The China-US trade dispute has escalated sharply again. After China introduced a "game-changer" countermeasure by imposing restrictions on rare earth exports, President Trump immediately announced that he would impose a 100% tariff on Chinese products from November 1 and implement export controls on "all critical software." These "mutual confrontational" actions, especially Trump's intense reaction, indirectly prove that China's countermeasures have indeed hit the U.S. "pain points."

China's Countermeasures: Rare Earths and Port Fees in Tandem.

On Thursday (October 9), the Ministry of Commerce of China issued six announcements at once, stating that it would strengthen the control over the export of five types of medium and heavy rare earth products, as well as related technologies, equipment, and raw materials. The scope and intensity of the control are much greater than before. Rare earths, known as the "vitamins of industry," are a key card that China uses to hold a critical position in the global supply chain in the high-tech field. Analysts say that Beijing did this to retaliate against the United States and its allies' suppression of China's high-tech industry, and to gain more favorable conditions for the upcoming China-US economic and trade negotiations.

Subsequently, on Friday, October 10, the Ministry of Transport of China released an announcement saying that starting next Tuesday, a special port fee will be charged on U.S. vessels docking at Chinese ports. The fee is calculated at 400 yuan per net ton and will increase annually. This move is intended to respond to the previous discriminatory behavior of the U.S. in charging port service fees on Chinese vessels.

Although both sides have started to impose port fees on each other, considering China's absolute advantage in the global shipbuilding industry (China built more than 1,000 commercial ships last year, while the U.S. built less than 10), analysts predict that the countermeasure taken by China will cause relatively less actual damage to the U.S.

Trump Unleashes His "Final Card": Tariffs and Market.

Facing China's strong countermeasures, Trump spoke particularly aggressively on social media. He first said there was no need for high-level meetings with China, and then announced that he would impose a 100% tariff on Chinese goods and restrict the export of critical software. By doing so, Trump clearly unleashed his last available "market card."

As some analysts pointed out, after the U.S. took countermeasures against China, especially after losing the "big killer" chip technology, the only card Trump had left was the U.S. market. He increased tariffs to 130% (slightly lower than the previous 145%) in an attempt to exert significant economic pressure on China to retaliate against Beijing's "extremely aggressive" actions.

However, the market reacted strongly to this move. As soon as the news came out, the three major stock indices in New York fell sharply. The Dow Jones Industrial Average dropped 1.90%, and the Nasdaq Composite Index fell even more, by 3.56%. In particular, the technology sector saw the biggest drop. This shows that investors are extremely worried about the possibility of the trade war becoming more severe and how it could affect the supply chain of the technology industry.

China Gains a "Super Chip," What's Next?

From the current situation, after China used its "key bottom card" of rare earths, not only did it successfully retaliate against the U.S. crackdown on China's high-tech industry, but more importantly, it precisely targeted the lifeline of the global high-end chip manufacturing industry. This way, China has secured a particularly important favorable condition.

For the U.S., although imposing a 100% tariff on imported goods from China is their last available card in the market, in today's highly globalized market environment, such a high tariff will ultimately fall on American consumers themselves, and it will also harm the interests of American tech companies.

For China, imposing tariffs may affect some foreign trade enterprises, but the rare earth leverage and relative advantages in maritime transport mean that China has a stronger position at the negotiation table. This trade war has evolved from an initial tariff battle into a struggle for control over the core of the high-tech industry supply chain.

Against the backdrop of the original plan for the leaders of the two countries to meet during the Asia-Pacific Economic Cooperation meeting, the escalation of this dispute undoubtedly casts a shadow over future negotiations and indicates that the friction in Sino-U.S. relations will enter a more intense and prolonged phase.

What do you think? Will China continue to expand its countermeasures under the current situation?

Original article: https://www.toutiao.com/article/7559828505585566208/

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