Face the facts, America’s trading partners need us, but they don’t seem to like us very much these days. As a nation, America has been changing the rules of trade while creating new headaches for the retail and supplier community – on a near-daily basis. At the same time, our overseas partners are starting to look elsewhere to power their economies and China is a willing partner. Could this all change when President Trump negotiates with President Xi this week? It certainly is possible – let’s hope!
Trade War (written in Chinese calligraphy) conflict between China and U.S.A. represented with flags and boxing gloves decorated with yen and dollar symbols fighting each other.
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Retailers understand that international trade fuels the American consumer, and any negative adjustment to the fragile trading formula sends ripples through supply chains, demolishes corporate earnings, and ultimately slows the retail economy. The stakes for this weeks meeting with President Xi of China are high – because if President Trump’s strategy for trade is not successful, Americans will see more rising prices, increased inflation, empty shelves, and employee layoffs. To be clear, none of this has happened as yet, and hopefully this week’s Presidential trip will draw new lines in the sand – so that the trading system is more fair, more balanced, and America can maintain leadership. If so, President Trump will have achieved monumental success, and he will have made a major step towards re-adjusting the world’s economy.
Some will say that all this trade turmoil is a positive development. Others will probably say that the constant changes are disruptive, hamper long-term planning, and have yet to prove their worth.
While every retailer understands the importance of China, all eyes have now suddenly turned to China’s latest Trump Card – the export of rare earth which will likely be the game-changer in these discussions.
For couch potatoes who sit on the beach and don’t dig too far, it turns out that China mines about 70% of the world’s capacity of rare earth – but (more importantly) they process about 90% of the world’s refining – which is critical for global manufacturing of key consumables like cars, TV’s, smartphones, appliances, fighter jets, and submarines. To most everyone’s surprise, China has cornered the rare-earth market, and America can’t live or grow manufacturing without these components. The accelerated dynamic occurred only recently – when China (in reaction to USA tariffs) added restrictive export controls to five rare earth metals, following the seven they had restricted a few months prior (and a few they banned for export to the USA last year).
These materials have names that you may not recall from your high school chemistry class (when you studied the Periodic Chart of Elements), but they have real-world use and real-world consequences. The latest on the list are holmium, erbium, thulium, europium, and ytterbium. Last year, (for the apparel retailers reading this) China banned the export of antimony to the USA. While that particular word may not ring your bell (it sounds like alimony) – antimony is a core ingredient in our specialty core fabric called polyester.
As President Trump goes after Chinese vessels, China has countered with a tax on American vessels. As President Trump props up the finances of Argentina, China has decided to buy their soybean business (leaving American farmers in the dust – and ripe for a bailout). These acts only confirm that while some believe that our trade war has no consequences – that concept only rests with those who haven’t yet been affected. Just ask the lobstermen in Maine what happened to their catch that was previously exported to China, or ask the farmers in the mid-west who were bailed out to the tune of $28 billion dollars a few years back.
President Trump’s trip to Asia this week features a visit to Malaysia for the ASEAN summit, a visit to Japan, and a visit to South Korea where he will attend APEC and also meet with President Xi of China. Prior to the trip, the key trade subject with China had drifted to rare earth – which now totally dominates the retail discussion on trade. With China still being the largest retail player for apparel, accessories, and footwear – 100% additional tariffs that that slated to be added to products in November – just weren’t in the planning. It’s refreshing to hear that they have now likely been put aside, as it was pretty clear (in retail terminology) that one would not be able to sell from an empty cart, that we are already in the Holiday selling season, and that as prices go up – sales would go down.
As an aside, I had to leave my NYC apartment this morning to get some fresh air, and take time off from this all-encompassing trade conundrum. As I exited the side door of the building, several burly men were digging a sizable hole in the street.
“Good morning burly men,” I said, “what’s going on?”
With typical NYC city bravado, the burliest of the men (head wrapped like a rock star) – looked me in the eye and said: “we’re digging a hole to China.”
“Funny,” I said, “I was just upstairs doing the same thing on my computer.”
We stared at each other for a moment (a NYC gaze), there was a pause in our banter, and then an abrupt end – drowned out by the sound of a jackhammer.
I mention this because the “China” conversation dialed me back to Oakland Beach in Rye, NY where (as kids), we did the exact same thing in the sand…..dug holes to China. The sand at that time was just sand, and little did we know that years later, it would turn our attention to rare earth.
The China-charged political comments on Capitol Hill do continue, but the tone has become significantly more civil than it has been in years. President Trump believes there is a deal to be made with China, and that the meeting this week will be a success. There also seems to be a new realization that China and the United States actually need each other. Caution does remain in the wind, but we may now be on a better path to finally see some issues get resolved.
As a country, America has come a long way from Trump’s first tariffs on solar panels and washing machines in 2018, through the famous Fox News Sunday program in 2019 when Peter Navarro (who was Trump’s Director of Trade and Manufacturing at the time) called out China’s 7 Deadly Sins. What started as a war against theft of intellectual property and trade deficits – eventually morphed into the world was taking advantage of America – with tariffs as the antidote to fight that back. Success or failure? Hard to say as yet, but at least progress is being made after years of trade stagnation.
Just like the kids that were digging in the sand near Rye Playland, and the burly men outside my NYC building – perhaps, once again, with China now likely planning to park rare earth restrictions to the side and President Trump willing to reduce tariffs, a new hole will finally be dug towards China.
Source: https://www.forbes.com/sites/rickhelfenbein/2025/10/26/chinas-rare-earth-may-save-the-retail-economy-when-trump–xi-meet/
