electronic devices, ports, threats of tariffs, sanctions and stock exchanges
The US side, in addition to threats to impose new tariffs of 100% on Chinese products from November 1 launched last week by Donald Trump, has forced major e-commerce companies not to sell Chinese electronic devices and phones, while at the same time “opening” another front with China in terms of port fees, with the decision to impose fees on ships that are in any way connected to China (prompting Beijing to take corresponding measures). Finally, the US appears willing to link the trade dispute with China and the war in Ukraine, once again threatening to impose tariffs on the purchase of Russian oil, thus giving a geopolitical dimension to the dispute.
For its part, China appears to consider that at this particular stage it has the upper hand in the trade dispute between the two countries, as in Beijing – the opinion prevails that the US cannot withstand the imposition of high tariffs for a long time, as – as proved in April – this would have a serious impact on the stock market. The Chinese leadership appears to estimate that the possibility of another collapse of the markets will force Trump to negotiate on the substance at the meeting that the American president is expected to finally have with his Chinese counterpart Xi Jinping, in South Korea on the sidelines of the Asia-Pacific Economic Cooperation (APEC) summit which is being held in the last days of October.
This belief of the Chinese leadership that it has the upper hand and that in a confrontation the American markets will suffer, became even clearer with the announcement of sanctions by Beijing on the American units of the South Korean shipping company Hanwha Ocean. The move rattled US markets on Tuesday, sparking a major initial sell-off as hopes of an easing of tensions faded, before major indexes partially recovered and steadied in the afternoon.
The US is on hold (at least) until the meeting
Trump had referred to the meeting – after announcements from Beijing that it was preparing new restrictions on rare earths – arguing that he saw “no reason to do it anymore”. But a few days later he hastened to clarify that his report did not mean that he was canceling the meeting. Then it became clear that the American leadership is not only not ready to cancel the meeting, but that it is acting in the direction of its realization.
As US Treasury Secretary Scott Besant said earlier today: “Washington does not want to escalate the trade war with China. President Trump is set to meet President Xi later this month in South Korea. Officials from both countries are in daily contact to organize it, and the US does not want to cut ties with China. Thanks to the trust that exists between the two presidents, the trade conflict has not escalated further.”
The negotiation papers and the milestone
This position in combination with his own statements, Trump’s positions, but also the assessments of experts regarding China’s stance on the issue, demonstrate that the two sides are taking negotiating positions in view of the meeting of the two leaders and this means, first of all, that the pressure to settle the differences between the two during the meeting will be significant, while any escalation or de-escalation moves will come afterwards from her. The fact that Trump has announced that 100% tariffs on Chinese goods will go into effect on November 1st, while the meeting is likely to take place in one of the last days of October, shows that he aims to have a bargaining chip.
However, as the director of the China center of the Brookings think tank, Ryan Haas, told the Wall Street Journal: “The meeting will be the message. There will be no major developments. Xi will want to use the meeting to project a greater guarantee of stability and predictability. Trump could seek assurances on rare earth flows. They are likely to announce an extension of the trade truce that limits the escalation of tariffs.”
The US is looking for allies and giving a geopolitical dimension
At the same time, of course, Scott Bessent, in his statements today, appeared to be trying to involve the allies of the USA in the controversy, since as he said: “Don’t laugh, here we have China against the rest of the world. We will not let a group of bureaucrats in Beijing attempt to control the global production chain.” For his part, the special representative of the US government for trade, Jamieson Greer, emphasized: “To be clear, this issue is not only about the US, it is a maneuver of economic coercion for all countries of the world. The US and its allies will not accept the restrictions.”
In this context, the US appears to want to add another dimension to the confrontation with China, with Bessed arguing that the US is ready to impose tariffs on China if it continues to buy Russian oil, but noting that Washington’s European allies should also be willing to follow the same path. “China’s purchase of Russian oil is what fuels the Russian war machines. China buys 60% of Russian energy and 90% of Iranian energy.” A spokesman for the US secretary of state said the US would share photos provided to it by the Ukrainian government showing Chinese components on Russian drones used in Ukraine.
