Last month, the Trump administration launched a trade war of unprecedented magnitude against China by announcing a staggering 145% tariff on Chinese imports. China responded by playing hardball. It imposed a 125% reciprocal tariff on U.S. goods. While previous escalations had seen China urging for dialogue and cooperation, this time Beijing’s response was defiant. The Chinese Ministry of Commerce declared it was “prepared to fight till the end.”
Last weekend, the optics changed dramatically. The U.S. and China agreed to a 90-day pause on their trade war in which the punitive, reciprocal tariffs were rolled back to 30% by the U.S. and 10% by China. This outcome did not surprise us. As it turns out, Beijing has an ace up its sleeve. The ace is China’s global dominance in critical materials.
