00:00Next, the U.S. Trade Representative Jameson Greer has described China's major expansion of its rare-earth export controls as a complete repudiation of U.S.-Chinese trade agreements over the past six months.
00:13Greer told a news conference that China's export restrictions were a global supply chain power grab and the U.S. and its allies would not accept the restrictions.
00:23U.S. Treasury Secretary Scott Besson slammed Beijing's rare-earth export curbs. He says it's now China versus the world, following that Washington and its allies would neither be commanded nor controlled.
00:38It's the latest episode in the tit-for-tat tariff saga between the world's two largest economies.
00:44At the heart of the renewed trade tensions, China's latest export controls on rare-earth materials.
00:49And make no mistake, this is China versus the world. They have put these unacceptable export controls on the entire world.
01:02China is a command and control economy, and we and our allies will neither be commanded nor controlled.
01:10China and the U.S. are back to butting heads amid a fragile truce set to expire in early November.
01:16With the latest control surrounding rare-earths, U.S. President Donald Trump has threatened to impose a 100% tariff on Chinese goods starting next month,
01:25which Beijing has slammed as a double standard.
01:28But the reignited trade tensions go beyond rare-earth materials.
01:32On the maritime front, the two nations have begun charging additional port fees on shipping vessels carrying cargo between them,
01:38a move that could disrupt global freight flows.
01:40The U.S. also says it stands ready to impose tariffs on China over its purchases of Russian oil,
01:47but that such action would require support from its European allies.
01:51Despite the exchange of hostilities, Washington says it does not want to escalate the trade conflict,
01:57and that Donald Trump remains ready to meet his Chinese counterpart Xi Jinping on the sidelines of the APEC summit in South Korea later this month.
02:04And wouldn't it be great to be a fly on the wall in that meeting?
02:08Let's bring in Gavin Bay.
02:09Gavin is from The Wall Street Journal, where he focuses on trade and economic policy.
02:13Gavin, great to see you.
02:14Looking forward to hearing what you've got to say about this one.
02:16Do you see this as a clash of the giants, or is there one side that's really holding, to use a Trump phrase, all the cards?
02:23I think both sides really hold a number of cards here.
02:28And really what we've seen over the past few weeks and months is this trade dispute has bled over from just being about tariffs to being about export controls,
02:36shipping fees, and a whole host of trade levers, trade negotiation tools that each side is pulling here.
02:42So while the U.S. is saying that China is weaponizing its supply chain, that's exactly what Beijing would say the U.S. has done with its extraterritorial export controls over computer chips.
02:54And so you have a little bit of what we might call superpower horseshoe theory, where each side is kind of accusing the other of similar behaviors here.
03:03I'm here on Capitol Hill today where Jameson Greer, the trade representative, just briefed U.S. senators, Republican senators over lunch.
03:11The feeling here is that cooler heads are going to prevail, although Greer and Treasury Secretary Scott Besant are talking very tough in that news conference today.
03:21Privately, I think most senators who were in that meeting today don't think we're going to see those 100 percent additional tariffs.
03:28They think they'll work something out, but there's still a lot of work to be done on that front here.
03:32I'm just still noting that down, superpower horse shoe theory.
03:36I think that's one that should stick definitely as a concept.
03:39Great idea. I'm getting this sense of the two men sort of playing horseshoes in the sort of old Western style, as it were.
03:48One of these things, though, that the rare earths question has pushed so many, how can we put it, almost colonial moves by Donald Trump since he's got back into power.
03:59But clearly China corners the market still, doesn't it?
04:01Yeah, absolutely. I mean, where they really have control of the market is the processing of many of these minerals to make them into the ultra heat resistant magnets that go into everything from electric vehicles to guided missile systems.
04:14They really do have a corner on that market.
04:17And what we saw them do last week was strengthen and expand their export controls, where if a company anywhere in the world wants to get a product with these rare earth minerals, they will have to apply to the Chinese government for a license.
04:30And the Chinese government is notoriously slow at approving these licenses if they approve them at all.
04:36And so this kind of expanding that export control regime really, you know, sparked the ire of the Americans.
04:43They thought that they had an agreement with China that they would not do this.
04:48Conversely, the Chinese thought that the U.S. was not going to expand its sanctions over Chinese firms.
04:54And that is what the U.S. did only days before that.
04:57And so you see these kind of this is a cycle where we get a truce where, you know, they have a handshake deal.
05:03They think they issue a statement.
05:04They think they've come to some sort of understanding.
05:06And then one side moves, the other side responds.
05:09And then we have this big trade dust up again.
05:12So I don't think we have much reason to believe that they won't resolve this.
05:16But each and every time that this happens, there's more risk to the global economy.
05:19There's more uncertainty for businesses.
05:22And there's more wild rides for the stock market.
05:24I mean, we saw, you know, a lot we saw stocks in the U.S. really take a hit on Friday after the Chinese action and the U.S. response.
