The New U.S.-China Trade Battle Over Subsidies. China Goes All In on U.S. Trade Battle, With Qualcomm in the Crosshairs. China Targets Qualcomm, Ships as Xi and Trump Seek Leverage.
U.S.-China Trade Battle Over Subsidies
A fresh trade conflict is brewing between the United States and China, reigniting long-standing tensions over industrial policy and global economic influence. At the heart of the dispute is China's extensive use of government subsidies to bolster its manufacturing sector—a practice the U.S. views as distorting global competition.
U.S. Actions and Concerns
- The Biden administration has imposed sweeping new tariffs on Chinese imports, targeting strategic sectors.
- Tariffs on Chinese-made container cranes—critical infrastructure for U.S. ports—have surged to 270%, a move aimed at curbing China's dominance in port technology.
- Additional tariffs have been levied on shipbuilding equipment, a sector where China has rapidly expanded its global footprint.
- U.S. officials argue these measures are necessary to counteract China's "unfair trade practices," including state-backed subsidies and below-market pricing.
- The broader goal is to revitalize American manufacturing, especially in industries deemed vital to national security and economic resilience.
- Washington accuses Beijing of using subsidies to undercut foreign competitors, creating an uneven playing field that disadvantages U.S. firms.
China’s Response and Stance
- China has responded swiftly, signaling its intent to retaliate and defend its industrial policies.
- In a strategic countermeasure, Beijing announced export restrictions on rare earth minerals, which are essential for producing semiconductors, electric vehicles, and defense systems.
- China holds a near-monopoly on the global supply of rare earths, giving it significant leverage in trade negotiations.
- These restrictions are widely interpreted as a pressure tactic to influence upcoming diplomatic talks and protect China's economic interests.
- Despite international criticism, China has consistently resisted calls to reform its subsidy system, viewing it as a cornerstone of its economic development strategy.
- Past trade negotiations have repeatedly stalled over this issue, with China unwilling to compromise on what it sees as sovereign economic policy.
What This Means for the Global Economy
- The escalating trade battle threatens to disrupt global supply chains, especially in sectors reliant on Chinese manufacturing and materials.
- U.S. importers may face higher costs and delays, particularly for infrastructure-related goods like cranes and ship components.
- The ripple effects could extend to industries such as logistics, construction, and defense, potentially slowing down key projects.
- China's rare earth restrictions could impact global tech production, raising concerns among allies and partners who depend on these materials.
- The timing of this dispute is critical—it unfolds just ahead of a high-stakes meeting between U.S. President Donald Trump and Chinese President Xi Jinping, where trade and security will dominate the agenda.
- Analysts warn that if tensions continue to rise, it could lead to a new era of economic decoupling, with both nations seeking to reduce dependence on each other.
China Targets Qualcomm, Ships as Xi and Trump Seek Leverage
The escalating tensions between China and the United States have recently seen China deploy new measures targeting U.S. companies and shipping, interpreted by analysts as a strategic move for leverage ahead of a potential meeting between President Xi Jinping and President Donald Trump.
China's Key Actions for Leverage
Antitrust Probe on Qualcomm:
The Action: China's State Administration for Market Regulation (SAMR) launched an antitrust investigation into U.S. semiconductor giant Qualcomm regarding its acquisition of Israeli automotive chip designer Autotalks.
The Allegation: The probe focuses on whether Qualcomm violated China's Anti-Monopoly Law by allegedly failing to properly declare certain details of the deal, which was completed in June.
Context: This move targets a major U.S. technology company that generates a significant portion of its revenue in China, adding a fresh point of friction to the ongoing tech war. It follows a similar recent scrutiny of U.S. chipmaker Nvidia.
Retaliatory Port Fees on U.S. Ships:
The Action: China's Ministry of Transport announced new, escalating port fees on vessels with U.S. ties (owned, operated, built, or flagged by American entities) docking at Chinese ports.
The Timing: The new rule is set to take effect on October 14, the same day the U.S. is scheduled to begin imposing its own port fees on Chinese-linked ships.
The Fee: The fee for U.S. ships will start at 400 yuan ($56) per net ton per voyage and is set to increase annually until 2028. China characterized the measure as a "countermeasure" against "discriminatory" U.S. practices.
Expanded Rare Earth Export Curbs:
China also tightened its control over the export of rare earth elements and related production technologies. These materials are crucial for high-tech sectors, including U.S. defense, electric vehicles, and semiconductors, and the move significantly increases China's leverage in negotiations.
U.S. Counter-Response and Escalation
In response to China's "hostile" actions, particularly the rare earth export curbs, the U.S. has threatened a major escalation:
- New 100% Tariffs: President Trump threatened to impose an additional 100% tariff on all Chinese goods entering the U.S., effective November 1, on top of existing duties.
- Critical Software Export Controls: The U.S. also announced it will place export controls on "any and all critical software" starting on the same date.
Geopolitical Context
These actions mark a significant re-escalation of the trade conflict, breaking an uneasy truce that had been in place since May. The moves are widely seen as both leaders attempting to assemble bargaining tools before an anticipated meeting between President Xi Jinping and President Trump at the Asia-Pacific Economic Cooperation (APEC) summit in South Korea, scheduled for the end of October.
However, the rapid deterioration in relations has put the planned meeting in doubt, with President Trump stating that he saw "no reason" to meet with President Xi, though he later clarified that the meeting had not been officially canceled.
