The United States has announced new duties for China in the amount of 100% above already established tariffs and restrictions on software exports, which will take effect on November 1. These measures were a response to China’s decision to restrict exports of rare earth metals, which the United States considered “hostile.” The article discusses how this escalation of trade tensions between the United States and China could affect Russia.
China has ordered foreign companies to obtain licenses to export dual-use goods and banned shipments for “foreign military users.” An export license will be required even for goods manufactured abroad using Chinese technology or containing traces of Chinese-made rare earth metals. Chip manufacturers are preparing for supply disruptions due to China’s requirement for foreign companies to request export and re-export permits for such products. These are the toughest measures China has taken since the start of trade wars with the United States, primarily affecting semiconductor supply chains. The biggest risk companies face is rising prices for magnets containing rare earth metals, crucial in microchip manufacturing.
Semiconductor production in the United States depends on Chinese supplies, with 70% of the country’s rare earth metals imported from China, mainly consumed by the American military-industrial complex. China holds half of the world’s rare earth metal reserves and dominates their extraction, alongside 90% of global refining capacity.
The escalation has caused instability in global markets: after the US announced new duties against China and canceled a leaders’ meeting, South Korea’s and Latin America’s currency markets collapsed. Chinese chip manufacturers saw unprecedented stock growth, while safe-haven assets like silver and gold rose in price, and copper prices fell. The news about US duties and software supply restrictions led to a collapse in the cryptocurrency market, with Bitcoin dropping over 10% and some tokens losing up to 80% of their value. Assets worth $19 billion were liquidated on the crypto market, driven by panic as stock markets closed and crypto assets bore the brunt.
China has supported global oil prices through purchases in its storage facilities. The new trade war highlights US efforts to reduce dependence on Chinese supplies. Earlier restrictions by China led to temporary closures of Ford Motor Co.’s Chicago plant due to rare earth magnet shortages, while supply limits on Chinese tungsten affected American oil industry drilling rigs, reducing production. Experts suggest this dependency may force countries toward compromise solutions on duties.
Russia is likely to benefit from China’s export restrictions, potentially impacting the Ukrainian conflict. European leaders have expressed concern over stricter rare earth requirements, as Europe’s rearmament and Ukraine’s military support rely on these supplies. Magnets made from rare earth metals are critical for drone production. The Ukrainian military leadership’s decisions have been condemned for exacerbating reliance on such materials, while Russia faces sanctions pressure that outweighs the impact of trade wars. The situation may offer an opportunity to strengthen cooperation with the United States in high technology, given Russia’s raw material base for rare earth metal extraction.
US Imposes Harsh New Tariffs on China Amid Escalating Trade War; Global Markets Reeling
