Recent developments have stirred tensions between the United States and China, with Beijing suddenly announcing strengthened export controls on rare earths and related technologies, leading President Trump to retaliate by imposing 100% tariffs on Chinese goods. The Chinese Ministry of Commerce clarified that the export control measures were not a complete ban, which was interpreted as a softening stance. Treasury Secretary Mnuchin pointed out that internal struggles within the Chinese government have impacted negotiations between the US and China. Experts are warning of a critical situation within the Chinese Communist Party, with the upcoming Fourth Plenum expected to bring about a “major showdown.”
On October 9th, China abruptly announced a significant expansion of export controls on five rare earth elements and related technologies and materials based on national security grounds. They would also impose strict scrutiny on foreign producers utilizing Chinese rare earths and technologies starting from December 1st. In response, Trump announced strong countermeasures, imposing 100% tariffs on Chinese goods from November 1st and implementing export controls on key software, causing ripples in the relationship between the two countries.
After the announcement of 100% tariffs by the US, China did not immediately reciprocate, and state media did not make loud statements. However, after two days of silence, the Chinese Ministry of Commerce issued a written clarification on the new rules for rare earth exports, stating that the export control measures were not a ban and assuring that they had assessed the potential impact on the production supply chain, believing the effects to be minimal. A spokesperson for the Chinese Ministry of Commerce also emphasized that concerning the tariff war, “We are unwilling to fight, but not afraid to do so.”
Earlier in the week, Treasury Secretary Mnuchin indicated in an interview that Xi Jinping might not have been aware of the announcement regarding rare earths agreements within China. He mentioned internal conflicts between Beijing government departments affecting US-China negotiations.
“We see conflict between the treasury and the commerce ministry. Their commerce ministry – including Li Keqiang – is more provocative,” Mnuchin told the Financial Times.
Mnuchin added, “The hardliners are from the commerce ministry and the national security department, with the latter having a bigger role in the economy.”
According to US officials, Li Keqiang, subordinates to Vice Premier Hu Chunhua, threatened during negotiations with the US this summer that the US would face “hellfire” if things didn’t go his way, but the issue of rare earth control was not explicitly mentioned at that time.
China’s move to expand restrictions on rare earth exports angered Trump, who warned of possibly cancelling his meeting with Xi Jinping at the end of the month in South Korea. However, Mnuchin revealed in an interview that extensive communication had taken place between the US and China over the previous weekend, and he expected the meeting between Trump and Xi to proceed “as scheduled.”
Shen Mingshi, a researcher at the Taiwan Institute for National Defense and Security Studies, told Epoch Times that what was generally perceived as internal struggles within the Chinese Communist Party was Xi Jinping’s attempt to create problems to extend his power. However, facing criticism from the party’s elder members, the authorities had softened their stance once again. In contrast, Mnuchin’s remarks suggested a different scenario, stating that Xi might not have been informed, and it was the commerce and national security departments that were more hardline, indicating a discrepancy or misunderstanding. This at least shows that the US also acknowledges the power struggle within the Chinese Communist Party. Therefore, Trump’s statement about Xi Jinping being in a bad position is justified.
On October 12th, Trump posted on Truth Social that Xi Jinping was facing a “bad situation.” However, Trump did not elaborate on what specific kind of difficult time Xi Jinping was experiencing.
The Fourth Plenum of the Chinese Communist Party is set to take place on October 20th, and given the intense infighting at the top levels of the CCP, resulting in the downfall of many Central Committee and Central Military Commission members, it is expected that personnel reshuffles will occur within the top ranks. There may be uncertainties regarding Xi Jinping’s attendance at the summit.
Yo Yuan, a lecturer on international studies at the University of St. Thomas in the US, told Epoch Times that American officials claimed there were individuals within the CCP planning to cause disruptions from within. It reflects the differences between the hawkish and dovish factions.
He believed these factions certainly existed but official acknowledgment of any division within the Chinese government was unlikely.
David Wong, an American economist, shared with Epoch Times that Beijing’s announcement of export controls on rare earths and critical minerals led the US to point out the “divergence between the treasury and the commerce ministry” within China, even mentioning the involvement of the national security department in economic decision-making. From the perspective of diplomatic messages, this appears to be a narrative crafted by the US to shape the bargaining logic of Beijing, explain its decision-making to the market and allies, and strengthen its negotiating leverage.
The tariff truce agreement between the US and China earlier this year is due to expire on November 10. Both countries are gearing up for the next round of trade negotiations. Prior to this, through negotiations, China relaxed its restrictions on rare earth exports to the US, and the Trump administration eased some technical controls against China. Trump has repeatedly stated that “the rare earth issue has been resolved.”
The Trump administration views the recent rare earth retaliatory measures by China as another betrayal of promises made.
According to a report by the Financial Times on October 14, Treasury Secretary Mnuchin stated on Monday that, “This reflects how weak their economy is and how they want to drag everyone down with them.”
“They are in a recession and are hoping to get out of it through exports. The problem is this will worsen their position in the world,” said Mnuchin.
Sources mentioned that if an agreement cannot be reached between the two sides, the US has drafted countermeasures to take. The US is also considering requiring companies exporting any software to China to obtain a license, potentially causing a significant impact on the Chinese industry.
It was reported that US and Chinese officials met in Washington on Monday. Mnuchin is expected to meet with Hu Chunhua again before the meeting between Trump and Xi Jinping on October 29 in South Korea.
David Wong believed that China’s restrained response after the US announced the preparation for imposing 100% tariffs on Chinese goods was related to maintaining a relatively stable external environment before the Fourth Plenum.
Shen Mingshi noted that immediately softening their stance after China threatened to increase tariffs demonstrated that China lacked confidence in the economic field and was taking significant risks. China is not being rational in its considerations, focusing more on power struggles and political factors rather than economic ones.
To Shen Mingshi, all factions within the Chinese Communist Party are making efforts ahead of the Fourth Plenum. There are many potential issues facing Xi Jinping, and the results of the power struggles will only become clear after the plenum, which may lead to policy changes, and the US is preparing for this scenario.
Yo Yuan said that the current situation in China is extremely precarious, and there may be a big showdown between the dovish and hawkish factions at the Fourth Plenum. However, according to past practices, if Xi Jinping’s power is secure, internal discussions are mostly formalities.