Hongkong
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President Donald Trump expressed shock at China's “surprising” move to impose sweeping rare earth export controls, accusing the country of “becoming very hostile.”
But Beijing says it is Washington that has expanded restrictions on Chinese companies, exacerbating tensions and prompting it to further tighten controls on critical minerals necessary to produce a wide range of electronics, cars and semiconductors.
In a rapid escalation of friction over the weekend, Trump said he would return tariffs on China to triple-digit levels due to Beijing's new controls, prompting the Chinese government to vow to take “corresponding measures.”
The move between the world's two largest economies has roiled markets, rattled global industry over a production hit and reignited fears of a repeat of spring's tit-for-tat tariff offensive, when levies on Chinese and U.S. imports reached levels equivalent to trade embargoes.
The new tensions could also undermine months of progress in trade talks and raise questions about whether a planned meeting between Chinese leaders Xi Jinping and Trump in South Korea later this month will still take place.
After Trump said he might cancel the meeting, Treasury Secretary Scott Bessant told Fox News on Monday that he still expected the meeting to happen.
China's Commerce Ministry said on Tuesday it remained open to negotiations, while reiterating that the United States cannot pursue dialogue while threatening new measures.
For Beijing, the current escalation could have been largely avoided if the Trump administration had not imposed more restrictions in late September, significantly increasing the number of Chinese entities on its export control list, Chinese experts and analysts said.
Jin Canrong, a professor of international relations at Renmin University in Beijing and a government adviser, said Beijing was merely responding to a series of “small moves” by Washington.
“After the United States bit China, it is now pretending to be innocent and even trying to play the victim,” he posted on Chinese social media Weibo on Saturday.
Wu Xinbo, dean of the Institute of International Studies at Fudan University in Shanghai and an adviser to China's Ministry of Foreign Affairs, said there were signs of thawing in Sino-U.S. relations this summer, especially after trade talks in Madrid in September and subsequent phone calls between Xi Jinping and Trump.
In a phone call with Trump in September, Xi Jinping made positive comments about the talks but also warned the U.S. president not to “implement unilateral trade restrictions and undermine the progress made by both sides.”
But just 10 days after that call, Washington significantly expanded export restrictions, placing subsidiaries of already-sanctioned companies in China and elsewhere under the same controls, increasing the number of companies facing restrictions in China from about 3,000 to thousands.
“From China's perspective, this is extremely malicious,” Wu said, adding that it once again showed that Trump had “bad intentions.”
“If the United States has been dealing with China for more than half a year and has not realized that taking such actions against China will have serious consequences, then I can only say that the people on the Trump team are too incompetent,” he said.
China’s Commerce Ministry echoed that sentiment on Sunday, citing further examples such as the U.S. plan to impose fees on Chinese-made ships that dock at U.S. ports.
The Ministry of Commerce stated that these actions of the United States “severely harmed China's interests and undermined the atmosphere of bilateral economic and trade negotiations” and urged Washington to “maintain hard-won progress” while vowing to take countermeasures if Trump follows through on his latest threat.
Paul Triolo, a China and technology expert at consulting firm Albright Stonebridge, said the escalation was similar to the downward spiral in bilateral relations in May.
“We are once again on the edge of the abyss,” Triolo said. “But the stakes are higher now because both sides now understand the consequences.”
After the two countries agreed to significantly reduce high tariffs and reach a trade truce through Geneva negotiations, Trump dropped a series of bombshells.
He banned multinational companies from using artificial intelligence chips from Chinese tech giant Huawei, imposed new export restrictions on chip design software for China and threatened to revoke the visas of Chinese students in the United States.
The moves stalled talks for weeks before negotiations salvaged a fragile trade truce.
Triolo said Beijing's move to tighten control over rare earths was a “logical” and “proportionate” response to the scale of Trump's actions, rather than a new move to gain leverage in upcoming negotiations.
China has a virtual monopoly on the global supply of rare earths (17 minerals) and is particularly dominant in their processing and refining.
The new regulations not only increase the number of elements subject to Beijing's export controls but also expand restrictions on production technology and overseas use.
For example, the rules apply to foreign companies seeking to supply other countries with rare earths produced in China or processed using Chinese technology.
New restrictions are sending shock waves to global industries and technology supply chains.
Following China's unprecedented introduction of rare earth licensing requirements in April, factories around the world, from carmakers to the defense sector, reported shortages of the critical mineral.
The new rules, which also target rare earth minerals used in the production of advanced semiconductors, could also put a halt to the global boom in artificial intelligence, which relies on these chips to power its training.
In response to growing global anxiety, China's Ministry of Commerce said the tightened rules were not an export ban and that it would issue licenses to applications that meet the requirements.
Experts say Beijing's measures reflect years of restrictions on semiconductors imposed by Washington that have limited exports to China of chips, chipmaking equipment, including equipment made in third countries with U.S. technology — a U.S. export control measure known as the Foreign Direct Products Rule implemented during the Biden administration.
While Beijing has long criticized the United States for its use of “long-arm jurisdiction,” China's actions this week show that it is willing to adopt similar tactics.
“From Trump’s first term to Biden’s term to his second term, the U.S. has continued to increase tariffs, technology restrictions and sanctions against China,” said Fudan University’s Wu. “Beijing has documented every step of these actions – now it’s time to settle the score.”
As for whether the much-anticipated meeting between the two leaders will still take place, Wu said the ball is in Trump's court.
“The United States should take concrete actions to improve relations. It should not be the other way around – China sacrificing its own interests or tolerating US pressure for a meeting,” he said.
Trump seems to have changed his attitude towards China.
Trump said in a “Truth Society” post on Sunday that the United States is willing to “help China, not hurt it.”
“Don't worry about China, everything will be fine!” he said, without elaborating.
Wang Yiwei, another international relations scholar at Renmin University of China, said China has been studying how to deal with Trump since his first term. Now it is “well-prepared – to understand his 'art of the deal,' his tactics and where America's vulnerabilities lie.”
“I think it's the United States that's anxious now, not China,” Wang said, adding that Trump is also facing growing pressure at home amid a prolonged government shutdown and his Republican Party controlling the executive and legislative branches.
Wang said U.S. dependence on China will continue, at least in the short term, because of China's tight control over rare earths.
“The message to Americans is: be realistic – it’s better to work with China.”