October 21, 2025 • 18 mins
China’s dominance of rare earths has given Xi Jinping powerful leverage over Donald Trump ahead of their expected meeting next week.
On today’s Big Take Asia podcast, host K. Oanh Ha and Bloomberg’s Daniel Ten Kate dig into how China is weaponizing rare earths and what the economic standoff means for a trade deal and the future of US-China relations.
Read more: Xi Is Never Giving Up His Newfound Leverage Over Trump
Further listening: Xi’s Bromance Diplomacy Is Challenging Trump’s World Order
The Rebel Army Behind One of the World’s Major Rare-Earth Supplies
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Speaker 1 (00:00):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:09):
I have a great relationship with Presidency. I expect to
be able to make a good deal with him, and
he'll make a good I want him to make a
good deal for China, but it's got to be fair.
Speaker 1 (00:19):
Ahead of a high stakes meeting with Chinese President Shijenping
next week, US President Donald Trump said he looks forward
to making a trade deal.
Speaker 2 (00:27):
Certainly, there are a lot of people that are waiting
for it, and maybe it won't happen. Maybe it won't happen.
Things can happen where for instance, maybe somebody will say
I don't want to meet it's too nasty, but it's
really not nasty. It's just business.
Speaker 1 (00:42):
If the meeting on the sidelines of the annual Apex
summit goes as planned, it would be Trump and She's
first in person conversation since Trump began his second term
and launched a trade war that's upended the relationship between
the world's two largest economies.
Speaker 3 (01:00):
U US went from negligible tariffs on China to ten percent,
then twenty, then fifty four, then one oh four, then
one forty five.
Speaker 1 (01:07):
There's no shortage of sticking points in a potential trade
deal between the US and China, but Bloomberg's Daniel ten Kate,
Executive editor of Government and Economics in Asia, says he's
watching one critical element of these negotiations closely.
Speaker 3 (01:23):
As long as China agrees not to really disrupt the
flow of rareth magnets, then you could see that they
could come to some sort of agreement where they extend
this tentative truce.
Speaker 1 (01:37):
When China announced sweeping new controls on its exports of
rare earth's earlier this month, Treasury Secretary Scott Bessentt accused
Beijing of pointing a bazooka at the global supply chain.
Trump threatened to call off talks the sheet altogether and
add an additional one hundred percent tariff on China, but
within forty eight hours Trump had backed off.
Speaker 2 (02:00):
I want them to play the rare earth game with US, and.
Speaker 1 (02:02):
On Monday, the President signed a landmark deal with Australia
to boost the supplies of rare earth as a strategic
counter to China. The deal outlines eight and a half
billion dollars worth of projects, with both nations initially committee
one billion dollars over the next six.
Speaker 2 (02:19):
In about a year from now, we'll have so much
critical mineral and rarer so that you won't know what
to do with him.
Speaker 1 (02:26):
His retreat was proof that the rare Earth's bazooka is
a weapon to be reckoned with and gives China serious
leverage in this trade war with the US.
Speaker 3 (02:35):
Trump took his biggest swing at China and he was
forced to back down. And for Shijimping, that was a
big political win. He was the only leader in the
world who had enough ammunition to be able to force
the Americans to back down. It is a game changer,
and I think the US and China are both coming
to terms with this. You see the US realizing that
(02:58):
all of a sudden, China is these rights and China's
put the US on the back foot a little bit. Here.
Speaker 1 (03:13):
This is the Big Take Asia from Bloomberg News. I'm Wanha.
Every week we take you inside some of the world's
biggest and most powerful economies and the markets, tycoons and
businesses that drive this ever shifting region. Today on the show,
China has dominated the rare Earth's world for decades, but
it's only now begun to make the most of that influence.
(03:36):
We'll look at how it's using American trade tactics to
press its rare earth's advantage and explore what weapons the
US has in its arsenal. To fight back, China introduced
new rules this month, the clamp down on the supply
and use of rare earths. Bloomberg's Dantan Kate says the
(03:58):
curbs go much further there then previous restrictions.
