Relations between the United States and China are tense again, with experts saying President Donald Trump’s administration “has no idea how to deal with China.”
The latest escalation came as the Chinese government expanded export controls on rare earth metals on October 9, increasing the number of elements on the list.
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China has the largest reserves and most of the processing facilities for rare earth metals used in a variety of everyday and critical industries such as electric vehicles, smartphones, laptops and defense equipment.
The first regulations also require countries to license the export of rare earth magnets and certain semiconductor materials that contain even trace amounts of minerals produced in China or using Chinese technology.
China’s actions on rare earths also come after the United States expanded its Entity List, a trade-restricted list of certain foreign nationals, entities, and governments, to further limit China’s access to cutting-edge semiconductor chips and add taxes on China-linked ships aimed at boosting the U.S. shipbuilding industry and loosening China’s grip on global shipping trade. China retaliated by applying its own charges to vessels owned, operated, built, or flagged by the United States.
“For the United States, its actions on chip exports and shipping industry fees were unrelated to the trade agreement with China,” said Bina Najibullah, vice-president of research and strategy at the Canada Asia Pacific Foundation.
Since then, the two countries have also been locked in an “information war,” with both countries accusing each other of holding the world hostage to their policies, Najibulla said.
But beyond the rhetoric, the world is seeing China seriously playing the game.
“For the first time, China is taking extraterrestrial action (by tightening rare earth export controls) that applies to other countries. China is prepared to back down from the US in response to any escalation by the US,” Najibullah said. “This is a very different kind of trade war than the one we were experiencing three months ago.”
Dexter Tiff Roberts, a senior nonresident fellow at the Atlantic Council’s Global China Hub, said this was a “power play” by China in the run-up to a planned meeting between Trump and Chinese President Xi Jinping at the Asia-Pacific Economic Cooperation Conference in South Korea later this month, noting that the talks resumed after initial noises that Trump no longer had a reason to meet with Xi.
“If you look at the Trump administration’s current approach, it’s gone too far,” Roberts said.
Roberts referenced multiple tariff threats and soon-to-be-announced carve-outs for those tariffs that the United States had issued against both China and certain industries, as well as a statement about the Trump-Xi meeting, in which Trump said nothing of the sort was happening, but then reversed himself two days later.
“The Trump administration has no idea how to deal with China,” Roberts said. “They don’t understand that China is prepared to suffer a lot,” so they won’t be easily intimidated by U.S. threats.
Meanwhile, the Chinese government knows that President Trump is determined to get a big deal with China and wants to cement that with a state visit, perhaps because “President Trump feels it’s important to his credentials as a big deal maker,” Roberts added, but he can’t get there without doing more for China.
“China has determined that it can make further efforts towards talks.”
Wei Liang, a professor at the Middlebury Institute of International Studies who specializes in international trade and China’s economic and foreign policy, agrees.
“Trump has a track record of TACO,” she said, referring to the term coined in May by a Financial Times columnist. This means “Trump always evades” as it relates to Trump announcing tariffs, then cutting out exemptions and pushing back the implementation date.
“He cares more about the stock market reaction than any other president, so he will definitely be more flexible in making concessions. This is the contradiction that is being perceived by his negotiators,” Liang said.
China’s defiant stance comes at the same time as China’s own political concerns, Liang added.
Although the country’s economy is a “black box” with no reliable data available on growth, employment or other measures, the consensus among Chinese experts is that the country has been affected by tariffs, slowing economic growth and increasing unemployment.
As China begins its four-day Fourth National Plenary Session on Monday, scheduled to approve its next draft five-year national economic and social development plan, Xi could use the opportunity to tell his domestic audience that the country’s problems stem from President Trump’s policies and that the whole world is suffering because of tariffs, which have nothing to do with China’s policies, Liang said.
Possibility of decoupling
All of this signals a major shift in thinking as Beijing appears more prepared than ever to “decouple” from the United States, where previously the standard response was that it would be a “lose-lose” situation for both countries, Liang told Al Jazeera.
However, in recent years, China has been diversifying its exports to other countries, particularly in the Belt and Road Initiative. The Belt and Road Initiative is an ambitious infrastructure project launched in 2013 to connect Europe to East Asia, and has since expanded to Africa, Oceania, and Latin America.
Even for things it needs from the United States, such as soybeans, aircraft, and high-tech chip equipment, Liang pointed out that, as with chip equipment, the US can find other suppliers or has learned how to work around its needs.
Meanwhile, especially since the U.S.-China trade war began during President Trump’s first term, China has introduced a series of national security laws, including its own version of the U.S. Entity List, through which it places restrictions on exports, Najibulla said.
“Everyone should have been prepared as China has been preparing. When there was a regime change (in the United States after the first Trump administration), we breathed a sigh of relief, but China continued to prepare,” she said.
“This should be a wake-up call for all countries to find other sources to meet their needs. Everyone should redouble their efforts to diversify, because we have seen China’s strategy.”
