[ISAFIS Newsletter #14] The Broken Truce? Trump’s Precarious, Renewed Trade Tension with China

Written by: Jonathan Jordan Staff of Research and Development

Trade tensions between the US and China resumed as Trump threatened to deal an additional 100% trade tariff rate and export restrictions of “all critical software” on China. Announced on October 10, the threat was a response to Beijing’s rare-earth mineral export controls and is set to take effect on November 1 or earlier. China’s new regulation on its rare-earth minerals on October 9 prohibits the exchange of 12 kinds of said resources or technologies containing 0,1% of them by companies and foreign governments without a license issued by the Chinese Communist Party (CCP) except for humanitarian uses. However, this mandate, effective from December 1, is itself a retaliation to the US’ recent trade curbs against Chinese companies, even though the CCP does not acknowledge it as such. 

Image 1. US President Donald Trump and Chinese President Xi Jinping at the G20 Leaders Summit on June 29, 2019, in Osaka, Japan
Source: Reuters/Kevin Lamarque

The renewed tension could spark another round of trade war between the world’s biggest factory and its biggest consumer. It came in the backdrop of already increasing friction between Washington and Beijing as both enacted port fees on each other’s ships on October 7. A new trade war means that both sides would surely suffer losses more than they reap benefits. It also would disrupt the global economy in general. Moreover, this move promotes hostile relations, perhaps jeopardizing the planned meeting between Trump and Xi Jinping on the sidelines of the upcoming APEC (Asia-Pacific Economic Cooperation) Summit in South Korea. Hence, is Trump’s move to counter Chinese export control really tenable in the long term, and can it deter Beijing’s advances in the global economy?

The Precarious Position of the US
Trump’s response to threaten 100% tariffs on China is aimed at preventing China’s rising economic power and maintaining the US’ position as a hegemon. China currently dominates the mining and refining of critical rare-earth minerals. These minerals are used in many important technologies, including jet fighters, computer chips, smartphones, and artificial intelligence systems. By restricting its exports, China essentially controls who can acquire crucial high-tech equipment. Because the US does not have the capacity to mine and refine as much rare-earths as China, it risks falling behind on the great power competition. Thus, Trump’s knee-jerk reaction is an attempt to mitigate China from making progress and to possibly convince it to back down on its restrictive policies.

On the contrary, tariffs and trade wars do not benefit either side, only causing economic pain for the world in general. Trade measures and wars are not something new. US economic action targeted specifically at China can be traced back to the Obama administration. The trade war between the two states began during Trump’s first term after he announced a 60 billion US dollar tariff increase on Chinese goods in June 2018, and continued during his second term. Regardless, both sides incurred economic damages, with the US suffering more severely, according to a 2025 study by Lixia Wang et al. In addition, for the rest of the world, trade wars mean lower trade and overall economic growth. The WTO (World Trade Organization) predicted in early October that the 2026 increase in trade will be just 0,5%, significantly lower than this year’s 2,4%.

The additional 100% levy on Chinese goods is likely to be ineffective and harmful for the US. The market didn’t respond kindly to Trump’s recent threats. The S&P 500 and Nasdaq indexes fell in the immediate aftermath by 2,7 and 3,6% respectively. Experts warned that this measure could halt trade between Washington and Beijing and also contribute to a global economic growth downturn. WTO warned the economic conflict could reduce global economic output by 7%. Though the US could cushion the impacts more effectively, notably through diplomacy, and is still a strong force in the global economy, China has the upper hand in negotiations through its monopoly of rare-earth minerals. In addition, China’s moves are “more organized, prepared and strategic” than Washington’s erratic and indiscriminate tariff impositions. 

These issues seemed to have affected Trump’s decision to soften his tone towards China. The US president has said that the 100% tariff rate is “not sustainable” and ensured that the forthcoming meeting with Xi will go ahead. In his attempt to calm the market down, Trump writes on his Truth Social, “Don’t worry about China, it will all be fine! Highly respected President Xi just had a bad moment”. 

Besides, prolonged trade tensions are bad for the export-oriented Chinese economy as well. For now, it seems, both sides are not willing to escalate, and have planned to discuss the matter soon. However, this could change any moment.

Conclusion
Tariffs and trade wars are not effective, tenable solutions for maintaining US hegemony and preventing China’s economic rise. Both the US and China seem to understand this, trying to soften their approach and reach a deal. China, for its part, has left room open for negotiations and plans to apply their rare-earths control slowly. Regardless, over-protectionism is harmful for the world as a whole. In an increasingly interdependent world, both great powers must learn to live and accommodate each other for their own national interests and the good of the international community.

References
Bradsher, K., & Tobin, M. (2025, October 9). China Clamps Down Even Harder on Rare Earths. The New York Times. https://www.nytimes.com/2025/10/09/business/china-rare-earth-exports.html.

Buchwald, E. (2025, October 18). The latest chapter of the Trump-Xi ‘situationship’ explained. CNN. https://edition.cnn.com/2025/10/18/economy/trump-xi-tariff-trade.

Chiachu, D., & Shalal, A. (2025, October 18). Trump says 100% tariffs on China not sustainable, still plans to meet Xi. The Jakarta Post. https://www.thejakartapost.com/world/2025/10/18/trump-says-100-tariffs-on-china-not-sustainable-still-plans-to-meet-xi.html.

Hawkins, A., & Kine, P. (2025, October 13). The US and China are about to launch the next front in their trade war. Politico. https://www.politico.com/news/2025/10/13/us-china-trade-war-tariffs-00604356.

Hunnicutt, T. (2025, October 11). Trump ratchets up US-China trade war, promising new tariffs. The Jakarta Post. https://www.thejakartapost.com/business/2025/10/11/trump-ratchets-up-us-china-trade-war-promising-new-tariffs.html.

Sarwindaningrum, I. (2025, October 11). Trump Ancam Tarif 100 Persen Lagi untuk China, Enggan Bertemu Xi Jinping. Kompas. https://www.kompas.id/artikel/trump-ancam-tarif-100-persen-untuk-china-ancam-batalkan-pertemuan-dengan-xi-jinping.

Shamim, S. (2025, October 13). Trump’s 100% tariff threat: History of US trade measures against China. Aljazeera. https://www.aljazeera.com/news/2025/10/13/trumps-100-tariff-threat-history-of-us-trade-measures-against-china.

Wang, L., Sha, L., Gu, Y., & Guo, F. (2025). The U.S. – China Trade War: Who Is More Injured? Journal of Contemporary China, 1-17. https://doi.org/10.1080/10670564.2025.2450015.

Widi, H. (2025, October 9). Tarif Baru AS Bakal Mempersuram Perdagangan Dunia 2026. Kompas. https://www.kompas.id/artikel/tarif-baru-as-bakal-mempersuram-perdagangan-dunia-2026.