For months, bubbling trade tensions between China and the U.S. seemed to calm to a simmer, with words like “thaw” and “truce” swapped in for warnings of economic “war.”
Now, hostilities appear to be returning to full boil.
A series of tit-for-tat moves this week by the two superpowers has thrust trade hostilities back in the global spotlight, roiling markets and raising alarms of what might come next.
“Let’s poke the bear again,” economist Aleksandar Tomic, an associate dean at Boston College, said of the renewed sparring. “Let’s stir the hornet’s nest.”
A look at where things stand in the U.S.-China trade standoff:
Signs of trade-war escalation roil markets
Tensions between China and the U.S. transcend any presidency or political party. But Donald Trump’s return to the White House has brought new levels of rancor. A volley of tariffs were introduced, raised and reduced in the year’s first half, igniting retaliation from Chinese leader Xi Jinping. But more recently, several months of relative calm had prevailed.
That truce showed signs of fizzling this week, though, with China announcing strict new limits on exports of rare earth minerals crucial to high-tech products. Trump, in turn, threatened an additional 100% tax on Chinese imports by Nov. 1 and export controls on American software. Both sides also hit one another’s ships with new port fees.
Whether public moves by Washington and Beijing are meant to advance private talks between the two sides is unknown. But they roiled stock markets, with Friday bringing the S&P 500 its worst day since April and a new dose of uncertainty about what is next.
“Either this is it, the so-called tariff truce is over and both sides are going to rapidly escalate or these are negotiation talks ahead of the talks between Xi and Trump,” said Marc Chandler, chief market strategist at Bannockburn Capital Markets in Cincinnati, Ohio.
Jostling for advantage, with exports as bargaining chips
With so much unknown about any possible behind-the-scenes negotiations between the two nations, it is hard to gauge who might have the upper hand.
But China may sense an opening, with Trump challenged by a government shutdown and the impacts of the ongoing trade war.
American soybean farmers who long relied on Chinese sales are now being passed over for exports from Brazil, Argentina and elsewhere. U.S. investors have happily watched markets driven upward by excitement over artificial intelligence, but China dominates the world in the rare earth minerals that are key to technological hardware. American consumers who have come to expect an endless supply of cheap goods that roll off Chinese conveyor belts are bracing for higher prices.
