The US-China trade relations are turning from bad to worse recently, with multiple retaliatory options on the table for both sides.
One of the options for China is to cut off rare earth metal supplies to US technology and defense industries.
That’s according to a couple of Globaltimes editorials.” US faces squeeze on rare earths,” says one editorial. “US need for rare earths an ace on Beijing’s hand,” goes another. Both pieces were discussed here.
Another option for China is to go after American “entities” with a big presence in the Chinese market. Xinhua seems to have paid the way with a press release on Friday. “Foreign enterprises, organizations and individuals that do not comply with market rules, violate contracts, block or cut supplies to Chinese firms with non-commercial purposes, and seriously damage the legitimate rights and interests of Chinese enterprises, will be added to the list of unreliable entities,” said Gao Feng, a spokesperson with MOC.
Then there’s the option of China launching a massive sell-off of US Treasuries, though this option could end up being more harmful to the US to Beijing than Washington, as discussed in another piece here.
And there’s the option of China spoiling America’s Iran sanctions. “If Beijing decides to go out of traditional negotiation lanes, America’ Iran sanction plan might become another flash point in the deteriorating US-China relations,” says Xiaomeng Lu, China practice leader at Access Partnership, a global public policy consultancy for the tech sector. “And can cancel existing agricultural and energy purchase orders, or undo the suspended 25% tariff on 144 American cars and auto parts.”
Wait, there’s more, according to Lu. “China’s Ministry of Commerce may place additional tariffs on all imported products which contain US content, based on the percentage of US-derived parts and IP by market value. And they can cancel existing agricultural and energy purchase orders, or undo the suspended 25%.”
Meanwhile, America has its own retaliatory options. Like use Huawei CFO’s extradition as a leverage or turn up human rights pressure on Xinjiang’s Uighur detention camps, according to Lu.
While, it’s still unclear, which option each side will purse at this point, one thing is clear: Financial markets will continue to be on edge, driven by news rather than fundamentals until the trade tensions between the two countries ease.