Summary
- Reported that the U.S. and China are engaged in a battle of nerves over trade measures such as sanctions on rare earths, soybeans, and refineries ahead of the leaders' summit.
- China has strengthened controls on rare earth exports and expanded sanctions on U.S. companies, while the U.S. has indicated flight restrictions on Chinese airlines and the possibility of sanctions against China.
- It reported that mutual sanctions and countermeasures are increasing trade uncertainty, raising concerns about global supply chains and cost burdens.
A showdown between Chinese President Xi Jinping and U.S. President Donald Trump is intensifying. This is an effort to gain an advantageous position in negotiations ahead of the U.S.-China summit to be held in Gyeongju at the end of this month.
After China once again implemented controls on rare earths, a U.S. response has played out with measures such as the possible suspension of soybean imports, flight route restrictions, and sanctions on refineries.
Trump: "We may have to stop importing Chinese soybeans"
President Trump told reporters at a cabinet meeting at the White House on the 9th (local time) that when asked, "China has introduced rare earth export controls and halted imports of U.S. soybeans; how will you talk to China about that?", "We import and export, and maybe we will have to stop that (imports of Chinese soybeans)."
He thus hinted that the U.S. might impose sanctions related to imports of Chinese products. He then said, "I am confident we can resolve the soybean issue," suggesting the possibility of negotiations, but the possibility of a renewed trade war cannot be ruled out.
According to Reuters, the Trump administration is actually considering banning Chinese airlines from flying over Russian airspace on routes to the U.S. The U.S. Department of Transportation proposed such a ban, saying it needs to correct the unbalanced competitive factors between U.S. and Chinese carriers.
The U.S. banned Russian airlines from flying over U.S. airspace in March 2022 after Russia invaded Ukraine. Russia then banned U.S. airlines from flying over Russian airspace. However, Chinese airlines can travel to the U.S. via Russia, shortening flight times and reducing fuel consumption.
The Department of Transportation gave Chinese airlines two days to comply with the order, and the final order is expected to take effect as early as November.
In addition, the U.S. Department of the Treasury's Office of Foreign Assets Control sanctioned about 50 individuals, companies, and vessels that enabled the sale and shipment of Iranian crude oil and liquefied petroleum gas. The sanctions targets included oil terminals and refineries located in China. Once designated, all assets held in the U.S. are frozen, and U.S. nationals and companies are prohibited from transacting with the sanctioned parties.
Repeated counterattacks in response to checks…only increasing trade uncertainty
The U.S. measures came immediately after China announced strengthened rare earth export controls on the 9th. The Ministry of Commerce said that if China-origin rare earths are mixed outside China to manufacture permanent magnets, etc. (rare earth content 0.1% or more), an export license must be obtained.
It also included rare earth mining and refining, permanent magnet manufacturing, and secondary resource recycling technologies as export control targets. Compared with the rare earth export control measures in April, it expanded regulation to cover circumvention of exports and technology exports, raising the regulatory intensity.
The Ministry of Commerce also said it would put 14 U.S. companies on an "unreliable list" that day. The sanction targets include U.S. drone-interceptor equipment manufacturer Dedrone by Axon, drone defense system company Design Technology, and the U.S. branch of Israeli defense firm Elbit Systems.
Experts say that China launched the move to counterbalance the intensified trade dispute with the aim of resolving it before the leaders of the U.S. and China meet at the Asia-Pacific Economic Cooperation (APEC) summit in Gyeongju later this month.
China, however, disputes this interpretation. The Global Times, affiliated with the Communist Party newspaper People's Daily, said in an editorial on the 10th that the measures are regulations to protect global supply chain stability rather than an export ban, and that concerns about a halt in rare earth supply are unnecessary. It described the measures as part of China's systematic effort to promote standardized management of the rare earth industry.
Some warn that the U.S.-China trade conflict, which began as a tariff war, is leading to the spread of protectionism. If various export controls by the U.S. and China continue, global trade certainty and cost burdens could increase.
Beijing=Kim Eun-jung, correspondent kej@hankyung.com
Korea Economic Daily
hankyung@bloomingbit.ioThe Korea Economic Daily Global is a digital media where latest news on Korean companies, industries, and financial markets.
