The revival of the US-China trade war

President Donald Trump responded Friday by announcing new 100 percent tariffs on Chinese goods, as well as new export controls on critical technology destined for China. Trump also threatened to scuttle a planned meeting later this month with Chinese President Xi Jinping on the sidelines of an Asian leaders meeting in South Korea. That sit-down was supposed to lay the groundwork for a full-scale summit early next year.

Both sides left time for an off-ramp. China delayed the start of its new restrictions until Dec. 1. Trump delayed the imposition of his retaliatory measures until Nov. 1. This raises the possibility that the world’s two largest economies are mainly staking out hardline negotiating positions, with threats and ultimatums, to improve their bargaining positions.

Longer term, however, the past 48 hours point toward a looming era of increasing friction as the superpowers shift from competition with occasional cooperation to clashes and outright conflict.

China controls about 70 percent of the world’s rare earth mining and 90 percent of the global processing. It was entirely foreseeable that they would use this market power as a pressure point when Trump picked a fight with Xi earlier this year.

At the same time, China has its own pain points. The United States dominates in semiconductors and chip-design software that China cannot yet manufacture domestically and needs to compete in the artificial intelligence boom. The United States also remains the world’s largest consumer market and accounts for about 15 percent of their exports.

China’s willingness to play the rare earths card has pushed the United States to look elsewhere for alternative sources, something that America should have started doing decades ago. Despite the name, rare earths are actually not all that rare, but they are currently most easily and cheaply mined in China.

The United States has vast deposits of rare earths but significantly trails China and Brazil, partly because of deindustrialization but also because mining certain materials tends to create politically untenable levels of environmental damage. As a result, Trump has been looking to strike minerals deals with countries such as Ukraine, the Democratic Republic of Congo and possibly even Myanmar or Venezuela — all of which are embroiled in conflict but have significant assets below ground.

Even more frustrating than needing access to Chinese minerals to keep the economy going is America’s dependence on them processing and transforming its own minerals into finished products. The United States now exports 95 percent of its rare earths to China for processing because it costs so much less than doing it here. Trying to increase domestic processing capacity could take a decade or more, and permitting remains too cumbersome and slow.

Before the blowup at the end of this week, the two sides had been making conciliatory gestures on trade and seemingly trying to dial down the rhetoric ahead of the heads of state meeting. Trump nixed a $400 million lethal arms package to Taiwan, the self-governing democracy which China considers a renegade province. Trump also lifted a ban on selling AI chips to China. Beijing, in turn, toughened controls on two of the precursor chemicals used in the production of fentanyl, one of Trump’s demands. China also gave the preliminary okay for an American consortium to take 80% ownership of TikTok.

The bonhomie after summer trade talks in Geneva and London belied the reality that the United States and China are locked in a herculean struggle for influence and military superiority in the Asia-Pacific region that will define the 21st century. Escalating tensions have led some to speak fancifully of decoupling or delinking of the two economies.

The hard truth is that, for the foreseeable future, the United States and China remain mutually dependent. A trade war is in neither country’s interest. Since a divorce is unrealistic, at least anytime soon, it’s better Washington and Beijing go back to talking.