Speaker 3 (04:02):
If any product contains even a trace amount of rare earth,
then China has the right to restrict that product. So
if you have zero point one percent of rarest to
make any given product in the world, you need a
license and permission from China. Previous actions China cut off
(04:24):
supplies of rare earth to various companies. So if you
needed rare earth to make an electric vehicle, for instance,
and you bought that from China, China was saying, you
need a license to get these rare earths, whereas before
you could freely buy them. Now, what China has done
is they're not just stopping the rare earth from getting
(04:46):
to those factories, but they're saying, even if you use
those rarest to make that car, if you want to
sell that car to another country, you're also going to
need permission now that just seems completely unworkable in reality,
and that's what raises questions about, Okay, are they going
to put a stop to global trade. No, that's not
(05:08):
in China's interest at all, but they are asserting the
right to effectively intervene whenever they want.
Speaker 1 (05:15):
The rules are set to take effect later this year,
and while it's unclear how Beijing plans to enforce them,
Dan says the move shows just how powerful a weapon
rare earths can be for China.
Speaker 3 (05:28):
They control a lot of the supply, somewhere in the
neighborhood of about seventy percent of that. But what China's
real advantage is that they can process the rare eer.
So once you take the rare eers out of the ground,
you still need to ship them to somewhere where they
can be processed into a material that can then be
sent to a factory that can be used to make
(05:48):
a phone or make a TV or something like that.
And China controls nearly all of that technology now. The
US used to be the world's largest producer of wearers,
and they let that atrophy and disappear to China back
in the eighties and nineties. So the issue is now
that the amount of rarer supply that includes no Chinese
(06:12):
minerals or any processing by Chinese technology using Chinese technology
is very small, and is.
Speaker 1 (06:21):
It viable then for the world to somehow very quickly
establish another supply chain for wearers that doesn't rely on China.
Speaker 3 (06:31):
It depends on who you talk to there. Again, I
mean Trump will say in a year, will be okay,
We'll have enough supplies, We'll be able to get the
processing up and running. In the US is doing I
mean the Pentagon has taken a steak MP Materials, which
owned the largest rarest mind in the US, which is
(06:51):
based in California. We've also seen the US government taking
equity stakes in some Australian producers. You have Australia pitching
ITSLF as the savior in this regard. But the problem
there is that if you talk to certain people in
the industry, they say, actually getting the technologies up to
(07:11):
process these heavy rare earths is not that easy. It
actually takes a lot of time to come up with
and you're starting from scratch almost because you've lost some
of the materials to do that. The issue also is
that even if you have a country like Malaysia processing
a lot of rare earth, if they're using Chinese equipment,
then China can also block those wearers from going to
(07:35):
the US. So the amount of the rare earth's supply
chain globally that doesn't just include minerals from China, but
also doesn't rely on Chinese technology to process those minerals,
that is very small, and that is the fundamental issue.
Speaker 1 (07:51):
Now, China has spent years cultivating its rare earth industry.
Today it dominates the market as a producer and refiner
of these vital minerals, but it's only recently been trumping
the rare earth card in trade negotiations.
Speaker 3 (08:08):
If you look in the nineteen eighties, China's known that
it has where dung Jopping at one point said the
Middle East has oil, China has rare earth. So they
started processing really once China emerged from the mal years
and they started opening up the country, rare earth was
one of the first industries that they really started to develop,
and you saw a lot of the rarest production moving
(08:32):
from the US and other places to China in the
nineties and by the two thousands, they've had a very
firm grip on the supply almost ninety ninety five percent.
Things really came to a head in twenty ten when
there was a territorial dispute with Japan, and China cut
off rare earth then, and that really spooked Japan, and
(08:55):
the world really had known that, Okay, we can't rely
on China anymore for supplies of rare earth. China can
just flip a switch, cut us off, and then suddenly
we don't have the building blocks we need to produce
a lot of the technology and products that are used
in the modern economy. But even after that, we're still
(09:17):
here fifteen years later, and China still has a stranglehold
on the world supply.
Speaker 1 (09:23):
Rare earths have been central to negotiations between the US
and China since Trump relaunched his trade war earlier this year.
When Trump imposed tariffs of more than one hundred percent
back in April, she cut off crucial rare earth supplies
to the US. The resumption of rare earth shipments was
top of Trump's wish list during trade talks with China
(09:43):
in June. It was also a key component of the
trade truce between the two countries that's set to expire
next month.
