Rare Earths and Tungsten as Trump Cards to Cool Down Sino-US Trade War

Rare earths and tungsten are trump cards of China, the United States is cooling down Sino-US trade war, the outside world believes that China’s holding the trump cards are largely countering the United States.

Chinese President Xi Jinping and US President Trump met at the G20 summit recently, and the two sides agreed to restart the negotiations. On July 2th, local time, the British Broadcasting Corporation (BBC) pointed out that, experts analyzed the significance of the seminar, some of them thought that the Osaka Special Seminar was Washington seeking to cool down the trade war. Some experts thought that, perhaps the US has realized that China still has its "trump cards" against America. Sino-US negotiations reached a stalemate in May. While the United States increased tariffs on China, US also issued two prohibitions to block Huawei’s communications equipment, it let to Sino-US trade war escalation.

the trump card of China in trade war image

The report pointed out that, the counter-measures against Sino-US trade war by China include: restricting the supply of rare earths, countering tariffs, selling US treasury bonds, and restricting the Chinese market owned by US companies. President of the People’s republic of China Xi Jinping inspected rare earths companies in Jiangxi in May, sparking speculation that China might cut off export of rare earths raw materials. Rare earths are key raw materials for high-tech electronic consumer products and military products. 80% of the rare earths imports from the United States come from China, limiting the export is considered to be a key counter-measure in Sino-US trade war.

US financial giant Citigroup analysts said that if China tries to impose restrictions on the entire supply chain on rare earths and tungsten, this will make US face serious problems. Once China really plays the rare earths and tungsten cards in the future, it is a very decisive step and the impact will be great. The report also said that China can increase tariffs on US products worth about 10 billion US dollars, but it has not been implemented yet. Beijing reduced tariffs on US auto imports in December last year, China may resume these tariffs. China could also increase tariffs on agricultural products such as soybeans.

However, the report believes that tariff counterattacks are difficult to implement in some respects and may have an impact on Chinese companies and market. In addition, China currently holds about 1.12 trillion US treasury bonds and is the largest holder of US government bonds. China’s selling of US bonds will hurt US market, raising US interest rates and borrowing costs. However, this measure will also devalue China's foreign exchange reserves.

Reuters News Agency reported that many large US companies are lobbying in Washington, wishing Donald Trump government to adopt a more moderate policy toward China to prevent Beijing from taking retaliatory measures against US companies. Many US brands have joint ventures and Chinese partners in China, and Washington's pressure on China will affect these US companies. The analysis believes that Chinese consumers may also "boycott" US products, and China can also use other means to sanction US companies. 

At present, the Sino-US trade war has let global economy suffer a lot. The special session brings the Sino-US negotiations back on track. The call for an agreement between the two sides to stop the trade war is getting higher and higher.