Supply chains everywhere are disrupted. US farmers will be bailed out, again.
When I say most trade will stop, I mean with China. If global trade stops we will be in a severe depression.
China Takes Aim at U.S. Companies
Trump did not expect any country to fully retaliate or didn’t care. He soon will as China Has Readied a Trade-War Arsenal That Takes Aim at U.S. Companies
On Wednesday, China said it would increase tariffs on all U.S. imports to 84%, a response to new U.S. tariffs on Chinese imports of 104% that went into effect at midnight. It also added six U.S. companies including defense and aerospace-related firms Shield AI and Sierra Nevada to a trade blacklist, and imposed export controls on a dozen American companies including manufacturer American Photonics and BRINC Drones.
While Trump has focused on tariffs as his trade weapon of choice, China’s strategy goes well beyond imposing its own levies, relying on the lure of the Chinese market for U.S. companies. A central thread running through its calculus is how to inflict hardship on companies that bank on their ties with the world’s second-largest economy.
Tools that Beijing has already used and is likely to expand include export controls of critical materials American companies use to make chips and defense-related products, regulatory investigations designed to intimidate and penalize U.S. companies, and blacklists intended to bar U.S. businesses from selling to China. In addition, authorities are preparing new ways to pressure American companies to give up their crown jewels—intellectual property—or lose access to the Chinese market.
The toolbox underscores leader Xi Jinping’s capacity to engage in a prolonged economic warfare with the U.S. As both capitals appear to move toward decoupling, it also highlights the ever-rising risks for U.S. companies operating or investing in China, or simply trading with the country.
“China has systematically put together a new arsenal of tools that’s intended to minimize the cost to China and maximize the pain on the U.S.,” said Evan Medeiros, a former senior national-security official in the Obama administration and now a professor at Georgetown University. “They’re prepared in a way that gives them an asymmetric advantage in the trade war.”
China’s government and state media have taken a defiant tone, with the Commerce Ministry saying, “If the U.S. insists on its own way, China will fight to the end.”
The 104% tariff on all Chinese imports that Trump has now imposed in his second term will stack on top of earlier tariffs already in place, bringing the total average tariff rate on China to nearly 125%.
There are some options Beijing will for now be less likely to resort to as the costs to China itself could be high. That includes sharply devaluing the yuan or aggressively selling down its holdings of U.S. Treasurys. Both moves could destabilize China’s own financial market and hurt its strategic goal of bolstering trade relations with other countries.
A new report commissioned by the U.S. Chamber of Commerce Foundation found that most of the roughly 200 American companies surveyed in the past couple of years identify China as their No. 1 source of geopolitical risk
In response to Trump’s recent tariff actions, China last week launched an antitrust probe into the China operations of DuPont, which relied on the mainland and Hong Kong for 19% of its revenue last year, without giving much explanation.
Wild Ride in Futures
I watched the futures gyrate wildly last night with equities swinging hundreds of points up and down in minutes. Bonds did the same thing.
I will comment more on bonds later today with some charts.
The implications are not pretty, but the bond gyrations have nothing to do with China dumping Treasuries as many speculated on X.
Meanwhile, please note that gold is up $115 as I type. Gold is at $3,104 and West Texas Intermediate Crude (WTIC) oil is down another $2 to $57.39. Wow to both.
The Clueless Want Trump to Hike Tariffs on China Again
I failed to bookmark the link but a widely followed person on X wants Trump to hike tariffs on China to 400 percent.
It would not matter. We are already at the point trade with China will cease or nearly cease. Another 4,000 percent hike would not do much.
What About Farmers?
Trump is already discussing aid to farmers. Here is how it works.
Trump taxes US consumers via tariffs. Trump will then pay farmers to stop complaining.
In short, US consumers are taxed and the money is given to farmers.
That is exactly what happened in 2018 and it is going to happen again.
We call this winning.
The Nuclear Option
The alleged nuclear option of China dumping treasuries is nonsense.
China’s true nuclear option would be an total export ban on rare earth minerals the world needs to make cell phones, microchips, wind turbines, and missile guidance systems.
Understanding Rare Earths
At present China produces 60 percent of the world’s rare earths but processes nearly 90 percent, which means that it is importing rare earths from other countries and processing them. This has given China a near monopoly.
According to the United States Geological Survey, China has been supplying 54 percent of the germanium used by the United States, a material used in infrared technology and fiber optics.
The United States has not mined its own gallium, used in semiconductors, since 1987. Japan supplies 26 percent of American imports of gallium, China 21 percent and Germany 19 percent, along with several smaller suppliers.
Antimony (Sb), a critical metalloid, is a key element of the American war machine, essential for communication equipment, night vision goggles, explosives, ammunition, nuclear weapons, submarines, warships, optics, laser sighting and more, according to U.S. Army Major General (retired) James Marks.
China controls nearly 50% of the global antimony supply.
Related Posts
November 21, 2024: China’s Puts Export Curbs on Minerals US Needs for Weapons and Technology
In a warning shot to the Trump administration, China tightens export controls on some dual-use minerals.
December 3, 2024: China Halts Rare Exports Used by US Technology Companies and the Military
This is China’s advance salvo at Trump tariffs. It comes one day after the Biden administration expanded curbs on the sale of advanced American technology to China.
And on April 4, 2025 China retaliated by restricting exports of seven types of rare earths.
China can easily block rare earth exports to the world. If that happens, Trump will panic.
We should not be in this position, but we are.