Speaker 3 (09:51):
The fundamental part of the truce is that the tariffs
go down to round fifty five percent, and in return,
the US gets enough rare earth magnets that it needs
to function to keep its factories open. The issue is
that China really wants the US to stop putting any
other measures on. China saw the deal as we want
(10:14):
no more export controls, we want no more punitive actions
against Chinese companies. So they saw the Commerce Department in
particular doing that and the Hawks of the United States
continuing to press ahead with that, and they basically just said,
we need to put a stop to this, and we're
going to take this opportunity to put this really big
(10:35):
measure in place.
Speaker 1 (10:37):
China's latest moves pressing its advantage with rare earths were
met with outrage in the White House, but their tactics
taken directly from America's own manual on how to wager
trade war. After the break, well, look at how China
is trying to beat America at its own game and
(10:58):
how the US is retaliating. During Donald Trump's first term
in office, he dropped the hammer on China, blacklisting Chinese
(11:18):
telecom giants and cutting the country off from critical US
chips and software. Of course, Huawei not the only one
affected by these decisions are the blast radius in terms
of Huawei supplies pretty well. Overnight, Huawei, China's crown jewel
in tech and the world's biggest maker of telecom gear,
found itself scrambling, and so did Beijing. For all its
(11:40):
economic muscle, China had no real way to strike back.
Bloomberg's Dan ten Kate says that moment was a wake
up call for Chinese present Shi Jinping to look at
how the US used the law to shape export rules
and control global trade and copy that playbook.
Speaker 3 (11:58):
The US basically owed China the way for doing all
of these things. And so what you saw was after
Trump's first term, Xijinping went out and he got those tools,
and in twenty twenty they passed an export control law
that gave them the ability to do everything that the
US was currently doing to them. And if you look
(12:19):
at the current rule, this rule that okay, if there
is even a trace amount of errors, we can control
everything that comes directly from something called the foreign Direct
Product rule, which the US passed that in nineteen fifty nine.
Speaker 1 (12:35):
The Foreign Direct Product Rule, it allows the US to
ban the sale of products to foreign firms if any
part of a product is made with American intellectual property.
Speaker 3 (12:47):
Over the years, the US would implement that against China.
So there was an exchange one in particular where Walter Mondale,
the Vice president of the time, went to China and
he spoke with Donghaoping in nineteen seventy, and a lot
of that conversation was around, okay, what can you sell us,
and Dung at one point expressed frustration. He said, the
(13:09):
Japanese and the Europeans won't even sell us a product
because it as an American component. And that principle is
essentially what China's doing today. If you have a bit
of wearers that's been manufactured through our processes, then we
assert the right to be able to control that. And
China's ultimate goal here is not necessarily to restrict trade
(13:34):
and try and shut down the global supply chains. It
certainly doesn't have the capability to enforce that at all,
but it does want the same tools as the US,
and it wants to show the world that, hey, we
can mess with you any time we want. We can
assert the right to come in and block you from
(13:55):
doing things.
Speaker 1 (14:00):
Dan says, the US still has plenty of weapons of
its own, and China isn't in a good position to
fight off a sustained attack on trade. It's struggling with
manufacturing overcapacity, a slump in consumer spending, and an AILNK
property sector. Dan says it's not that America's trade measures
wouldn't be highly effective against China, it's that using them
(14:23):
could be risky to the US.
Speaker 3 (14:26):
The US has a lot in its arsenal. The question
is what measures can the US put in place that
won't blow back on America, and that looks limited to
things like airplane parts, chip design, software, ethane, and a
few other things that China needs that the US has now.
(14:49):
The other big one is tariffs. Obviously, if Trump wanted
to put one hundred and fifty percent tariffs on Chinese
goods heading into America, that would do serious i economic
damage to China, but it would also hurt the US.
Also controls the financial system, so it could do drastic
things there, but again, anything they do on that front
will also blow back at the US. So Trump is
(15:12):
looking for something that he can hit China with that
wouldn't hurt the US and there's not too many great options.
He can do some things, but ultimately he wants a
deal where everybody wins.
Speaker 1 (15:24):
Now, looking ahead, Trump and she will meet at the
APEX summit in South Korea next week. What are the
likely outcomes that we can expect from that?
