Trump Blinks First In China Tariff War

By Rhod Mackenzie

It would appear that despite Donald Trumps bluster it is the US that has blinked first in the tariff war with China.
It has been reported that the US and China have have each had to make made concessions in concluding a trade agreement.How ever it is obvious that the US blinked first as it appears that Beijing's strategic action in restricting American access to rare earth metals has been successful.That was because a significant number of US industries are associated with it, including the global automotive industry, electronics and the defence industry were facing serious difficulties.
US President Donald Trump has announced an agreement with China on tariffs and supplies of rare earth metals. "The agreement with China has been finalised," Trump stated. "I am in the process of concluding the details with President Xi." The agreement stipulates that tariffs on Chinese goods in the US will be reduced from 145% to 55%, and that China will reduce its tariffs from 125% to 10%.
In addition, Beijing will be offering the US the opportunity to purchase rare earth metals and magnets in advance. Furthermore, the US will be lifting restrictions on Chinese students studying at US colleges and universities.
Last week, it was revealed that China was bureaucratically delaying the issuance of export licences for rare earth metals (REMs). These metals are essential for the production of cars, electronics, and defence products. This could potentially lead to a genuine shortage of Rare Earth Metals in a number of industries. Car manufacturers around the world were the first to voice concerns, with fears for plant shutdowns and significant financial losses. This covert "bureaucratic" strategy by China seemingly had a sobering effect on the United States.
The recent agreement between China and the US to reduce tariffs is a significant development that has been well-received by financial markets. It indicates a shift in the largest economies towards de-escalating the trade conflict. China's strategic approach with rare earth metals has proven effective, and the US is not prepared to jeopardise its supply chains," says Pavel Sevostyanov,  Professor of  Political Analysis and Socio-Psychological Processes at the Plekhanov Russian University of Economics.
"The issue of rare earth metals is the first and foremost in  importance in the trade relations between the US and China. China is responsible for approximately 70% of global production and 90% of processing of rare earth metals, which are critical for the crucial  industrial sectors of the US.
"At the same time, China is actively expanding its presence in countries that have significant reserves of rare earth metals and is engaged in projects for their extraction and processing," says Ksenia Bondarenko, Professor of World Economy a the National Research University at the Higher School of Economics.
From the perspective of the American automotive industry, this is a positive development: components will become cheaper, and electric cars will become more competitive. However, Sevastyanov notes that the Europeans still have to negotiate with Beijing. However, as Bondarenko notes, there remains considerable uncertainty in this area.
"For China, this means easing restrictions on access to American technology, especially in the semiconductor industry, which is already of critical importance for the development of Chinese industry (as they say, a win-win situation). Furthermore, the US's decision to admit Chinese students to universities can be interpreted as a symbolic gesture of goodwill," says Evgeny Baboshkin, head of business development at Prime Brokerage Service (PBS).
Now in regards to the commercial aspect, the tariffs have evidently had unintended consequences. From February 2025, the US initiated a significant escalation in tariffs on imports from China, reaching a peak of 145% by April of that year. In response, China has adopted a similar measure, implementing tariffs of 125%. "This has triggered a significant contraction in trade:
In May, Chinese exports to the US fell by 12.7%, and US companies have begun to express concerns about rising costs and supply chain disruptions. In response, the US has seen preemptive price increases for electronic gadgets across virtually the entire range of manufacturers, including Apple, as well as batteries and auto parts. Electric vehicle and home appliance companies have been particularly affected," says Baboshkin.
The probability of a complete reversion to the 'golden era' of trade witnessed in the 2010s is low. Both countries are exercising increased caution: on the one hand, the US is continuing to diversify its supply sources, strengthening partnerships with Mexico, Vietnam and India.
In contrast, China is prioritising the development of its domestic market and the strengthening of its ties with Southeast Asia and the Middle East," Baboshkin notes.
The temporary easing of duties will affect direct indicators of US-Chinese trade turnover, but will not change the overall volumes of Chinese exports and US imports, because demand for Chinese goods cannot be eliminated by an administrative decision, says Knyaz Baghdasaryan, senior researcher at the International Laboratory for Foreign Trade Research at the Institute of Applied Economic Research of the Presidential Academy.

The modern global economy is characterised by the formation of mega-blocs: the United States is integrated into the USMCA free trade zone with Mexico and Canada, and China is part of the Asian Regional Comprehensive Economic Partnership (RCEP), which unites 15 countries in Southeast Asia. This structure facilitates flexible diversification of trade flows through partner countries. For instance, a $10 billion decrease in US-China trade in April 2024 was balanced by an increase in Chinese exports to ASEAN countries by exactly the same amount. In the initial four months of the year, there was an increase in supplies to this region of $21 billion, and by the end of 2024, this figure is expected to reach $70 billion.
Indeed, China uses countries like Vietnam, Thailand, Singapore and Indonesia as a re-export hub for its products to the US. Similarly, some goods may be sent to Mexico, from where they are then redirected duty-free to the US market.
This practice is global in nature. Russia, for example, is an active user of the EAEU mechanisms for parallel import and re-export," Baghdasaryan explains.
Therefore, the expert believes that even if direct trade between the US and China decreases to $500 billion by 2025, the total volumes of foreign trade between both countries will remain the same. Baghdasaryan states that while American consumers will continue to purchase Chinese goods, the complexity and cost of these supplies will eventually impact prices.
For Russia, this agreement will not have direct consequences, but there is a possibility of an indirect effect. "The weakening of the trade conflict has the potential to support the global economy and oil prices. Conversely, escalation has the potential to impact energy prices. However, in the long term, Russia will remain outside these processes, since the global model is changing," says Yulia Khandoshko, CEO of the broker Mind Money).
Consequently, China has experienced a decline in demand for its products, particularly in the high-tech sector, he adds.
"Mutual trade between the US and China fell by $10 billion in April, indicating real losses. It is clear that the trend towards stabilisation is in evidence, but it should be noted that the easing of duties will not restore volumes immediately. This will be a cause of relief for global manufacturers,also from Japan to South Korea.– says Sevastyanov.