Trump threatens 100 per cent tariffs on China as trade war fears reignite

Washington: US President Donald Trump has threatened to impose an additional 100 per cent tax on Chinese imports starting on November 1 or sooner, potentially escalating tariff rates close to levels that in April fanned fears of a global recession.

Trump on Friday expressed frustration with new export controls on rare earth elements by China – and said on social media that “there seems to be no reason” to meet Chinese leader Xi Jinping as part of a coming trip to South Korea.

Trump later told reporters he had not cancelled his meeting. “But I don’t know that we’re going to have it,” he said during an Oval Office appearance. “I’m going to be there regardless, so I would assume we might have it.”

He also suggested there might be time to ratchet down his steep new tariff threat. “We’re going to have to see what happens. That’s why I made it November 1,” he said.

China’s new restrictions

The Chinese government last week restricted access to rare earth minerals, requiring foreign companies to get special approval for shipping the metallic elements abroad.

It also announced permitting requirements on exports of technologies used in the mining, smelting and recycling of rare earths, adding that any export requests for products used in military goods would be rejected.

China produces over 90 per cent of the world’s 17 processed rare earths and rare earth magnets. They are vital materials in products ranging from electric vehicles to aircraft engines and military radars.

China’s move on Thursday included adding five new elements and extra scrutiny for semiconductor users, and adding dozens of pieces of refining technology to its export-restricting control list.

On social media, Trump described the export controls as “shocking” and “out of the blue”. He said China was “becoming very hostile” and that it was holding the world “captive” by restricting access to the metals and magnets used in electronics, computer chips, lasers, jet engines and other technologies.

Trump said in his post that “starting November 1st, 2025 (or sooner, depending on any further actions or changes taken by China), the United States of America will impose a Tariff of 100% on China, over and above any Tariff that they are currently paying.”

The president also said his government would respond to China by putting its own export controls “on any and all critical software” from American firms.

The Chinese embassy in Washington did not immediately respond to a request for comment.

Trump known for using threats as a tactic

The S&P 500 tumbled 2.7 per cent on worries about the rising tensions between the world’s largest economies. It was the market’s worst day since April when Trump last bandied about import taxes this high. Still, the stock market closed before the president spelled out the terms of his threat.

Not only could the global trade war instigated by Trump be rekindled, but import taxes being heaped on top of the 30 per cent already being levied on Chinese goods could, by the administration’s past statements, cause trade to break down between the US and China in ways that could cause growth worldwide to slump.

While Trump’s wording was definitive, he is also famously known for backing down from threats.

Earlier this year, some investors began engaging in what the Financial Times called “TACO” trade (for “Trump Always Chickens Out”).

The prospect of tariffs this large could compound the president’s political worries, potentially pushing up inflation when the job market appears fragile and the effects of the government shutdown are becoming apparent, with layoffs of federal workers.

‘Both sides are reaching for their economic weapons at the same time, and neither seems willing to back down.’

Craig Singleton, Foundation for Defence of Democracies

The US and China have been jostling for advantage in trade talks, after the import taxes announced earlier this year triggered the trade war. Both countries agreed to ratchet down tariffs after negotiations in Switzerland and the UK, yet tensions remain as China has continued to restrict America’s access to the difficult-to-mine rare earths needed for a wide array of American technologies.

There is already a backlog of export licence applications from Beijing’s previous round of export controls on rare earth elements, and the latest announcements “add further complexity to the global supply chain of rare earth elements”, the European Union Chamber of Commerce in China said.

There are other flashpoints in the trade relationship, including Washington’s restrictions on Beijing’s ability to import advanced computer chips, sales of American-grown soybeans and a series of tit-for-tat port fees being levied by both countries starting on Tuesday.

Analysts say there’s time to de-escalate

Trump did not formally cancel the meeting with Xi, but indicated it might not happen as part of an Asian trip at the end of the month. The trip is scheduled to include stops in Malaysia, which is hosting the Association of Southeast Asian Nations summit, and Japan and South Korea, where Trump is slated to meet Xi ahead of the Asia-Pacific Economic Co-operation summit.

Sun Yun, director of the China program at the Stimson Centre, said Beijing’s move was a reaction to US sanctions of Chinese companies this week and the upcoming port fees targeting China-related vessels. She said there was room for de-escalation to keep the leaders’ meeting alive.

“It is a disproportional reaction,” Sun said. “Beijing feels that de-escalation will have to be mutual as well. There is room for manoeuvre, especially on the implementation.”

Craig Singleton, senior director of the China program at the Foundation for Defence of Democracies think tank, said Trump’s post could “mark the beginning of the end of the tariff truce” that had lowered the tax rates charged by both countries.

“Mutually assured disruption between the two sides is no longer a metaphor,” Singleton said. “Both sides are reaching for their economic weapons at the same time, and neither seems willing to back down.”

AP, Reuters

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