Trade War 2019: China Ready to Weaponize Rare Earth Supply

Posted August 10, 2019

China's total exports rose 3.3% over a year earlier to $221.5 billion, rebounding from June's 1.3% contraction amid weakening global consumer demand. A Wall Street Journal poll of 13 economists had forecast a drop of 2%.

Chinese tariffs on US soybeans have slashed exports of the most valuable USA crop and prompted the Trump administration to compensate farmers for two years with as much as $28 billion.

US imports of cabinets and vanities were valued at $4.4 billion previous year, while subsidies ranged from 11 percent to 229.2 percent for manufacturers in China's Jiangsu, Henan, Liaoning and Guangdong provinces, the Commerce Department said in a statement.

In a series of tweets on Thursday, Trump lamented the strength of the U.S. dollar which puts American manufacturers at a disadvantage, and once again demanded the Federal Reserve lower interest rates to counteract that.

"Until recently, the markets' view was that this trade war will be resolved, but clearly now the thinking is that maybe this is not the case and it could be accelerating from here", and Italy and Brexit worries are now adding to that, he said.

The applications were set to be processed at the beginning of August, however, the process has been suspended in response to China's decision to cut purchases of USA agricultural products, reports Bloomberg.

"Shipments in and out of China held up better than expected last month, but a sustained turnaround still looks unlikely in the near-term."

On Monday, China allowed its currency to devalue against the United States dollar, which some are saying is a move in a "currency war".

A strong dollar puts US manufacturers at a competitive disadvantage, he said.

Chen Lin, general manager of Hefei DGCT Imp. & Exp.

But a two-day meeting in Shanghai at the end of July failed to yield any significant purchases by China nor progress on US demands for changes to intellectual property, technology transfer and subsidy policies, prompting Trump to announce his next round of tariffs.

The dispute has hit hard at exporters on both sides. He said a weaker yuan won't help much either, and gives more clients an excuse to ask for discounts. The Association of China Rare Earth Industry issued a statement after a special working meeting on Monday to discuss the "guidance" given by Chinese President Xi Jinping during a visit to a rare earth plant in Jiangxi in May.

"The trade spat is driving the market insane", said Jigar Trivedi, commodities analyst at Mumbai-based Anand Rathi Shares & Stock Brokers.

Central banks in New Zealand, Thailand and India stunned financial markets on Wednesday with a series of surprising interest rate cuts and pointing to policymakers' dwindling ammunition to fight off a downturn.