President Trump has announced he is considering imposing new tariffs on Chinese goods and restrictions on export of critical software to China. The statement sent shockwaves through global economy and stock markets. It has sparked uncertainty and speculation. There are concerns new tariffs could escalate a trade war, and both countries might adopt policies to strengthen their positions. President Trump asserts these measures are in retaliation for China’s new controls on trade of rare earth metals.
However, the ground analysis shows it is not true. It was US that began to escalate trade tensions. The recent escalations started after US’s unilateral announcement to impose new fees on ships.
Washington declared it would impose a fee of $50 per net ton for each voyage to US on Chinese-owned or operated ships. Additionally, fee will increase by $30 per ton each year until 2028. China responded similarly and reciprocated the action. Beijing announced it will introduce a new fee of $56 per net ton for each voyage to China on US-owned, operated or affiliated ships. China will continue to raise the fee annually until 2028, when it is expected to reach $157.
At the same time, US is working to impose restrictions on Chinese tech companies. It is urging its tech firms to limit their dealings with China. The focus is especially on CHIPs and semiconductor-related companies. Unfortunately, all major US political parties are united in their desire to stop cooperation with China in these areas, as shown by actions of successive governments. For instance, in September 2022, Biden administration passed CHIPS and Science Act to control technological cooperation with China. President Trump is building on these efforts, and most recently, in September 2025, US expanded its restriction list to include more Chinese tech companies. These include various firms, and the sanctions are meant to hinder their growth, including that of their subsidiaries.
However, they conveniently overlook the fact China is not far behind US in these sectors; in fact, China is leading in many technologies, such as 5G, AI and defence technologies, among others. Moreover, China has absolute control over production and processing of rare earth metals, among others, which are an essential component for developing these technologies. The data shows China owns 34pc (44 million metric tons) of world’s rare earth metal reserves. Its share of global rare earth mining is 60pc.
Additionally, China accounts for 92pc of processing capacity and over 90pc of high-strength rare earth permanent magnets produced. Moreover, China has complete dominance in processing of heavy rare earth metals with 98pc control. It means China literally controls the supply. Therefore, any attempt to isolate China from CHIP or technology market would be disastrous for the world.
China is aware of this reality and is trying to avoid circumstances that would force it to control export of rare earth metals. However, the US has left China with no options by introducing obstacles and threatening Chinese interests. Out of compulsion, China had to introduce new measures to regulate export of rare earth metals and related products. As a warning shot, in April 2025, China began implementing new controls on trade of seven rare earth elements: samarium, gadolinium, terbium, dysprosium, lutetium, scandium and yttrium. These measures posed challenges for technology companies worldwide. The United States was hit hardest because it relies heavily on Chinese rare earth metals. Data shows US imports of rare earth metals from China ranged around 70pc during 2020 to 2023.
Instead of learning from past practices, US started introducing new types of trade barriers for China, such as a fee on cargo ships and new restrictions on Chinese tech companies, including Huawei, memory chip giant YMTC and drone maker DJI, among others. In response to US’s announcement of new barriers, China expanded its list of control measures. The updated list now includes rare earth metals holmium, erbium, thulium, europium and ytterbium. Analyaing these measures suggests China is applying same approach to US that Washington has proposed for others. China has stated anyone wanting to export these 12 rare earth metals must first obtain a licence. Furthermore, exporting technologies related to rare earth mining, smelting, processing and magnet manufacturing can only happen after securing a licence.
China has further tightened its control by imposing restrictions on foreign companies, planning to engage in trade of rare earth metals from China. According to new law, foreign companies must obtain permission from China to supply rare earth metals and their products, whether made in China or produced using Chinese technology. Additionally, China bans supply of these rare earth metals and their end products for military purposes by restricting exports to companies that could use them for military or sensitive applications. Conversely, China has also implemented sanctions against 14 US military, technology and security groups. Lastly, China has barred its citizens and companies from engaging in rare earth mining, processing and magnet manufacturing outside China without government approval.
The above discussion suggests China is no longer willing to accept any form of bullying or pressure. It has all the tools to retaliate and force US to come to terms. Second, China is not European Union, a European country, or Canada, Japan, etc.
China is world’s second-largest economy, with a significant trade surplus and extensive trade connections with over 150 countries. Third, China is an emerging superpower, which is consolidating its credentials and position as a superpower with every passing day. Fourth, China is becoming a hub for innovation and new technologies. Therefore, sanctions or restrictions will not be effective against it. Thus, tactics such as bullying, sanctions or threats generally prove ineffective against China.
In this scenario, a trade war with China is unlikely to be successful. Moreover, rare earth metal trade war is not in anyone’s interest; somewhat, it will further complicate global challenges. It will also severely impact Fourth Industrial Revolution. Therefore, China and US must resolve their issues through dialogue. For that purpose, US will have to adopt a rational policy grounded in facts and reality when dealing with Beijing. China will respond in kind, as it has consistently highlighted in its policies and actions. To achieve this, US needs to move away from a bully mentality and prioritise its own interests. Moreover, President Trump should move beyond MAGA thinking and try to negotiate based on new realities and facts.
In conclusion, resolving differences and ending trade war between two countries will not only benefit them, but also the world, given their status as two largest economies and trade partners. Therefore, US must focus on enhancing cooperation through dialogue and building bridges, not walls.