Beijing Restricts Rare Earths as Trump Threatens Massive Retaliation Against China
US-China Relations Strain as Trade Tensions Escalate Over Rare Earth Element Policies
In a significant diplomatic development, former President Donald Trump announced on Friday that a planned meeting with Chinese President Xi Jinping might be canceled. This decision comes on the heels of China’s controversial move regarding rare earth element policies, prompting Trump’s accusations of China’s increasingly “hostile” behavior and threats of substantial trade retaliation.
Impact of China’s Rare Earth Export Controls
China, the leading global producer of rare earth elements crucial to various industries, has sparked U.S. ire by tightening export controls. On Thursday, China’s Ministry of Commerce unveiled new restrictions on technologies related to the extraction and production of these critical materials. The announcement reportedly came as a surprise to the former American president, exacerbating existing trade tensions between the two countries.
Tensions Amplify with New Tariffs and Trade Talks
Accompanying the rare earth policy changes, China declared the imposition of “special” tariffs on American vessels in its ports. This move reciprocates similar measures enforced by the U.S. in April. Trump, citing these developments, expressed doubt regarding the necessity of his meeting with Xi Jinping at the upcoming Asia-Pacific Economic Cooperation (APEC) summit in South Korea.
Wall Street Reacts to Trade Dispute
The news sent shockwaves through financial markets, leading Wall Street into negative territory. As of 12:15 PM, the Dow Jones Industrial Average fell 1.14%, the NASDAQ index dropped 2.03%, and the broader S&P 500 index declined by 1.51%. Trump’s statements hinted at potential financial countermeasures, including a significant hike in tariffs on Chinese imports to the United States.
Evaluating Strategic Responses
Trump disclosed that several retaliation strategies are under serious consideration to counter China’s latest actions. He emphasized that allowing China to “hold the world hostage” is unacceptable, speculating this might have been Beijing’s strategy for some time.
Historical Context of Sino-American Trade Relations
The trade relationship between the U.S. and China has experienced fluctuations, notably since 2025. Earlier in the year, Trump described a telephonic conversation with Xi as “very productive,” alluding to potential future state visits. However, following Trump’s return to power in January, his protectionist stance has led to tariffs between the two nations reaching unprecedented levels, severely impacting supply chains.
Despite these challenges, an agreement was reached to ease tensions temporarily, reducing tariffs to 30% for Chinese imports to the U.S. and 10% for American imports to China. This trade truce is set to last until November 10.