Speaker 3 (15:33):
As long as China agrees not to really disrupt the
flow of rare earth magnets, then you could see that
they could come to some sort of agreement where they
extend this tentative truce. Trump also wants the TikTok deal
completed and she needs to sign off on that, so
that's another thing that could come out of it. And
(15:55):
the other major thing is on soybean purchases. That's a
big constituency for the US and for Trump. So China's
not blowing soybeans anymore, and it says it can't because
the tariffs are too high. But if there's some agreement
on that, then that could also be something we see
out of that.
Speaker 1 (16:12):
Meaning So it sounds like there are things that both
countries want that could still make them walk away and
say we got to win. Yeah.
Speaker 3 (16:23):
I think the ultimate problem here is that the space
for a deal is very limited by all the national
security restrictions that both sides have on each other. I
think that they don't really see a deal until you
get particularly Congress and the Hawks and Washington coming to
the conclusion that it's okay to have China involved. That's
(16:44):
just politically very difficult to see, particularly with all the
concerns about Chinese spying, China's military mighty. You'd have to
fundamentally change the conversation in Washington now. Trump during his
first term he basically flipped the conversation on China and
turned it into a bipartisan consensus against China and for
(17:06):
more hawkish posture towards China. So if anyone can change
the conversation in Washington toward China, it could be Trump.
Speaker 1 (17:15):
But Beijing's move to leverage its rare earth advantage has
now boxed Washington in limiting its options and raising the
possibility that this dispute may have no clear resolution, at
least not anytime soon.
Speaker 3 (17:30):
If you think about the leverage that both sides have
on each other. Right now, China has this rare earth card,
so what is the US doing. They're working over time
to try and create an alternative supply chain, so they're
no longer dependent on China's doing the same thing on
their side. They're trying to maintain this advantage as much
as possible, and also look at the areas where the
(17:51):
US has leverage over them, particularly on high end Nvidia chips,
and they're trying to build their own chips so they're
not relying on the US. So both economies are necessarily
looking for ways to work together over the long term.
They're looking for ways to not be reliant on each other.
Neither country has any leverage on them, and that's where
(18:14):
they're heading. And so that dynamic doesn't lead need to
be optimistic that we're going to get a long term
conclusion to this anytime soon.
Speaker 1 (18:28):
This is The Big Take Asia from Bloomberg News. I'm wanha.
To get more from The Big Take and unlimited access
to all of Bloomberg dot Com, subscribe today at Bloomberg
dot com slash podcast Offer. If you liked the episode,
make sure to subscribe and review The Big Take Asia
wherever you listen to podcasts. It really helps people find
the show. Thanks for listening, See you next time.
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:09):
I have a great relationship with Presidency. I expect to
be able to make a good deal with him, and
he'll make a good I want him to make a
good deal for China, but it's got to be fair.
Speaker 1 (00:19):
Ahead of a high stakes meeting with Chinese President Shijenping
next week, US President Donald Trump said he looks forward
to making a trade deal.
Speaker 2 (00:27):
Certainly, there are a lot of people that are waiting
for it, and maybe it won't happen. Maybe it won't happen.
Things can happen where for instance, maybe somebody will say
I don't want to meet it's too nasty, but it's
really not nasty. It's just business.
Speaker 1 (00:42):
If the meeting on the sidelines of the annual Apex
summit goes as planned, it would be Trump and She's
first in person conversation since Trump began his second term
and launched a trade war that's upended the relationship between
the world's two largest economies.
Speaker 3 (01:00):
U US went from negligible tariffs on China to ten percent,
then twenty, then fifty four, then one oh four, then
one forty five.
Speaker 1 (01:07):
There's no shortage of sticking points in a potential trade
deal between the US and China, but Bloomberg's Daniel ten Kate,
Executive editor of Government and Economics in Asia, says he's
watching one critical element of these negotiations closely.
Speaker 3 (01:23):
As long as China agrees not to really disrupt the
flow of rareth magnets, then you could see that they
could come to some sort of agreement where they extend
this tentative truce.
Speaker 1 (01:37):
When China announced sweeping new controls on its exports of
rare earth's earlier this month, Treasury Secretary Scott Bessentt accused
Beijing of pointing a bazooka at the global supply chain.
Trump threatened to call off talks the sheet altogether and
add an additional one hundred percent tariff on China, but
within forty eight hours Trump had backed off.
Speaker 2 (02:00):
I want them to play the rare earth game with US, and.
