Yahoo/Finance -Fortune Fortune Here’s how Trump can hit China’s economy where it really hurts as analysts say Beijing’s rare earths gamble could backfire - Jason Ma Sat, October 18, 2025 at 11:57 PM GMT+3 3 min read

 

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Fortune

Here’s how Trump can hit China’s economy where it really hurts as analysts say Beijing’s rare earths gamble could backfire

CSIS's Baskaran on China's Rare Earth StandoffScroll back up to restore default view.

Jason Ma

Sat, October 18, 2025 at 11:57 PM GMT+3 3 min read

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The Trump administration insists it holds the upper hand as trade friction with Beijing has reignited over its sweeping rare-earths export controls.

While President Donald Trump’s initial response was to announce an additional 100% tariff and software restrictions on China, which controls more than 90% of the world’s processed rare earths and rare earth magnets, he previously has alluded to harsher measures that could come into play.

“But the U.S. has Monopoly positions also, much stronger and more far reaching than China’s,” he warned in a Truth Social post before his tariff move. “I have just not chosen to use them, there was never a reason for me to do so — UNTIL NOW!”

Trump has since toned down his rhetoric and even acknowledged that his planned tariffs are not sustainable, while Wall Street has dismissed his threats as an attempt to gain leverage in negotiations and another opportunity for the “TACO” trade.

At the same time, the White House has said a planned meeting between Trump and Chinese President Xi Jinping is still going to happen at month’s end on the sidelines of a regional economic conference in South Korea.

Still, China’s rare earth restrictions stunned some obverses, who have said they could “forbid any country on Earth from participating in the modern economy,” given how critical the minerals are to a vast array of technologies.

On closer inspection, Capital Economics said Beijing’s policy is actually narrower in scope than initially feared. But China economics head Julian Evans-Pritchard and China economist Leah Fahy said in a note Monday that China is also looking to boost its negotiating position and was probably frustrated that the U.S. didn’t seem interested in rolling back its tariffs further.

“Whatever the motivation, China’s recent actions were a bit of a gamble and there is a risk that they could backfire,” they wrote.

They also listed ways that the U.S. could ramp up its retaliation and cause even more disruption to China’s economy.

For example, the U.S. could leverage its control of much of the commercial aviation supply chain by blocking exports of critical components—or even entire aircraft.

In addition, about 90% of the laptops and PCs in China still use the Windows operating system, according to Capital Economics. Trump could force Microsoft to halt sales and updates in China, eventually resulting in security holes going unfixed.

“There are domestic alternatives, but the experience of Huawei suggests that such a switch would reduce the global appeal of Chinese-branded mobile devices,” Evans-Pritchard and Fahy said. “Perhaps of greatest concern for China is the software used in advanced manufacturing — Western companies control over 70% of the Chinese market for chip design software, for example.”

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Fortune

Trump to hike China tariffs to 130% and impose software export controls next month, as trade war reignites to nearly ‘Liberation Day’ levels

President Donald Trump speaks during a Cabinet meeting at the White House on Thursday. · Fortune · Anna Moneymaker—Getty Images

Jason Ma

October 11, 2025 3 min read

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President Donald Trump said Friday that he will impose an additional 100% tariff on China and limit U.S. exports of software, escalating the trade war after months of it appearing to ease toward a resolution.

The latest salvo came after China restricted its exports of rare earths, which are critical minerals used across industries, from the tech sector to automakers and defense contractors.

Late in the afternoon, Trump took to Truth Social to decry Beijing’s “large scale Export Controls on virtually every product they make.”

“Based on the fact that China has taken this unprecedented position, and speaking only for the U.S.A., and not other Nations who were similarly threatened, 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,” he added. “Also on November 1st, we will impose Export Controls on any and all critical software.”

That would bring U.S. tariffs on China to 130%, nearing the 145% rate Trump imposed in April on “Liberation Day” and the immediate aftermath—before the U.S. agreed to put its highest levies on hold while China paused its retaliatory duties as negotiations unfolded.

Stocks and bond yields tumbled as Wall Street braced a potential new round of tit-for-tat retaliation. The S&P 500 plunged 2.7%, suffering its worst selloff since the height of the trade war chaos in April.

China has a stranglehold on rare earths, producing more than 90% of the world’s processed rare earths and rare earth magnets. That has served as a key source of leverage over the U.S.

Meanwhile, grain prices fell after Trump suggested earlier on Friday that he would not meet Chinese President Xi Jinping later this month at an economic summit in South Korea.

That dashed hopes that the two leaders could reach a trade deal that includes Chinese purchases of U.S. soybeans, which historically have been a top export but have failed to draw any orders from China this harvest season.

“Don’t think China’s soybean purchases are going to restart anytime soon … and they now certainly aren’t the biggest item on the bilateral economic agenda,” Brad Setser, a senior fellow at the Council on Foreign Relations and a deputy assistant secretary at the Treasury Department during the Obama administration, posted on X.

Before the flare-up, U.S.-China trade talks had been progressing after Trump reached deals with the European Union, Japan, South Korea and other top trading partners.

But tensions remained, including on the issue of rare earths while the U.S. had moved to restrict other countries’ exports of semiconductor-related products to China.

Also this week, the U.S. announced port fees on Chinese ships, prompting Beijing to impose a similar fee on U.S. ships docking at Chinese ports. China also launched an antitrust investigation into U.S. chipmaker Qualcomm.

Then on Thursday, China’s commerce ministry said that starting on Dec. 1 a license will be required for foreign companies to export products with more than 0.1% of rare earths from China or that are made with Chinese production technology.

“Our relationship with China over the past six months has been a very good one, thereby making this move on Trade an even more surprising one,” Trump said in an earlier Truth Social post. “I have always felt that they’ve been lying in wait, and now, as usual, I have been proven right!”

This story was originally featured on Fortune.com

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