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Albert Bakhtizin

US President Donald Trump has returned to a trademark policy in announcing a new round of trade confrontation that clearly echoes the conflict he launched in his first term. Officially, the trade war began on January 22, 2018, when he imposed a 30 per cent import tariff on solar panels.
While such measures are usually justified by noble intentions – protecting domestic industries and reviving local manufacturing – in reality, trade wars are often driven by the desire to seize foreign markets and weaken rival economies. But Washington had already missed the moment to contain Beijing’s rise.
Between 1990 and 2018, China’s share of global gross domestic product in purchasing power parity (PPP) terms grew from 3.8 per cent to 17.3 per cent, while the US share fell from 20.1 per cent to 15.6 per cent.
The trade war launched in 2018 and subsequent rounds were essentially an attempt to “restore fairness” and reclaim America’s economic leadership. But has this strategy succeeded? According to the data, not really – China’s share of global GDP in PPP terms has since risen further, to 19.3 per cent, while the US share has slipped to 14.8 per cent.
Economic research on trade wars shows they harm all participants, leading to a decline in global performance indicators. Yet, in most cases, larger economies tend to fare better and nations with more diversified economic structures are generally less vulnerable to external shocks.
Given the tight interdependence of today’s economies through global supply chains and growing trade, pressure on any key player inevitably affects everyone else. The question is how strong the multiplier effect will be. Our 2018 simulations indicated that China would suffer less than the US, as it could redirect much of its exports and replace missing imports with alternative suppliers – a scenario that proved largely accurate.




By 2025, the results are clear. Between 2018 and 2024, China’s economy grew at an average annual rate of 5.32 per cent, compared with 2.52 per cent for the US. The trade war has failed to deliver the results Washington had hoped for. China diversified its export destinations – across Asia, the Middle East and Africa – expanded domestic technological production and built its own base in microelectronics and artificial intelligence.
Over the same period, the global trade architecture centred on the World Trade Organization weakened, trade fragmentation intensified and the use of the yuan and other regional currencies in settlements grew. There is little reason to believe Trump’s newly announced 100 per cent additional tariff on Chinese imports will work any better or help the US achieve its stated goals.
Yet beyond tariff battles, targeted measures against the most sensitive areas of an opponent’s economy can be far more disruptive. One of the clearest examples is the global market for rare earth elements, which is highly concentrated, creating significant vulnerabilities. These materials are essential for the production of liquid crystal displays, MRI scanners, drones, solar panels, batteries and other high value-added technologies that define 21st-century industry.
According to US Geological Survey data, China holds the world’s largest rare earth reserves at 44 million tonnes or 49 per cent of the global total, followed by Brazil with 23 per cent and India with 7.7 per cent. Taken together, Brics members account for over 76 per cent of global reserves. If Vietnam, which recently became a “partner country”, is included, this rises to 89 per cent.
In a full-blown trade war between blocs, a complete halt to shipments of critical materials to geopolitical rivals could be a highly effective economic weapon, sharply slowing industrial output in targeted countries. Our simulations, carried out in collaboration with specialists at China’s National Supercomputer Centre in Guangzhou, suggest restricting rare earth exports to the US could shave 2-3 percentage points off its GDP growth – a reflection of the large multiplier effects in these sectors.


Brics’ expansion and its relatively favourable position in terms of resource endowments provide an additional strategic advantage in the geopolitical confrontation. Put bluntly, if a comprehensive trade war were to break out, rare earth supplies could become one of the West’s most vulnerable points.
In 2018, the US could still afford such “experiments” but now, the American economy has become far more deeply embedded in global hi-tech supply chains and heavily dependent on rare earth imports. Any disruption of those supplies would amount to shooting itself in the foot.
Compared to the US-led pole, the China-led Asian bloc appears more prepared and resilient in terms of technological and human potential. Meanwhile, a new system of macro-regions is taking shape. In Southeast Asia, the Gulf states and parts of the Americas, countries are building their own production and trade networks, increasingly conducting transactions in sovereign currencies.
Clearly, America’s “Liberation Day” tariffs have so far led only to higher US consumer prices, with annual inflation rising to 2.9 per cent. Trump’s new tariffs are unlikely to bring about US re-industrialisation or restore the American model of global leadership. More likely, they will accelerate the emergence of a multipolar economy in which China serves as a main pillar of stability rather than a mere actor defending its interests.
The most rational strategy for the US from the standpoint of economic growth is to accept the new reality and focus on developing its own macro-region. For now, in the event of a full-scale trade war, its risk of sliding into recession is far greater.


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Given its rare earth vulnerability, US cannot risk all-out trade war

Illustration: Craig Stephens

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Washington must accept that it has missed its chance to contain China’s rise and focus on developing a US macro-region


Washington must accept that it has missed its chance to contain China’s rise and focus on developing a US macro-region.


US-China trade war

US-China trade war: All stories

US-China trade war: Opinion

US-China tech war

Donald Trump

Donald Trump’s China policy

Rare earths

Brics

Trade

World Trade Organization (WTO)

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Vietnam

China economy

India

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China technology

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Expresses the views, ideas and conclusions of the author. (Eg. Enough of Crazy Rich Asians, think of crazy poor Hongkongers.)


Given its rare earth vulnerability, US cannot risk all-out trade war

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Washington must accept that it has missed its chance to contain China’s rise and focus on developing a US macro-region

Washington must accept that it has missed its chance to contain China’s rise and focus on developing a US macro-region