Speaker 1 (02:02):
On Monday, the President signed a landmark deal with Australia
to boost the supplies of rare earth as a strategic
counter to China. The deal outlines eight and a half
billion dollars worth of projects, with both nations initially committee
one billion dollars over the next six.
Speaker 2 (02:19):
In about a year from now, we'll have so much
critical mineral and rarer so that you won't know what
to do with him.
Speaker 1 (02:26):
His retreat was proof that the rare Earth's bazooka is
a weapon to be reckoned with and gives China serious
leverage in this trade war with the US.
Speaker 3 (02:35):
Trump took his biggest swing at China and he was
forced to back down. And for Shijimping, that was a
big political win. He was the only leader in the
world who had enough ammunition to be able to force
the Americans to back down. It is a game changer,
and I think the US and China are both coming
to terms with this. You see the US realizing that
(02:58):
all of a sudden, China is these rights and China's
put the US on the back foot a little bit. Here.
Speaker 1 (03:13):
This is the Big Take Asia from Bloomberg News. I'm Wanha.
Every week we take you inside some of the world's
biggest and most powerful economies and the markets, tycoons and
businesses that drive this ever shifting region. Today on the show,
China has dominated the rare Earth's world for decades, but
it's only now begun to make the most of that influence.
(03:36):
We'll look at how it's using American trade tactics to
press its rare earth's advantage and explore what weapons the
US has in its arsenal. To fight back, China introduced
new rules this month, the clamp down on the supply
and use of rare earths. Bloomberg's Dantan Kate says the
(03:58):
curbs go much further there then previous restrictions.
Speaker 3 (04:02):
If any product contains even a trace amount of rare earth,
then China has the right to restrict that product. So
if you have zero point one percent of rarest to
make any given product in the world, you need a
license and permission from China. Previous actions China cut off
(04:24):
supplies of rare earth to various companies. So if you
needed rare earth to make an electric vehicle, for instance,
and you bought that from China, China was saying, you
need a license to get these rare earths, whereas before
you could freely buy them. Now, what China has done
is they're not just stopping the rare earth from getting
(04:46):
to those factories, but they're saying, even if you use
those rarest to make that car, if you want to
sell that car to another country, you're also going to
need permission now that just seems completely unworkable in reality,
and that's what raises questions about, Okay, are they going
to put a stop to global trade. No, that's not
(05:08):
in China's interest at all, but they are asserting the
right to effectively intervene whenever they want.
Speaker 1 (05:15):
The rules are set to take effect later this year,
and while it's unclear how Beijing plans to enforce them,
Dan says the move shows just how powerful a weapon
rare earths can be for China.
Speaker 3 (05:28):
They control a lot of the supply, somewhere in the
neighborhood of about seventy percent of that. But what China's
real advantage is that they can process the rare eer.
So once you take the rare eers out of the ground,
you still need to ship them to somewhere where they
can be processed into a material that can then be
sent to a factory that can be used to make
(05:48):
a phone or make a TV or something like that.
And China controls nearly all of that technology now. The
US used to be the world's largest producer of wearers,
and they let that atrophy and disappear to China back
in the eighties and nineties. So the issue is now
that the amount of rarer supply that includes no Chinese
(06:12):
minerals or any processing by Chinese technology using Chinese technology
is very small, and is.
Speaker 1 (06:21):
It viable then for the world to somehow very quickly
establish another supply chain for wearers that doesn't rely on China.
Speaker 3 (06:31):
It depends on who you talk to there. Again, I
mean Trump will say in a year, will be okay,
We'll have enough supplies, We'll be able to get the
processing up and running. In the US is doing I
mean the Pentagon has taken a steak MP Materials, which
owned the largest rarest mind in the US, which is
(06:51):
based in California. We've also seen the US government taking
equity stakes in some Australian producers. You have Australia pitching
ITSLF as the savior in this regard. But the problem
there is that if you talk to certain people in
the industry, they say, actually getting the technologies up to
(07:11):
process these heavy rare earths is not that easy. It
actually takes a lot of time to come up with
and you're starting from scratch almost because you've lost some
of the materials to do that. The issue also is
that even if you have a country like Malaysia processing
a lot of rare earth, if they're using Chinese equipment,
then China can also block those wearers from going to
(07:35):
the US. So the amount of the rare earth's supply
chain globally that doesn't just include minerals from China, but
also doesn't rely on Chinese technology to process those minerals,
that is very small, and that is the fundamental issue.
