Tensions between the US and China are escalating across various economic and technological sectors.
Tensions arising from great power competition between the United States and China have reached a serious escalation point in recent months, mired in disputes over tariffs, technological restrictions and control of key raw materials. While the two countries are on the one hand negotiating to resolve escalating trade tensions with mutual tariff increases, on the other hand they are having conflicts on many fronts, from the chip industry to artificial intelligence, from rare earth elements to soybean exports, from fees imposed on ships at ports to third-country routes that airlines will use. Even what happened just this week shows that the two countries are moving against each other in many different areas. While Beijing authorities imposed new restrictions on the export of rare earth elements and manufacturing technology on September 9, they added companies and entities, including US defense firms, to the sanctions list on September 10 and opened an antitrust investigation into US chipmaker Qualcomm. On the other hand, US President Trump harshly criticized China's steps regarding rare earth elements and announced that if this attitude continues, they will impose 100% additional tariffs on all products imported from China from November 1 and will also stop the export of all important software. RARE EARTH PRINCIPLES In a series of announcements on September 9, China's Ministry of Commerce announced new restrictions on certain materials and products considered sensitive to national security. At the heart of the restrictions are rare earth elements and related manufacturing technologies used in the industry, especially in the production of high-tech devices and equipment, from electric vehicles to smartphones, from spacecraft to weapons systems. While the export of technologies related to the mining, smelting and separation of rare earth elements, the production of magnetic materials and the use and recycling of these elements as secondary resources is limited, the transfer of technologies related to the establishment of assembly lines at facilities where they are processed, repaired, troubleshooted, maintained and updated is also within the scope of control. In addition, foreign companies exporting rare earth elements produced in China must obtain a license from the Ministry of Commerce to export products with dual civilian and military uses. On the other hand, while the ministry expanded the list of critical minerals subject to China's export controls, it also imposed export restrictions on minerals used in battery manufacturing and certain products containing superhard metals. IT COMES BEFORE THE MEETING HELD AT THE APEC COMMUNITY CONFERENCE Notably, this decision was made at a time when ongoing tariff negotiations between the US and China are taking place and leaders of the two countries are preparing to meet face-to-face within the framework of the Asia Pacific Economic Cooperation (APEC) Summit to be held in Korea later this month. In response to restrictions imposed by the US in the technology sector, especially the chip industry, China previously imposed restrictions and controls on rare earth elements, which meet the majority of global supply. In response to export restrictions on the chip industry imposed by former US President Joe Biden in December 2024 by limiting exports of gallium, germanium and antimony, China imposed controls on exports of tungsten, tellurium, bismuth, molybdenum and indium in response to re-elected President Donald Trump's first round of tariff hikes in February. Seven rare earth elements, including samarium, gadolinium, terbium, dysprosium, lutetium, scandium, yttrium and their alloys, are on the export control list against increased tariffs within the scope of “corresponding tariffs” announced by Trump in April. CHINA ACQUIRES ABOUT 69% OF GLOBAL PRODUCTION According to data from the United States Geological Survey (USGS), global rare earth element production will reach 390 thousand tons in 2024, of which 270 thousand tons will be produced in China. China, which produces about 69% of rare earth elements including 17 metal oxides and has a processing capacity of 85% of the global market, revealed its intention to turn its dominance in the global market into economic leverage by responding to US technological restrictions and tariff moves with export controls in the sector. TRUMP'S REACTION In a post on the Truth Social account, US President Trump criticized China's steps regarding rare earth elements, claiming that many countries have sent letters from the Beijing government stating their intention to impose export controls on all rare earth element production, even if it is not produced in China, and warned that such an attitude would hinder world markets and harm global production in many industries. Describing China's attitude as “insidious” and “hostile”, Trump said: “We can never allow the world to hold China hostage.” he said. In response to this attitude, the US President announced that they will impose 100% additional tariffs on China from November 1 and will also stop the export of all important software. Although Trump initially signaled that he would cancel his meeting with Xi at the APEC Summit at the end of the