US-China Trade War Broadens from Tariffs to Strategic Materials and Products
Following the 145% tariff imposed by the US upon China, China has raised tariff on US up to 125%. In addition, China is now resorting to other countermeasures. First off, China announced it is restricting the export of Rare Earth Elements (#REE), which could impact the US tech sector, auto industry and military complex. Then, China threatened to cancel its order for Boeing passenger jets.
Rare Earth Elements are a group of 17 elements that are not so rare, but their extraction and processing are costly both financially and environmentally. Therefore, the USA and other countries were too only too happy to leave this ‘poisoned chalice’ to China who now dominates the REE market.
Indeed, China mines more than 60% of the world’s REE More importantly, China processes nearly 92% of the global REE, which places a joker card in China’s hands to play against the US.
Magnets made of REE can be found in motors/generators, smartphones, MRI machines and even fighter jets. Indeed, ,amu military equipment such as nuclear attack submarine, naval destroyers and the multirole F35 stealth jet are loaded with REE.
As one analyst puts it, China is being surgical in its response to Trump’s tariff by hitting where it hurts America the most. So much so that Trump scrambled to order a study on the effect of tariffs on #CriticalMinerals, a broader set of strategic mining resources encompassing REE.
Between 2020 and 2023, 70% of US imports of REE originated from China. Since 2020, the US has been favoring the emergence of its domestic supply chain for REE. The objective is to become self-sufficient in REE by 2027 and the US Department of Defense (DoD) has invested more than USD 439 million in that effort so far.
As always, every cloud has a silver lining. If the US manages to cut down its reliance on China for REE, then it will put the US in a favorable position in the tech and military race with China.
In a related move, China is mulling the cancellation of its order of Boeing planes and the suspension any previously scheduled delivery of new planes and even spare parts. Boeing (NYSE: BA) stock price took a nosedive in the aftermath of the announcement.
Since the beginning of 2025, Boeing delivered 18 aircrafts to China. China’s top three airlines, Air China, China Eastern Airlines and China Southern Airlines, were expecting to take delivery of nearly 180 planes during the next two years. Now, all these orders destined for China are being put into question.
All airlines are state-owned in China and the Central Government can order them to stop their purchase of Boeing passenger jets. China was the biggest market for Boeing until the trade war. Now, it looks like its arch-rival Airbus might benefit the most from the rife between China and the US.
At the same time, China is doubling down to develop its own indigenous passenger jets. The COMAC C919 is the narrowbody passenger jet equivalent to the Boeing B737. However, many key components such the jet engine and avionics still have to be imported until China manages to reverse engineer the design and primes its civilian aircraft ecosystem to deploy its wings.
According to the Wall Street Journal, the US is weaponizing trade in an attempt to isolate China. Countries which side with US might see their tariffs go down while others countries side with China will be punished with hefty tariffs. During the 90-day suspension, it is reported that the US is in negotiations with more than 70 countries at the same time.