President Donald Trump explicitly confirmed that the United States is engaged in a trade war with China during a White House press briefing.
When asked about the potential for a new trade war following his announcement of 100% tariffs on Chinese exports effective November 1, Trump responded: “We’re in one now!” He emphasized that tariffs serve as a “crucial defense tool” against China’s actions, adding, “If we didn’t have tariffs, we would have no defense. They’ve used tariffs on us.”
This statement marks a sharp revival of hostilities after a fragile truce held since May 2025. The latest round stems from China’s October 10 restrictions on rare earth mineral exports—critical for manufacturing semiconductors, electric vehicles, and defense technologies—citing national security.
China dominates global supply over 80%, and these curbs were seen by the US as a direct economic weapon. Trump retaliated the same day via a Truth Social post and executive order, imposing sweeping tariffs and export controls on Chinese software and goods.
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Targets $194B in Chinese imports down from $239B in 2024; threatens Boeing parts export curbs. Adds fees on US-linked vessels; antitrust probe into Qualcomm. At White House event; still mulls Xi meeting in Seoul unconfirmed by China.
This echoes the 2018-2020 trade war under Trump’s first term, which imposed tariffs on $360B in Chinese goods, but the current escalation risks broader fallout, including a potential “virtual trade embargo” if rates climb to 145% on the US side and 125% from China.
Stocks dipped 1-2% on October 10 amid tariff fears, with tech giant like Apple, reliant on Chinese supply chains hit hardest. Oil rose 1% on October 16 as India pledged to halt Russian imports, indirectly boosting US energy leverage.
Beijing’s commerce ministry called the US moves “threatening to intimidate” and vowed to “fight to the end,” warning of “very disruptive” retaliation like further sanctions on US firms. No official confirmation of a Trump-Xi summit at the APEC forum in late October.
Analysts warn of supply chain chaos, higher consumer prices like electronics up 10-15%, and slowed global growth. Gold hit all-time highs on October 16 amid safe-haven buying. On X, reactions range from market panic (“$SPY should sell off”) to criticism (“US is the aggressor”).
A Trump-Xi meeting could de-escalate, but with tariffs locked in until November 10 negotiations, the “trade war” label now fits Trump’s rhetoric. This positions the US to protect domestic manufacturing but risks alienating allies decoupling from China.
China’s expanded export controls on rare earth elements (REEs), announced on October 9, 2025, represent a significant escalation in the US-China trade war.
These controls require export licenses for a broader range of REEs now covering 12 elements and related products like magnets and devices containing trace amounts, extending to extraterritorial enforcement on foreign firms.
China processes ~90% of global REEs and mines ~70%, giving it immense leverage over supply chains for semiconductors, electric vehicles (EVs), defense systems, and renewable energy tech.
While Beijing claims the impact will be “limited” for compliant civil uses, US officials label it a “supply-chain power grab” threatening global stability. Short-term disruptions include license delays and cost spikes; long-term, it accelerates bifurcation and diversification efforts.
The controls disrupt at multiple stages: mining, processing, magnet production, and end-use integration. Neodymium, dysprosium in F-35 jets, submarines, drones, missiles, radar.
License denials for military-linked firms; US DoD reports 20-30% supply shortfall risk by Q1 2026. “Veto power” over US weapons production; potential for Chinese “Entity List” mirroring US sanctions.
Europium, yttrium in chips, lasers, etching; vital for Nvidia/Intel fabs. Backlogs in EU/Asia processing; Apple/Nvidia face 10-15% cost hikes, Nasdaq dipped 3.6% post-announcement.
Global chip shortages akin to 2021, but targeted; delays in AI hardware. Neodymium/praseodymium magnets for motors; terbium in batteries/wind turbines. Tesla/Ford/GM report EV production halts; EU VDA warns of battery shortages, prices up 15%.
License delays add 1-2 months to shipments; global firms like Samsung scramble for stockpiles. Inflation pass-through: US households could see $500-800 annual gadget price hikes.
These disruptions stem from China’s shift from raw export quotas from April 2025 limits on 7 REEs to comprehensive controls, including proof-of-non-military use. Analysts estimate 20-40% of global REE flows could face delays, with extraterritorial rules forcing foreign firms to self-police.
REE prices surged 15% in the week post-announcement, neodymium oxide up 12%, reversing a 33% YTD decline. However, broader controls could stabilize at higher levels, adding 5-10% to input costs for affected industries.
US rare earth miners like MP Materials +25% in 5 days and Lynas (Australia, +8.5%) rallied on diversification bets, while Chinese processors dipped 5-10%. Tech indices fell, with $2T US market wipeout on October 10.
IMF warns of “disruptive” retaliation spiral, potentially shaving 0.2-0.5% off 2026 global GDP. Europe reports “months-long” license backlogs, risking EV/renewable delays.
The US views this as “economic coercion” violating May 2025 Geneva truce, prompting:Tariffs & Controls: Trump’s 100% tariffs on $194B Chinese goods effective Nov 1 plus export curbs on US tech to China.
$400M Pentagon equity in MP Materials; new Texas/California processing plants. DoE backs Lynas/Australia partnerships for magnets. G7 coordination; US stakes in rare earth firms; EU/Japan recycling incentives. JPMorgan’s $10B fund targets US defense/AI/REE investments.
Alternatives need 5-10 years; short-term stockpiles cover 3-6 months for most firms. China signals de-escalation via “export control dialogues,” but experts predict deeper mistrust, hastening “bifurcated” chains US-led vs. China-centric.
A Trump-Xi meeting in late October, APEC could pause escalation, but tariffs lock in until Nov 10 talks. This “weaponization” of REEs underscores resource geopolitics: China gains leverage in chip ban disputes, while the US pushes re-industrialization.
It risks inflating costs like $2,400/household from existing tariffs and fragmenting trade, but could spur innovation in recycling/AI-optimized mining. Watch Nov 1 tariffs and license issuance rates for escalation signals—deeper decoupling seems inevitable, benefiting diversified players but punishing delay.
