China holds cards in US tariff stand-off

Last updated: April 15, 2025 1:25 am

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The US has taken steps to reduce its dependence on Chinese rare earth metals, including investing in domestic production and seeking alternative sources in countries like Australia. However, these efforts will take time to bear fruit, leaving the US vulnerable to potential disruptions in the supply chain.

Overall, the US-China trade stand-off is shaping up to be a high-stakes battle of economic power and leverage. Both countries have their strengths and vulnerabilities, and the outcome of the conflict remains uncertain. As tensions escalate and both sides continue to impose tariffs and restrictions on each other, the global economy is likely to feel the repercussions of this trade war.

The trade war between the United States and China has escalated into a dangerous stand-off, with both economic powerhouses engaging in a tit-for-tat battle of tariffs and restrictions. President Donald Trump has been demanding that Beijing seek a deal from his administration, but experts warn that China’s capacity to resist coercive tactics should not be underestimated.

China heavily relies on the US as a key market for its manufactured goods, but its centralized political control, diversified export markets, and strategic control over materials like rare earth metals give it significant negotiating power. The question now is how far China can use this leverage without causing further damage to its own economy.

Last year, China had a trade surplus of almost $300 billion with the US, making it vulnerable to Trump’s tariffs. However, international economists point out that China can more easily replace its imports from the US than the other way around. The US exports low value-added goods to China, while China exports higher-end products like electronics and machinery to the US.

Marta Bengoa, a professor of international economics, emphasized that the US is more dependent on China, as China can easily find alternative sources for agricultural products, while the US struggles to replace electronics and machinery. The depreciating dollar has also made it more expensive for the US to import goods, adding to the economic pressure.

While the trade war will impact both countries, China imports higher-end products like aircraft parts and pharmaceuticals from the US, and many American businesses have operations in China. Goldman Sachs analysts estimate that millions of Chinese workers could be affected by declining exports to the US, putting pressure on the Chinese economy and labor market.

In response to US tariffs, China has been reducing its reliance on exports to the US by rerouting production through countries like Vietnam and Cambodia. This strategic move has allowed Chinese manufacturers to take advantage of cheaper labor and avoid US tariffs. However, Trump has threatened Vietnam with reciprocal tariffs, creating uncertainty for Chinese exports.

China also holds a large amount of US government debt, which it could sell to reduce its exposure. This could impact the value of the dollar and US assets, prompting further declines. Despite the potential risks, China is expected to continue diversifying its reserves into other currencies in the long term.

Additionally, China’s control over rare earth metals, essential for modern manufacturing, gives it significant leverage in the trade war. The US has taken steps to reduce its dependence on Chinese rare earth metals, but vulnerabilities remain. China recently placed export controls on rare earth elements, further complicating the supply chain for products like jet engines and electric vehicles.

Overall, the US-China trade stand-off represents a high-stakes battle of economic power and leverage. As tensions escalate and both sides impose tariffs and restrictions, the global economy is likely to feel the repercussions of this ongoing trade war. The outcome remains uncertain, but both countries are facing tough decisions as they navigate this challenging economic landscape. If you are experiencing issues with your internet connection or browser settings, there are a few steps you can take to troubleshoot and resolve the issue. Checking your internet connection is the first step in diagnosing the problem. Ensure that your device is connected to a stable and strong Wi-Fi network. If you are using a wired connection, make sure the Ethernet cable is securely plugged in.

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