New Delhi. A fresh tariff war has broken out between the world’s two largest economies. America and China have come face to face in this matter. This comes after US President Donald Trump’s statement in which he announced the imposition of 100 percent additional duty on Chinese imports after Beijing announced new export controls on additional rare earth minerals.
Along with this, Trump has also imposed new export controls on important software. China had already imposed rules on the export of some rare earth elements, but on October 9 it added five more rules. The Ministry of Commerce announced that in order to protect national security and interests, the Ministry will impose export controls on rare earth-related technologies, including rare earth mining, smelting and separation, magnetic material manufacturing and rare earth secondary resource recycling.
Six months ago, the ministry had announced export controls on seven medium and heavy rare earth elements. Exporters were required to obtain licenses for materials that are critical to various high-tech applications, including electric vehicles, defense systems and renewable energy technologies.
China’s dominance of the rare earth market is notable, controlling approximately 90 percent of global refining capacity and a large share of mining production. President Trump retaliated by announcing additional tariffs on all Chinese imports, bringing the total tariff burden to 130 percent effective November 1.
Meanwhile, new export controls on critical US-made software will further tighten technology flows between the two countries. Another step has been taken which is causing fluctuations in trade at the respective ports.
The new service charges under the US Trade Representative Office will be effective from October 14. The charges are said to be part of a ‘Section 301 action’ that targets Chinese owned, operated and built vessels as well as non-US built vehicle carriers.
“The United States has repeatedly exaggerated the concept of national security, abused export control measures, and arbitrarily exercised long-term jurisdiction and imposed deep sanctions on a number of entities, including China,” the state-controlled news website People’s Daily reported, citing a statement from its commerce ministry on October 11.
The ministry also claimed that China’s retaliatory measures against additional port duties imposed by the US on Chinese vessels are ‘legitimate defense’ aimed at maintaining a ‘fair competitive environment’ in the international shipping and shipbuilding markets.
This new wave is now raising questions over a possible fifth round of talks, which was expected when Trump went to South Korea for the Asia-Pacific Economic Cooperation (APEC) leaders’ summit, where he was to meet Chinese President Xi Jinping.
The US President has already questioned the necessity of this meeting and hinted at its possible cancellation. The re-ignition of the trade war has created turmoil in global markets. According to a report by the Global Trade Research Initiative (GTRI), new tariffs and export controls could push up prices of electric vehicles, wind turbines and semiconductors as supply chains struggle to adjust.
Economists warn that this increase could accelerate the global inflation cycle, especially if other countries are forced to choose sides or implement their own countermeasures. “The impact will be felt soon. Prices of electric vehicles, wind turbines and semiconductor components are expected to rise, while the US will look to source substitutes from India, Vietnam and Mexico,” the GTRI report said.