05:32Then Besant and Trump put out some conciliatory messages, tried to deescalate the stocks, come back up.
05:37And I think Beijing watches that kind of pattern of behavior and they think, oh, we've really got some leverage in this situation.
05:44So I think that, again, my expectation is cooler heads will prevail.
05:49Trump and Xi will meet.
05:50But this is kind of an escalation cycle that just seems to be happening over and over.
05:55Indeed.
05:56Besant's words, China versus the world.
05:58That's what he called it.
05:59I suppose the onus is on the United States then to find an alternative source.
06:03And one thinks of Greenland.
06:04One even thinks of Ukraine.
06:08Yes.
06:08And I think it's not just the sources of these minerals.
06:10It's where do you process them?
06:12You know, we we a lot of U.S.
06:14allies or the U.S.
06:15itself can produce some of these minerals.
06:17But, you know, bringing them into a usable product is a very, you know, time consuming, costly and environmentally kind of polluting endeavor.
06:26And the U.S.
06:27used to do a lot of that here.
06:29We seeded a lot of that production to China over the last few decades.
06:33And now U.S.
06:34political elites are really waking up to the fact that, oh, we need to do a lot more of that here.
06:38So this was a topic of discussion in the first Trump term, during the Biden term and now.
06:43But the fact of the matter is it's difficult to build these factories.
06:46It's difficult to make them profitable, especially compared to competition overseas, especially from China.
06:52And we're just a little bit behind the curve on this.
06:54So, you know, you've seen the Trump administration take some very, you know, very aggressive actions, actually taking public stakes in certain like MP materials, a rare earths processor in the United States.
07:06The U.S. took a public stake in that, almost virtually nationalizing or partially nationalizing a private company.
07:14That's something that would have been unheard of in past Republican administrations.
07:18But the Trump administration has embraced that sort of state capitalist approach as it tries to catch up with the ultimate state capitalists in Beijing.
07:26Indeed, they're doing such things almost smacks of socialism, doesn't it?
07:30I'm sure Trump wouldn't like to have that label attached to in any way, shape or form.
07:34But fundamentally, I'm still left with the feeling that China has the whip hand here.
07:39China has the best possible chance of getting what it wants out of this meeting between Trump and Xi.
07:43It may, but also, you know, you have to remember, and the U.S. officials would stress that the Chinese economy is really teetering right now.
07:52And as much as a 100 percent additional tariff on top of the tariffs already, as much as that would be damaging to the U.S. economy,
07:59the U.S. bet in this in these negotiations is the Chinese economy can't take that pressure either.
08:04So I think you see that each side has leverage over the other one right now.
08:09And the Chinese are really playing hardball leading up to this meeting.
08:13But I think, you know, we will see we'll see Trump and Xi meet.
08:17They seem to like each other personally, and they'll work through a number of these issues, not just the rare earths.
08:21But Trump is very angry that China has stopped buying U.S. soybeans, for instance.
08:25The soybean farmers are really feeling the squeeze.
08:27They're waiting for a bailout from the Trump administration.
08:30Trump posted on Truth Social yesterday he's going to try to find a resolution to that issue as well.
08:36So there's a lot to talk about here.
08:39And I think we'll see, you know, some of these issues get worked out in the weeks to come.
08:43Indeed. And the issue of tariffs, Gavin, just to sort of get this final one in for you.
08:46And clearly, when that happens, it's not good news for the stock market.
08:50It's not good news for the sort of broader economies.
08:52But, of course, it's not good news for the consumer, is it?
08:56Yeah. And I think you've seen part of part of the pressure on the Trump administration is you do see prices in the U.S.
09:02starting to tick up, especially in tariff related industries.
09:05Right. We've seen some grocery bills get higher.
09:07We've seen, you know, just consumer consumer goods get higher over the last few months.
09:13And then there's, you know, there's all different types of tariff regimes here.
09:16So if it's not getting hit by Trump's reciprocal tariffs, maybe the product is getting hit by his different national security tariffs.
09:22Or maybe it's the expiration.
09:24You know, they killed off the de minimis rule, which lets small shipments come into the U.S. tariff free.
09:29You know, I just ordered something that had an extra tariff I wasn't expecting because that de minimis rule is actually not on the books anymore.
09:37So there's a lot of different price pressures on the U.S. economy.
09:40Hiring is slowing. Manufacturing jobs are lagging behind.
09:43So there's it's a really high stakes game of chicken that these two leaders are playing.
09:48And I think a lot of people in this building and in the U.S. Congress really hope that cooler heads prevail.
09:53High stakes game of chicken and superpower horseshoe theory.
09:57They're the two phrases I'm going to take from this, Gavin.
10:00Thank you, sir, for giving that very lively.
10:02My pleasure.
10:03Detailed briefing on the high stakes when Trump meets Xi.
10:07And hopefully we come back to you for more analysis if you're available, sir.
10:10Thank you very much to Gavin Bade from The Wall Street Journal, focusing on trade and economic policy with great aplomb, I will add.
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