Here’s how Trump can hit China’s economy where it really hurts as analysts say Beijing’s rare earths gamble could backfire
The Trump administration insists it has the upper hand as trade friction with Beijing reignites over rare earth export controls.
President Donald Trump’s first reaction was to make a statement. additional 100% tariff and software restrictions He has previously talked about tougher measures that could be put in place against China, which controls more than 90% of the world’s processed rare earth elements and rare earth magnets.
“But the US also has Monopoly positions that are much stronger and more far-reaching than China’s,” he warned in a post on Truth Social before the tariff move. “I didn’t choose to use them, there was never a reason for me to do so – UNTIL NOW!”
Trump has since toned down his rhetoric and even acknowledged that his planned tariffs are not sustainable, while Wall Street has dismissed his threats as an attempt to gain leverage in negotiations and another opportunity for “TACO” trading.
At the same time, the White House said a planned meeting between Trump and Chinese President Xi Jinping would take place on the sidelines of a regional economic conference in South Korea at the end of the month.
Still, China’s rare earth restrictions have stunned some observers, who say they can be done.Banning any country in the world from participating in the modern economyGiven how critical minerals are to a wide range of technologies.
On closer inspection, Capital Economics said Beijing’s policy was actually narrower in scope than initially feared. But China is also trying to strengthen its negotiating position and is likely disappointed that the United States does not appear willing to roll back tariffs further, Chinese economic chief Julian Evans-Pritchard and China economist Leah Fahy said in a note Monday.
“Whatever the motivation, China’s recent actions were a bit of a gamble and risk backfiring,” they wrote.
They also outlined ways the United States could escalate its retaliation and cause even more disruption to the Chinese economy.
For example, the United States could strengthen its control over large parts of the commercial aviation supply chain by blocking exports of critical components or even entire aircraft.
Additionally, according to Capital Economics, approximately 90% of laptops and PCs in China still use the Windows operating system. Trump can force Microsoft Stopping sales and updates in China ultimately results in failure to fix security vulnerabilities.
“There are local alternatives, but experience Huawei “Perhaps the biggest concern for China is the software used in advanced manufacturing – for example, Western companies control more than 70% of the Chinese chip design software market,” Evans-Pritchard and Fahy argue.
