"The two major economies of the world have agreed to extend the tariff suspension period for another 90 days. China's extremely effective arsenal of countermeasures has played an important role."

This dramatic move fully suits Trump's taste. The President of the United States means: only he can decide the fate of his trade partners, including tariffs and tariff suspensions. On Tuesday night, just before the deadline, he signed an agreement to extend the suspension of tariffs between China and the US by another 90 days, until November 10.

What about China? It responded with unusual calm to Trump's statements. According to the German newspaper Handelsblatt on the 12th, China had already known that it would be extended - probably as early as the beginning of the Stockholm trade negotiations in mid-July. Chinese media published a joint statement from the two superpowers on the Stockholm talks on Tuesday morning, which included the extension of the tariff suspension period.

China's rational attitude may be one of the reasons why the trade dispute between the two major economies did not escalate further. However, more importantly, China has been preparing for Trump's second term. In recent years, Beijing has built a set of retaliatory measures, including some targeted measures aimed at countering the US, thus forcing the US to maintain restraint.

Trade negotiation site between China and the US

Trump recently boasted about how much loss China suffered under the high punitive tariffs imposed by the US (as high as 145%). He claimed that the US has stopped trading with China, "China is on the brink of collapse" during an interview with ABC's CNBC.

What he didn't mention was how heavy the impact of China's countermeasures was on American industry, especially in terms of restrictions on the export of rare earths and permanent magnets. China used its near-monopoly position over these key materials to force the US to make concessions.

After Trump took office, China initially reacted extremely cautiously to Washington's threats. It wasn't until the situation escalated most severely in early April that it launched its harshest measures: implementing export controls on rare earths and electric motor permanent magnets.

The full impact of this measure took several weeks to manifest. Due to the new licensing regulations that initially caused a halt in exports, many American companies, especially those in the automotive industry, faced the threat of shutdown. European companies were also affected. It was reported that President Trump was surprised by China's targeted retaliation.

Report from the German newspaper Handelsblatt

In May, the emergency became so severe that the US was forced to relax export restrictions on chips and aircraft engines during the second round of trade negotiations held in London, in order to obtain key raw materials from China. Analysts said that this made the balance of tariff negotiations begin to tilt in favor of China.

After China eased its restrictions, according to the General Administration of Customs of China, China's rare earth exports increased in June, with a 660% increase in exports to the US compared to the previous month. The total volume of precious metal exports increased to 3,188 tons, up about 160% from 1,238 tons in May. These minerals are essential for high-tech products such as smartphones, jet engines, electric vehicles, and wind turbines. The US weapon manufacturing also relies on China's rare earths.

After the US relaxed export controls, tech giant Nvidia also announced that it would resume selling its artificial intelligence chip H20 in China. After the White House banned the sale of the chip to China in April, it promised to issue licenses for the product in the Chinese market. However, media reports indicate that the Trump administration charges American companies exporting AI chips to China 15% of their revenue.

US tariffs and China's counter-tariffs implementation

The fact that the US had to make concessions also indicates that China was well-prepared for Trump's second term. In recent years, China has established mechanisms that can quickly respond to sanctions and countermeasures. This is a lesson learned from Trump's first presidential term. In 2018, he imposed tariffs on various Chinese imports and implemented strict sanctions against Chinese telecommunications equipment manufacturer Huawei.

Therefore, China not only strives to reduce its technological dependence on the US, but also has built a comprehensive defensive toolkit, including various laws and mechanisms, to quickly respond to sanctions, and take countermeasures such as export controls and sanction lists.

The precise implementation of export controls shows that China has carefully considered how to inflict the most severe damage on the US.

US needs Chinese rare earths

However, despite the suspension of additional tariffs, the US still imposes high tariffs on imported Chinese products, which harms both the Chinese and American economies. According to analysis by the Peterson Institute for International Economics (PIIE), the US imposes an average tariff of 50% on imports from China. Despite the suspension of additional tariffs, China's exports to the US have declined sharply in recent months.

But unlike India, Trump previously imposed a 25% punitive tariff on India for continuing to purchase oil and gas from Russia, while he has so far only issued threats to China. China is Russia's largest trading partner.

Some observers have already speculated that Trump's hesitation towards China is also related to his urgent desire to meet with China. According to Kyodo News, China plans to invite US President Trump to attend the 80th anniversary military parade in Beijing in September.

Chinese cargo ship loaded with "Made in China"

The most concerning issue remains the outcome of the tariff negotiations between China and the US within the next 90 days. According to German television channel One, currently, extending the trade suspension period can prevent the trade dispute from escalating. It is believed that Trump may meet with China later, and direct dialogue is crucial for determining political strategies beyond technical details.

At the same time, Trump also faces the legality of tariffs. Last Thursday, US appellate court judges discussed the legality of multiple tariffs during hearings. At the end of May, the appellate court temporarily lifted the legal blockade on almost all of the president's tariffs, shortly after the lower court - the New York International Trade Court - had just ordered the lifting of the blockade. A final decision has not yet been made. Nevertheless, this legal dispute may continue and eventually be taken to the US Supreme Court.

Regardless, reaching a tariff agreement between China and the US is beneficial for both economies.

Original article: https://www.toutiao.com/article/7537682131359941120/

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