Trade Tensions Escalate as China and USA Break Trade Truce
At the beginning of October, China announced the tightening of export on Rare Earth Elements (#REE) and related products. In response, President Trump announced that the US will stop shipping Boeing parts to China. The latest escalation is somewhat unexpected as the bilateral negotiations appeared to be moving nicely along with the impending conclusion of a Tik Tok deal and deadline on new #tariffs pushed back to the 1st of November 2025.
Given new countermeasures by China,Trump also stated that he does not see the necessity of the proposed meeting with Xi on the sidelines of the upcoming APEC Summit in Seoul at the end of October 2025.
In another move, US imposed extra port charges on ships which are built, owned or operated by China. In a tit-for-tat, China also decided to impose similar charges on American ships.
China has also stopped all purchases of soybeans from the USA, shifting its procurement to Brazil and Argentina, instead. That move had American farmers up in arms as they scramble to find new buyers for their crops, especially in a year of bumper harvest.
Previously, the USA restricted the export of the top AI chips to China. Then, the USA appeared to relax the restrictions, but China said thanks, but no thanks, since the chips offered were not the latest and most powerful ones. In addition, China is pushing to develop its own chips to replace the US ones.
Trump also hinted that the US has more cards up its sleeve such certain mission-critical software where the US enjoys a dominant position. Currently, the USA is moving fast to diversify the sourcing of #CriticalMinerals and #RareEarths, in particular. The USA and other like-minded Western allies are planning to set up an alternative supply chain for such Critical Minerals in order to dilute the dominance of China in this sector.
Trump has also been complaining about China’s lukewarm response and cooperation to stem the flow of Fentanyl into US. Although China implemented some measures, they are deemed to be too little and have hardly made any difference so far.
If no trade deal is reached between US and China by the 1st November 2025 deadline, Trump plans to slap on China a whopping 155% tariff, which will basically stop all trade between the world’s two largest economies.