Speaker 1 (07:51):
Now, China has spent years cultivating its rare earth industry.
Today it dominates the market as a producer and refiner
of these vital minerals, but it's only recently been trumping
the rare earth card in trade negotiations.
Speaker 3 (08:08):
If you look in the nineteen eighties, China's known that
it has where dung Jopping at one point said the
Middle East has oil, China has rare earth. So they
started processing really once China emerged from the mal years
and they started opening up the country, rare earth was
one of the first industries that they really started to develop,
and you saw a lot of the rarest production moving
(08:32):
from the US and other places to China in the
nineties and by the two thousands, they've had a very
firm grip on the supply almost ninety ninety five percent.
Things really came to a head in twenty ten when
there was a territorial dispute with Japan, and China cut
off rare earth then, and that really spooked Japan, and
(08:55):
the world really had known that, Okay, we can't rely
on China anymore for supplies of rare earth. China can
just flip a switch, cut us off, and then suddenly
we don't have the building blocks we need to produce
a lot of the technology and products that are used
in the modern economy. But even after that, we're still
(09:17):
here fifteen years later, and China still has a stranglehold
on the world supply.
Speaker 1 (09:23):
Rare earths have been central to negotiations between the US
and China since Trump relaunched his trade war earlier this year.
When Trump imposed tariffs of more than one hundred percent
back in April, she cut off crucial rare earth supplies
to the US. The resumption of rare earth shipments was
top of Trump's wish list during trade talks with China
(09:43):
in June. It was also a key component of the
trade truce between the two countries that's set to expire
next month.
Speaker 3 (09:51):
The fundamental part of the truce is that the tariffs
go down to round fifty five percent, and in return,
the US gets enough rare earth magnets that it needs
to function to keep its factories open. The issue is
that China really wants the US to stop putting any
other measures on. China saw the deal as we want
(10:14):
no more export controls, we want no more punitive actions
against Chinese companies. So they saw the Commerce Department in
particular doing that and the Hawks of the United States
continuing to press ahead with that, and they basically just said,
we need to put a stop to this, and we're
going to take this opportunity to put this really big
(10:35):
measure in place.
Speaker 1 (10:37):
China's latest moves pressing its advantage with rare earths were
met with outrage in the White House, but their tactics
taken directly from America's own manual on how to wager
trade war. After the break, well, look at how China
is trying to beat America at its own game and
(10:58):
how the US is retaliating. During Donald Trump's first term
in office, he dropped the hammer on China, blacklisting Chinese
(11:18):
telecom giants and cutting the country off from critical US
chips and software. Of course, Huawei not the only one
affected by these decisions are the blast radius in terms
of Huawei supplies pretty well. Overnight, Huawei, China's crown jewel
in tech and the world's biggest maker of telecom gear,
found itself scrambling, and so did Beijing. For all its
(11:40):
economic muscle, China had no real way to strike back.
Bloomberg's Dan ten Kate says that moment was a wake
up call for Chinese present Shi Jinping to look at
how the US used the law to shape export rules
and control global trade and copy that playbook.
Speaker 3 (11:58):
The US basically owed China the way for doing all
of these things. And so what you saw was after
Trump's first term, Xijinping went out and he got those tools,
and in twenty twenty they passed an export control law
that gave them the ability to do everything that the
US was currently doing to them. And if you look
(12:19):
at the current rule, this rule that okay, if there
is even a trace amount of errors, we can control
everything that comes directly from something called the foreign Direct
Product rule, which the US passed that in nineteen fifty nine.
Speaker 1 (12:35):
The Foreign Direct Product Rule, it allows the US to
ban the sale of products to foreign firms if any
part of a product is made with American intellectual property.
Speaker 3 (12:47):
Over the years, the US would implement that against China.
So there was an exchange one in particular where Walter Mondale,
the Vice president of the time, went to China and
he spoke with Donghaoping in nineteen seventy, and a lot
of that conversation was around, okay, what can you sell us,
and Dung at one point expressed frustration. He said, the
(13:09):
Japanese and the Europeans won't even sell us a product
because it as an American component. And that principle is
essentially what China's doing today. If you have a bit
of wearers that's been manufactured through our processes, then we
assert the right to be able to control that. And
China's ultimate goal here is not necessarily to restrict trade
(13:34):
and try and shut down the global supply chains. It
certainly doesn't have the capability to enforce that at all,
but it does want the same tools as the US,
and it wants to show the world that, hey, we
can mess with you any time we want. We can
assert the right to come in and block you from
(13:55):
doing things.
