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US-China Trade War Escalates, But China’s ‘Trade Trump Card’ Threatens US

President of People's Republic of China Xi Jinping at a meeting with Russia President Vladamir Putin. (Photo: Kremlin.ru)
President of People's Republic of China Xi Jinping at a meeting with Russia President Vladamir Putin. (Photo: Kremlin.ru)

With reference to Mao Zedong’s historic Long March China’s president enters a new, higher-stakes stage of the trade war with the U.S.

Chinese President Xi Jinping told his country to prepare for difficult times and a “new Long March” on Wednesday, as the U.S.-China trade war intensifies with new rounds of tariffs and the blacklisting of Chinese telecom giant Huawei.

“We are here at the starting point of the Long March to remember the time when the Red Army began its journey,” Xi said at a rally in Jiangxi province. The president was referring to the “Long March” of the Chinese Civil War in the 1930s, in which the Communist Army retreated from the Nationalist Party to recover before eventually taking power in 1949.

“We are now embarking on a new Long March, and we must start all over again!” Xi claimed, according to the South China Morning Post.

After President Trump fulfilled his threat to increase tariffs on $200 billion in Chinese goods from 10% to 25% earlier this month, China immediately retaliated with tariffs as high as 25% on $60 billion of U.S. goods. President Trump then targeted Chinese tech giant Huawei with executive orders that essentially barred its trade with U.S. firms, before giving the company a temporary reprieve to continue buying U.S.-made electronic components for 90 days.

US Vulnerable to China’s ‘Trade Trump Card’

On Monday, President Xi and chief trade negotiator Liu He toured one of China’s most prominent rare-earth industrial facilities, an ominous threat Chinese state media labeled a “trade trump card.” Rare earths are elements that are essential to the 21st economy, involved in the production of oil refining, military equipment, batteries and consumer electronics like the iPhone. China supplies around 80% of the U.S.’ rare earths imports, and America has only one rare minerals facility, which the Chinese partly own.

“It would affect everything—autos, renewable energy, defense and technology,” Ryan Castilloux, the founding director of a prominent strategic metals consultancy, told Foreign Policy.

President Trump’s former adviser Steve Bannon believes Xi’s threat on rare minerals is a signal to the U.S. that “this economic war is about to go to another level.”

If China halts rare mineral supplies to America, U.S. tech companies like Apple and Tesla would take a serious hit. Goldman Sachs analyst Rod Hall told CNBC that Apple is particularly vulnerable to Chinese retaliation, estimating the company’s earnings could drop by as much as 29% if mainland China bans its products.

“Should China restrict iPhone production in any way, we do not believe the company would be able to shift much iPhone volume outside of China on short notice. We believe that Apple is near its annual rapid ramp of new iPhone production to prepare for new device launches in the fall, so even a short-term action affecting production could have longer term consequences for the company,” Hall said.

Trump said he has not “made that decision yet” on whether to hit another $325 billion in Chinese goods with tariffs. President Xi said he is in “no rush to resume negotiations, but the two leaders will meet at the G-20 summit in Japan next month.

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Peter Castagno

Peter Castagno is a freelance writer with a Master’s degree in International Conflict Resolution. He has traveled throughout the Middle East and Latin America to gain firsthand insight in some of the world’s most troubled areas, and he plans on publishing his first book in 2019.

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