Trump Unwisely Escalates Trade War: Expect A “Rare Earth” Response From China


As threatened, Trump Hits China with Tariffs on $200 Billion in Goods, Escalating Trade War.

President Trump, emboldened by America’s economic strength and China’s slowdown, escalated his trade war on Monday, saying the United States would impose tariffs on $200 billion worth of Chinese goods as punishment over Beijing’s trade practices.

The fresh round of tariffs comes on top of $50 billion worth of Chinese products already taxed earlier this year, meaning nearly half of all Chinese imports into the United States will soon face tariffs. The new wave is scheduled to go into effect on Sept. 24, with tariffs starting at 10 percent before climbing to 25 percent by the end of the year. The timing will partially reduce the toll of price increases for holiday shoppers buying Chinese imports in the coming months.

The White House also said that the United States was prepared to “immediately” place tariffs on another $267 billion worth of imports “if China takes retaliatory action against our farmers or other industries.”

Unlike the first round of tariffs, which were designed to minimize the impact on American consumers, this wave could raise prices on everyday products including electronics, food, tools and housewares.

American businesses — which have warned that tariffs could hurt profits, force job cuts and, in some cases, destroy companies, said the taxes were going to hurt the United States more than the administration realized. The National Association of Chemical Distributors released a study this month that predicted nearly 28,000 chemical distributor and supplier jobs would be eliminated because of higher prices from the $200 billion round of tariffs.

Response Coming

The question not whether China responds, but how.

I would expect China to immediately pull out of Trump’s recently initiated trade talks.

That’s merely symbolic. Then what?

Four Ways China Can Retaliate

  • Let the Yuan slide 25% negating the tariffs.
  • Further limit US firms ability to do deals in China
  • Place higher tariffs on US agricultural products
  • Halt Rare Earth Exports. Rare earths are 17 minerals used to make cell phones, hybrid cars, weapons, flat-screen TVs, magnets, mercury-vapor lights, and camera lenses.
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