Speaker 1 (14:00):
Dan says, the US still has plenty of weapons of
its own, and China isn't in a good position to
fight off a sustained attack on trade. It's struggling with
manufacturing overcapacity, a slump in consumer spending, and an AILNK
property sector. Dan says it's not that America's trade measures
wouldn't be highly effective against China, it's that using them
(14:23):
could be risky to the US.
Speaker 3 (14:26):
The US has a lot in its arsenal. The question
is what measures can the US put in place that
won't blow back on America, and that looks limited to
things like airplane parts, chip design, software, ethane, and a
few other things that China needs that the US has now.
(14:49):
The other big one is tariffs. Obviously, if Trump wanted
to put one hundred and fifty percent tariffs on Chinese
goods heading into America, that would do serious i economic
damage to China, but it would also hurt the US.
Also controls the financial system, so it could do drastic
things there, but again, anything they do on that front
will also blow back at the US. So Trump is
(15:12):
looking for something that he can hit China with that
wouldn't hurt the US and there's not too many great options.
He can do some things, but ultimately he wants a
deal where everybody wins.
Speaker 1 (15:24):
Now, looking ahead, Trump and she will meet at the
APEX summit in South Korea next week. What are the
likely outcomes that we can expect from that?
Speaker 3 (15:33):
As long as China agrees not to really disrupt the
flow of rare earth magnets, then you could see that
they could come to some sort of agreement where they
extend this tentative truce. Trump also wants the TikTok deal
completed and she needs to sign off on that, so
that's another thing that could come out of it. And
(15:55):
the other major thing is on soybean purchases. That's a
big constituency for the US and for Trump. So China's
not blowing soybeans anymore, and it says it can't because
the tariffs are too high. But if there's some agreement
on that, then that could also be something we see
out of that.
Speaker 1 (16:12):
Meaning So it sounds like there are things that both
countries want that could still make them walk away and
say we got to win. Yeah.
Speaker 3 (16:23):
I think the ultimate problem here is that the space
for a deal is very limited by all the national
security restrictions that both sides have on each other. I
think that they don't really see a deal until you
get particularly Congress and the Hawks and Washington coming to
the conclusion that it's okay to have China involved. That's
(16:44):
just politically very difficult to see, particularly with all the
concerns about Chinese spying, China's military mighty. You'd have to
fundamentally change the conversation in Washington now. Trump during his
first term he basically flipped the conversation on China and
turned it into a bipartisan consensus against China and for
(17:06):
more hawkish posture towards China. So if anyone can change
the conversation in Washington toward China, it could be Trump.
Speaker 1 (17:15):
But Beijing's move to leverage its rare earth advantage has
now boxed Washington in limiting its options and raising the
possibility that this dispute may have no clear resolution, at
least not anytime soon.
Speaker 3 (17:30):
If you think about the leverage that both sides have
on each other. Right now, China has this rare earth card,
so what is the US doing. They're working over time
to try and create an alternative supply chain, so they're
no longer dependent on China's doing the same thing on
their side. They're trying to maintain this advantage as much
as possible, and also look at the areas where the
(17:51):
US has leverage over them, particularly on high end Nvidia chips,
and they're trying to build their own chips so they're
not relying on the US. So both economies are necessarily
looking for ways to work together over the long term.
They're looking for ways to not be reliant on each other.
Neither country has any leverage on them, and that's where
(18:14):
they're heading. And so that dynamic doesn't lead need to
be optimistic that we're going to get a long term
conclusion to this anytime soon.
Speaker 1 (18:28):
This is The Big Take Asia from Bloomberg News. I'm wanha.
To get more from The Big Take and unlimited access
to all of Bloomberg dot Com, subscribe today at Bloomberg
dot com slash podcast Offer. If you liked the episode,
make sure to subscribe and review The Big Take Asia
wherever you listen to podcasts. It really helps people find
the show. Thanks for listening, See you next time.
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