Hot Take on the Resumed US/China Trade Crisis

Trump announced 100% additional tariffs on China after markets closed Friday, following an ominous Truth Social post mid-day warning of retaliation against China’s export controls on rare earths. The controls do not cut off Chinese exports of rare earths. They require exporters anywhere in the world to seek Chinese permission to export any dual use product containing Chinese rare earths or made using Chinese technologies. These are “secondary sanctions” like the ones the US uses to keep other nations from doing business with Iran and Russia – and increasingly, China. But because of the centrality of Chinese rare earths in electronics, and the Chinese market for electronics, these have teeth. The new tariffs return to the levels before the May 12 “reset,” but at least so far China has not retaliated. Trump is going all-in before the “reset” would have expired on November 12, and before SCOTUS can rule against his tariff authority under IEEPA. There remain off-ramps, and if China doesn’t retaliate, one of them may yet be taken.