By Tom Fowdy
In retaliation for Donald Trump's trade war campaign, targeting China more aggressively than the rest of the world, Beijing has responded by imposing an embargo on the export of rare earths on an almost blanket scale. These materials, which China has a market monopoly on, are critical to the functioning of supply chains around the world, ranging from automobiles to washing machines. The withholding of such minerals has immediately brought some industries to a complete halt, with Suzuki Motors in Japan being forced to suspend production.
The emerging crisis has produced a phone call between Donald Trump and Xi Jinping amidst several weeks of posturing between both sides, while diplomats have scrambled to plead with Beijing to reverse these restrictions. All of it, of course, from China's perspective, is a bit ironic. How is it so that the countries that piled export restrictions onto Beijing, citing national security, often for superfluous reasons to try and blockade China's technological rise, can now expect them to be so lenient when it goes the other way?
If the leadership in Beijing has any prudence about it, China should immediately demand that such countries, such as the European Union, stop their blockade of Huawei, stop chip and semiconductor embargos, and cease from capitulating to US anti-China "strings" in any prospective trade agreements to resolve Trump's tariffs. Of course, it would be naïve to assume such logic is absent from any negotiations that might be taking place. China is finally playing hardball, displaying its hand and reminding the world once again that the premise of "decoupling" from it is fantasy talk.
Since the initiation of Trump's second trade war, China has been far more tempered, patient and seemingly resistant to the President's bluster and threats; it is firm but not erratic. First, I believe that China has learned from the experience of the first Trump era, whereby going out all guns blazing in a narrative war only dramatically exacerbated anti-China sentiment in Washington and in that administration. The covid pandemic era, which consisted of tit for tat attacks, projection of blame games, amongst other things, was a toxic time for the whole world. Although we are not faced with such a catastrophic global crisis as back then, Beijing has learnt that you don't deal with Trump by engaging in a rhetorical race to the bottom and explosive escalation.
Instead, China has been firm but wise to recognise strategically that Trump is a disaster for America's global status, and if he is starting fires all over the world with even allied countries, why on earth would you stop him? Why intervene to disrupt him dosimetrically or bring his administration down? In 2020, as I've talked about at length before, there was a naïve miscalculation in Beijing that only if Trump was undermined domestically, US foreign policy would return to a "normal trajectory." It took four years of Biden to make it clear such optimism is nigh on delusional. US hostility towards Beijing is a new normal.
But still, Trump's actions on the world stage are fundamentally self-defeating, and as the saying goes, "don't interrupt your enemy when he is making a mistake." Trump is attempting to use various trade war attacks to coerce other countries into unilaterally subduing themselves, unilaterally to American interests, but I have stated many times that this is an overplaying of the US hand, which underestimates China's economic power and leverage.
For example, it was reported by Reuters the other day that the United States has made a long list of demands to Vietnam to remove China from their supply chains in order to get tariffs listed. Vietnam, China's neighbour, which relies extensively on Chinese-made imports and components for its own, less sophisticated, manufacturing, is in no position to do that. In fact, Hanoi even signed more supply chain agreements with China when Xi visited earlier this month. This is a signature example of Trumpian delusion in practice and a fundamental misreading of global supply chain dynamics.
In this case, China has chosen to be calm, confident, and firm, yet not insecure or erratic over Trump's behaviour, knowing that it is a larger trading nation than the United States. Thus, Beijing has been willing to negotiate but also to carefully play its hand to remind people who really hold the cards here, and China's rare earths embargo is much more punitive than Trumpian tariffs, with the President and his team wrongly believing that the entire world revolves around the American market.
In doing this, they've quickly couped a golden concession which will stun and infuriate most China hawks, Trump to visit Beijing, all while seemingly exploiting the global trade chaos he initiated. Trump will, of course, need to be given a few things to present as a "win" as he always does, but it seems he has met his match with China, carefully leveraging its economic muscle.
The views do not necessarily reflect those of DotDotNews.
Read more articles by Tom Fowdy:
Opinion | Judicial resistance to Trump's tariffs weakens his hand, even as he appeals
Opinion | Trump is making the US a hostile place to study, and that's great news for China
Opinion | Lee Jae-myung will tilt South Korea's foreign policy, but change will be sparse
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