Can Scott Bessent see China’s trade counterstrike with clear eyes?
News Summary
US Treasury Secretary Scott Bessent and Chinese Vice-Premier He Lifeng are expected to meet in Malaysia this week to ease tensions ahead of a potential Trump-Xi meeting at the APEC summit. This follows President Trump's threat of an additional 100% tariff on China, which he later indicated might not be sustainable, and the US Commerce Department's tightening of restrictions on Chinese entities. The article suggests that Bessent, despite calling China's rare earth export controls an "unprovoked escalation," missed the broader context. It argues that China's controls are a response to a decade of US policies rather than recent provocations. The gravity of China's move was evident in the share price corrections of Apple and TSMC. The piece concludes that China's intricate export control framework is the result of patient, long-term planning, awaiting an opportune moment, which the US inadvertently provided.
Background
This news highlights the ongoing trade and technology tensions between the US Trump administration and China in 2025. The meeting between US Treasury Secretary Scott Bessent and Chinese Vice-Premier He Lifeng occurs amidst a period of heightened friction. The US had previously threatened significant tariffs on Chinese goods and implemented export restrictions on Chinese companies in the technology sector. China views these actions as deliberate escalation by the US and has responded with export controls on rare earths. Rare earths are critical minerals indispensable for various high-tech products and defense industries. The article suggests that China's strategic control over rare earths is not a hasty reaction but a calculated response to a decade of US policies against China.
In-Depth AI Insights
How do China's export controls on rare earths reflect its long-term strategic patience rather than simple retaliation? - The article emphasizes that China's rare earth export controls are a result of "10 years of policy, not 10 days of provocations," suggesting decisions are based on long-term strategic planning and geopolitical evolution. - This "strategic patience" likely involves accumulating advantages in supply chains, developing alternative technologies, or fostering partnerships to effectively use these resources as leverage or countermeasures at critical junctures. - China may have observed US actions over the past decade regarding technology restrictions (e.g., entity lists), anticipated future measures, and proactively positioned itself to ensure an asymmetrical advantage if conflicts escalate. How might the Trump administration's trade tactics, particularly tariff threats, inadvertently provide a "perfect pretext" for China's long-term strategy? - The Trump administration's "maximum pressure" tactics, such as the 100% tariff threat, while intended to force short-term concessions, may be interpreted by China as further validation of its assessment of a long-term US containment strategy. - Such aggressive tactics provide China with a legitimate public rationale for announcing and implementing pre-planned countermeasures (like rare earth controls), making its actions appear defensive or responsive rather than escalatory. - This could lead to a spiraling escalation in US-China trade/tech conflicts, where each escalation is perceived by the other as justification for further action, solidifying distrust and confrontation between the two nations. What are the implications for global supply chains and investors from the "weaponization" of critical raw materials like rare earths? - Rare earth export controls highlight the growing importance of critical minerals as geopolitical tools, prompting nations to accelerate diversification and localization of supply chains to reduce reliance on single sources. - For technology and manufacturing companies dependent on these materials (e.g., Apple, TSMC), this means higher operating costs, risks of supply chain disruption, and persistent uncertainty over future profitability, potentially forcing significant strategic adjustments. - Investors need to reassess industries and companies vulnerable in critical raw material supply and focus on those with strengths in supply chain resilience, diversified sourcing, or alternative technology development, which could emerge as new investment opportunities.