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Key Takeaways
- President Donald Trump threatened “massive” increases in tariffs against China on Friday after China announced new restrictions on crucial rare earth minerals used in high-tech manufacturing.
- Trump also questioned the need for an upcoming meeting between himself and Chinese President Xi Jinping.
- China has leveraged its dominance of the rare earth market as a bargaining chip in trade negotiations with the U.S., which relies heavily on rare earths for its high-tech industries.
The U.S.-China trade wars flared up again Friday when President Donald Trump threatened to increase import taxes as part of a dispute over critical “rare earth” minerals that China exports.
In a lengthy social media post on Friday, Trump questioned the need for an upcoming meeting with Chinese leader Xi Jinping and threatened new tariffs in retaliation for China’s move on Thursday to restrict its exports of rare earth minerals, which are critical to high-tech manufacturing in the U.S. and abroad.
The dispute threatened to derail trade negotiations between the world’s two largest economies and reignite a trade war that reached a peak earlier this year when the two nations imposed triple-digit tariffs on one another’s exports. In May, the two sides agreed to a shaky truce. The two countries lowered their tariffs somewhat while attempting to make a more permanent deal, backing off from levels reached earlier in the year that amounted to a near embargo.
How This Affects The Economy
The flare-up in tensions between the U.S. and China could exacerbate a trade war that has already driven up inflation and weakened the job market. The S&p 500 fell nearly 2% after his post.
“Dependent on what China says about the hostile ‘order’ that they have just put out, I will be forced, as President of the United States of America, to financially counter their move,” Trump wrote. “One of the Policies that we are calculating at this moment is a massive increase of Tariffs on Chinese products coming into the United States of America.”
China has been able to use its control of the rare earth market as leverage against the U.S. in the trade dispute. Rare earths such as Neodymium, which is used to make magnets, are crucial for electronics, automobiles, weapons, and other industries. On Thursday, China announced sweeping new restrictions on rare earth exports ahead of a possible meeting between Trump and his Chinese counterpart in South Korea.
The trajectory of U.S.-China trade relations has been volatile since Trump took office for the second time in January. In recent months, the trade wars appeared to settle down, with Trump touting a deal on the ownership of TikTok. But in the latest post, Trump used harsh language, describing China’s gaining control over the rare earth market as “a rather sinister and hostile move.”
