Xi and Trump clash over rare earth restrictions

China has defended its new export restrictions on rare earth materials as “legitimate defensive actions,” after U.S. President Donald Trump threatened to double tariffs on Chinese goods to 100% and cancel his long-planned meeting with Xi Jinping, their first in six years.

The decision of course reignited tensions between both governments just weeks after they claimed to have reached a “basic consensus” during talks in Madrid.

On Sunday, Beijing’s Commerce Ministry accused the U.S. of violating the trade truce by introducing new export restrictions since the September meeting. The ministry said, “Willful threats of high tariffs are not the right way to get along with China,” insisting the country “does not want a trade war, but is not afraid of one.”

Washington had recently expanded its chip export rules to block Beijing’s access to advanced semiconductors and software. Trump responded by declaring that his government would apply 100% tariffs and extend curbs to “any and all critical software.”

Xi and Trump clash over rare earth restrictions

The latest escalation came after China unveiled broad global controls on products containing even traces of rare earths, materials essential to artificial intelligence, electric vehicles, and weapons manufacturing.

Trump fired back by threatening to walk away from the upcoming Asia-Pacific summit in Gyeongju, South Korea, where he and Xi were expected to meet later this month. He said Beijing’s rare earth policy would “hold the world captive,” a remark that triggered a $2 trillion plunge in global stock markets.

Beijing viewed the truce sealed in Geneva and reinforced in London earlier this year as an agreement to halt any new restrictions on vital shipments. Xi’s government now considers that understanding broken.

Zhou Mi, a senior researcher at the Chinese Academy of International Trade and Economic Cooperation, said, “We will not be intimidated by such coercive and unilateral actions of power politics. Our actions have clearly shown this.”

Both sides appear to be leaving room for compromise. Trump’s tariffs are due to take effect on November 1, just before China’s new curbs begin the following week, coinciding with the expiration of their last temporary deal that capped tariffs at 145%.

Beijing expands curbs and targets shipping fees

Within hours of tightening the export controls, China announced it would start charging U.S. ships docking at Chinese ports from October 14, mirroring a new American fee on Chinese vessels entering U.S. ports that takes effect the same day.

The Commerce Ministry called the step “necessary passive defensive actions,” accusing Washington of “seriously undermining the atmosphere of the economic and trade talks.” The Center for Strategic and International Studies reported that the U.S. makes up just 0.1% of global shipbuilding compared to China’s 53.3% share.

Trade officials from both sides have met several times this year (in Geneva, London, and Stockholm) to draft a trade framework. The most recent discussions in Madrid in September produced a tentative deal on the divestment of Chinese-owned TikTok, ahead of the U.S. deadline to either sell its American unit or shut it down.

On September 19, Trump and Xi spoke by phone to finalize the next steps, agreeing to meet at the Asia-Pacific summit. However, after China tightened its export curbs, Trump publicly threatened to cancel the meeting.

Analysts at Hutong Research said, “Washington’s fear of China is strategic, not economic. A disruption in rare earth flows threatens defense production capacity, a core pillar of U.S. global power projection and, by extension, dollar stability.”

China accounts for about 70% of the global supply and has repeatedly used the critically needed minerals as a bargaining chip in trade discussions.

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