month, saying the meeting made no sense under these conditions, he later left the door open for a meeting in his statement. SANCTIONING THE COMPANY China's Ministry of Commerce announced on September 10 that it would impose sanctions on 14 companies and organizations from the US and Canada, including companies developing anti-drone technology, on the grounds that they operate against China's security and development interests. Arguing that these companies and organizations harm China's sovereignty, security, and development interests by engaging in military-technical cooperation with Taiwan, making statements defaming China, and helping foreign countries put pressure on Chinese companies, the Beijing government has labeled them as “unreliable entities.” China has previously imposed sanctions on many US companies, especially the defense industry, for similar reasons in response to US sanctions targeting Chinese companies on national security grounds. QUALCOMM INVESTIGATION On the same day, China's State Administration for Market Regulation announced that an antitrust investigation had been launched into US chipmaker Qualcomm. It was stated that the investigation will look into whether Qualcomm's acquisition of Israeli automotive chip and communications solutions developer Autotalks violated China's antitrust regulations. Qualcomm, known for its “Snapdragon” mobile device chips and generating 46% of its revenue from China, the world's largest smartphone market, has become the second US chipmaker, after Nvidia, to be hit with an antitrust investigation by China. In the investigation launched against Nvidia on December 9, 2024, the company's acquisition of Israeli networking products and solutions developer Mellanox, which it acquired in 2019, was the subject of the investigation. Following the investigation, on September 15, it was announced that Nvidia had violated the terms of the Chinese government's takeover approval and that the antitrust investigation against the company would be deepened. WAR CHIP The US government, led by former President Joe Biden, has placed blocking the transfer of critical technologies that could threaten national security at the heart of its strategy to compete with China. The Science and Chip Act, which took effect on August 10, 2022 with Biden's approval, announced Washington's intention to establish barriers to China's technological capabilities in this area, with restrictions it imposed on Chinese manufacturers' access to advanced chip technologies. On October 7, 2022, the U.S. Department of Commerce's Bureau of Industry and Security (BIS) reported that 31 companies and entities, including China's largest memory chip maker Yangzte Memory Technologies and largest semiconductor hardware maker Naura Technology Group, were placed on the Export Control List. On the other hand, in addition to export restrictions, Biden, with the Presidential executive order he signed on the anniversary of the passage of the Science and Chip Act on August 10, 2023, restricted American companies from making venture capital investments and equity partnerships in China in three important technology sectors: semiconductors and microelectronics, quantum information technology and artificial intelligence systems. The Biden administration last announced on December 2, 2024 that export restrictions were imposed on 24 types of chip manufacturing hardware and 3 types of software used in semiconductor development to China. The Trump administration, which came back to power earlier this year after Biden, still maintains the Biden administration's chip restrictions on China, on the other hand controls the export of artificial intelligence chips and stops selling software used in chip design to China. TAX SCHEDULE RESULTS US President Trump's efforts to reshape global trade in favor of his country with the tariff policy he implemented after taking office earlier this year also had the effect of escalating economic and trade tensions between the two countries. Trump announced additional customs duties on trading partners, including China, on April 2. As a result of the tariff dispute between the two countries sparked by China's response, the United States increased tariffs on China to 145% and China increased tariffs on the United States to 125%. After trade tensions escalated, US and Chinese officials met in Geneva, Switzerland for tariff negotiations on May 10-11 and decided to jointly reduce customs duties for 90 days. After the meeting, it was decided that, effective May 14, the United States will reduce customs duties on Chinese goods from 145% to 30% for 90 days, and China will reduce tariffs on American goods from 125% to 10%. The two countries' delegations met in London, the capital of England, on June 9-10 to attend the second round of negotiations and announced that they had reached an agreement on the framework of measures to implement the agreement reached in previous meetings. The delegations agreed that the interim agreement reached on tariffs during the third round of negotiations held in Stockholm, Sweden, on July 28-29, would be extended for another 90 days, starting from August 12. Delegations last negotiated in Madrid, the Spanish capital, on September 14-15, and are expected to meet again before the temporary agreement expires on November 10.
