The Trump administration insists it holds the upper hand as trade friction with Beijing has reignited over its sweeping rare-earths export controls.<\/p>\n
While President Donald Trump\u2019s initial response was to announce an additional 100% tariff and software restrictions<\/a> on China, which controls more than 90% of the world\u2019s processed rare earths and rare earth magnets, he previously has alluded to harsher measures that could come into play.<\/p>\n<\/p>\n \u201cBut the U.S. has Monopoly positions also, much stronger and more far reaching than China\u2019s,\u201d he warned in a Truth Social post before his tariff move. \u201cI have just not chosen to use them, there was never a reason for me to do so \u2014 UNTIL NOW!\u201d<\/p>\n Trump has since toned down his rhetoric and even acknowledged that his planned tariffs are not sustainable, while Wall Street has dismissed his threats as an attempt to gain leverage in negotiations and another opportunity for the \u201cTACO\u201d trade.<\/p>\n At the same time, the White House has said a planned meeting between Trump and Chinese President Xi Jinping is still going to happen at month\u2019s end on the sidelines of a regional economic conference in South Korea.<\/p>\n Still, China\u2019s rare earth restrictions stunned some obverses, who have said they could \u201cforbid any country on Earth from participating in the modern economy<\/a>,\u201d given how critical the minerals are to a vast array of technologies.<\/p>\n On closer inspection, Capital Economics said Beijing\u2019s policy is actually narrower in scope than initially feared. But China economics head Julian Evans-Pritchard and China economist Leah Fahy said in a note Monday that China is also looking to boost its negotiating position and was probably frustrated that the U.S. didn\u2019t seem interested in rolling back its tariffs further.<\/p>\n \u201cWhatever the motivation, China\u2019s recent actions were a bit of a gamble and there is a risk that they\u00a0could backfire,\u201d they wrote.<\/p>\n They also listed ways that the U.S. could ramp up its retaliation and cause even more disruption to China\u2019s economy.<\/p>\n For example, the U.S. could leverage its control of much of the commercial aviation supply chain by blocking exports of critical components\u2014or even entire aircraft.<\/p>\n In addition, about 90% of the laptops and PCs in China still use the Windows operating system, according to Capital Economics. Trump could force Microsoft<\/a> to halt sales and updates in China, eventually resulting in security holes going unfixed.<\/p>\n