The US-China tariff war has reached a new level: Beijing could create huge problems for America.

This week, Beijing shattered a fragile trade truce with Washington by announcing comprehensive export restrictions on products containing even traces of Chinese rare earth elements, writes Politico.

An enraged President Donald Trump threatened to retaliate with 100% tariffs and new restrictions on the export of critical software products. He declared that he saw "no point" in meeting with Chinese leader Xi Jinping this month.

This rupture marks the sharpest escalation of tensions between Washington and Beijing since both countries imposed triple-digit tariffs on each other in the spring. Months of behind-the-scenes efforts to stabilize relations are on the brink of collapse, revealing just how fragile the economic truce was. New doubts are raising about whether Trump, operating with a weakened national security team and a fragmented China strategy, is prepared for a new move by Beijing.

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This is perhaps the clearest test of Trump's ability to transform his deal-based approach to trade into a coherent strategy on China—one that can withstand the long-term economic war Beijing is preparing for. Most of China's new restrictions will take effect on December 1, while the US countermeasures will follow on November 1.

On October 9, China's Ministry of Commerce announced the most extensive restrictions to date on rare earth metal exports. This will allow Beijing to restrict not only the supply of raw materials and magnets, but also any products containing such elements. (These are permanent magnets produced using rare earth metals such as neodymium, samarium, and dysprosium. They are a crucial component of many modern technologies.) - Note.)

With Chinese rare earth materials used in everything from iPhones and electric motors to fighter jet sensors, the new rules effectively give Beijing a veto over a significant portion of global production.

The scale of the impact of these measures, as well as the US retaliatory measures, was already evident on October 10: after Trump's tariff announcement, the S&P 500 index fell more than 2%, its worst day since April.

Former Trump administration officials believe China's latest move is a particularly sophisticated show of force, highlighting the growing disconnect between Beijing's long-term strategy and the Trump administration's improvisational shifts in strategy.

"We're playing chess on two boards, and Beijing is playing chess on four," said Lisa Tobin, former director of China affairs at the National Security Council during the first Trump administration.

White House officials acknowledge that their approach to foreign policy is more top-down than in previous administrations. But they reject the notion that downsizing the National Security Council hinders their pursuit of a coherent China policy. On the contrary, they argue, it makes their approach more effective.

However, China's escalation came just as Trump and Xi Jinping were scheduled to meet this month on the sidelines of the Asia-Pacific Summit in South Korea. This meeting—the first of Trump's second term—could have stabilized relations until November 10, when a decision must be made on whether to impose the next round of tariffs.

After months of feeling confident in its own superiority, China may be testing how far it can push a White House that values ​​deals over ideology – and finding that even this administration has its limits.

"This is the scenario analysts have been warning about: Beijing's assertiveness colliding with Washington's impatience," explained Craig Singleton, a senior fellow on China at the Foundation for Defense of Democracies. "Whether Trump escalates or holds back depends on how China behaves in the coming days."

Beijing's pressure has affected politically sensitive sectors of the US economy, particularly the boycott of American soybeans and agricultural products from Trump-supporting states. Furthermore, China has introduced reciprocal port fees: starting October 14, both sides intend to tax each other's ships for their port stays.

Trump has long considered trade the main indicator of the success of relations with Beijing.

"Previously, there was a more conscious balance between economic and national security issues," one former official emphasized. "Now, it seems like we're simply dealing with isolated crises without a broader strategic picture."

The new export regulations go far beyond previous ones. They require government approval for technologies used in rare earth element processing, including mining, smelting, and separation, while prohibiting Chinese citizens from providing "substantial assistance or support" to such operations abroad.

Former officials involved in US policy toward China say Beijing's goal is to remind Washington how easily it can turn economic interdependence into leverage.

"It's a gun to the head in the negotiations," said Jeffrey Hertz, former director of international economics at the Biden administration's National Security Council. "China isn't saying it's completely halting exports right now, but it's showing it could do so at any time—and that will be the backdrop to the negotiations."

In February, Trump signed an executive order directing federal agencies to maximize domestic mineral production. However, even his allies acknowledge that it will take years to bring the new facilities online.

According to Bradley Martin of the RAND Corporation, this is precisely what China is counting on, as the US will have a long way to go in catching up in rare earth materials: “China is betting that we won’t be able to catch up quickly, and the vulnerability will be unequal: we need to buy these materials more than they need to sell them to us.”

However, while demonstrating strength, Beijing is also expressing a willingness to de-escalate tensions. According to a spokesperson for the Chinese Ministry of Commerce, the country wants to cooperate with the United States in establishing "export control dialogue mechanisms" to ensure "the security and stability of global industrial and supply chains."

This may not be just rhetoric. The Trump administration's freeze earlier this year on exports of ethane—a substance vital to China's petrochemical industry—reminded Beijing that the US, too, is capable of using exports as a weapon.

Speaking in the Oval Office on October 10, Trump said he could still meet with Xi and that the imposition of tariffs on November 1 left room for compromise.

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The alternative is a further deterioration in trade relations, which could have dire consequences for the US economy given its continued dependence on China for industrial materials and consumer goods.

"The restrictions on rare earth exports are a powerful blow, and they've delivered," concluded Cameron Johnson, a senior partner at Shanghai-based consulting firm Tidalwave Solutions. "China hasn't yet implemented similar measures in pharmaceuticals, biotech, or chemicals. But if they did tomorrow, our economy would grind to a halt—and we wouldn't be able to counter it."

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