Trump threatens to call off meeting with Xi after Beijing's move on rare earths.
U.S. President Donald Trump on Friday threatened a "massive increase" of tariffs on Chinese goods and said he sees no reason to meet with Chinese President Xi Jinping, as the two countries are at loggerheads over U.S. access to critical minerals and other issues.
In a post on his Truth Social online platform, Trump said: "I was to meet President Xi in two weeks, at APEC, in South Korea, but now there seems to be no reason to do so." The upcoming Asia-Pacific Economic Cooperation summit is scheduled for Oct. 31 and Nov. 1
Behind the rupture is the issue of rare-earth minerals. Trump said in his post that China is "becoming very hostile, and sending letters to Countries throughout the World, that they want to impose Export Controls on each and every element of production having to do with Rare Earths, and virtually anything else they can think of, even if it's not manufactured in China."
Rare-earth minerals, which are used in products such as cellphones and automobiles, have long been a thorn in the side of the U.S.-China relationship. Last summer, China said it would allow rare-earth exports to the U.S., in a move that eased tensions and sent U.S. stocks higher.
But analysts say Beijing is being newly aggressive in its relations with the U.S., chalking it up to the rare-earth issue.
"Generally speaking, this is a fairly confident China that feels that it has a really big new variable in its relations with the United States, which is these rare-earth export controls, which I think are really seen in Beijing as a really, really strong weapon, and something that I think maybe is a little different from the first Trump administration," said Ilaria Mazzocco, an expert on Chinese economics at the Center for Strategic and International Studies, at an event in Washington earlier this week.
U.S. stocks turned sharply lower in the wake of Trump's comments, with the Dow Jones Industrial Average DJIA recently off more than 1% and the S&P 500 SPX down nearly 2%.
Trump said that besides higher tariffs, "many other countermeasures" against China are "under serious consideration." Sanctions look possible, said Rush Doshi, director of the China Strategy Initiative at the Council on Foreign Relations.
"It seems he is finally paying attention to the fact he is losing the trade war. Now it's time for him to push back. I've been predicting financial sanctions - I think that may be where this heads," said Doshi, who is also a Georgetown University professor and a former Biden administration official, in a social-media post.
U.S. imports from China are down more than 30% this year, but China is still the U.S.'s fourth-largest source of imports, so there is still meaningful domestic economic exposure, said Evercore ISI analysts in a note. Trump's options if he wants leverage ahead of any eventual meeting with Xi include "a more incremental or targeted tariff increase, new export controls (likely focusing on semiconductor equipment), or fleshing out the still-notional 'transshipment' tariff to indirectly tighten tariffs on China," they added.
Comments