China 'not afraid' of trade war amid rare earths dispute with US

Chinese authorities signaled Sunday that Beijing would not back down in the face of a 100% tariff threat from U.S. President Donald Trump, urging Washington to resolve differences through negotiations instead of threats.

Beijing called Trump’s latest tariffs on Chinese goods hypocritical and defended its curbs on exports of rare earth elements and equipment, but stopped short of imposing new levies on U.S. products.

“China’s stance is consistent,” the Commerce Ministry said in a statement posted online. “We do not want a tariff war, but we are not afraid of one.”

Responding to Trump

It was China’s first official comment on Trump’s threat to jack up the tax on imports from China by Nov. 1 in response to new Chinese restrictions on the export of rare earths, which are vital to a wide range of consumer and military products.

The back and forth threatens to derail a possible meeting between Trump and Chinese leader Xi Jinping and end a truce in a trade war in which new tariffs from both sides briefly topped 100% in April.

Trump on Friday responded to Beijing’s most recent export controls by imposing additional tariffs of 100% on China’s U.S.-bound exports, along with new export controls on critical software by Nov. 1.

The revived trade tensions have rattled Wall Street, sending Big Tech shares tumbling, as foreign companies are dependent on China’s production of processed rare earths and rare earth magnets, and could derail a summit between Trump and Xi, tentatively scheduled for later this month.

Trump has raised taxes on imports from many U.S. trading partners since taking office in January, seeking to win concessions.

China has been one of the few countries that hasn’t backed down, relying on its economic clout.

“Frequently resorting to the threat of high tariffs is not the correct way to get along with China,” the Commerce Ministry said in its post, which was presented as a series of answers from an unnamed spokesperson to four questions from unspecified media outlets.

The statement called for addressing any concerns through dialogue.

“If the U.S. side obstinately insists on its practice, China will be sure to resolutely take corresponding measures to safeguard its legitimate rights and interests,” the post said.

In addition to the 100% tariff, Trump threatened to impose export controls on what he called “critical software,” without specifying what that means.

Both sides accuse each other of violating the spirit of the truce by imposing new trade restrictions.

Trump said in a social media post that China is “becoming very hostile” and that it is holding the world captive by restricting access to rare earth metals and magnets.

The Chinese Commerce Ministry post said the U.S. has introduced several new restrictions in recent weeks, including expanding the number of Chinese companies subject to U.S. export controls.

On rare earths, the ministry said that export licenses would be granted for legitimate civilian uses, noting that the minerals also have military applications.

The new regulations include a requirement that foreign companies get Chinese government approval to export items that contain rare earths sourced from China, no matter where the products are manufactured.

‘Path for negotiations’

China’s decision not to immediately respond in kind to Trump’s opening salvo in this latest round of trade tensions could leave the door open for both countries to negotiate a de-escalation, analysts said.

“By clarifying the rationale behind its retaliatory measures, Beijing is also outlining a potential path forward for negotiations. The ball is now in the U.S. court,” said Alfredo Montufar-Helu, managing director at strategic advisory firm GreenPoint.

But Hutong Research said in a note on Saturday that if Beijing chooses not to respond to Trump’s 100% tariff hike, it may signal that it no longer prioritises a long-term deal with him, reflecting diminished confidence in his ability to restrain hawks or stick to commitments.

“Key watchpoints now: Whether Beijing moves to freeze or complicate the TikTok sale, given its political symbolism. Proceeding with the sale under current conditions would be seen as a major concession (from Beijing),” the research firm said.

Other tools in Beijing’s arsenal include regulatory action targeting U.S. companies. China’s State Administration for Market Regulation (SAMR) said last month that leading U.S. AI chip manufacturer Nvidia violated the country’s anti-monopoly law during U.S.-China trade talks in Madrid.

The market regulator on Friday announced an antitrust investigation into U.S. chip manufacturer Qualcomm over its June 2025 acquisition of Israeli chip designer Autotalks. A few hours after the Commerce Ministry’s response to Trump’s post and tariff hike, SAMR said Qualcomm had completed the acquisition without informing the regulator, adding that the U.S. firm had acknowledged this.

“Based on clear facts and conclusive evidence, our bureau lawfully initiated an investigation into Qualcomm’s unlawful … acquisition of Autotalks,” SAMR said.

Export controls

The Commerce Ministry also countered Trump’s narrative that China was using its dominance in processed rare earths and rare earth magnets to attack all countries, not just the U.S.

“We have been contacted by other Countries who are extremely angry at this great trade hostility, which came out of nowhere,” Trump said on Friday on Truth Social.

China produces over 90% of the world’s processed rare earths and rare earth magnets. The 17 rare earths are vital materials in products ranging from electric vehicles to aircraft engines and military radars.

Exports of 12 of them are restricted after China’s Commerce Ministry on Thursday added five, including holmium, erbium, thulium, europium and ytterbium, along with related materials.

The Commerce Ministry’s statement on Sunday sought to reassure foreign companies spooked by the latest export curbs, promising to promote compliant trade by granting general-purpose licenses and license exemptions.

“China’s export controls are not export bans,” it said. “Any export applications for civilian use that comply with regulations will be approved, and relevant enterprises need not worry.”