The Trump administration is warning that it has a tranche of “countermeasures” that it can deploy to put pressure on China in response to its tightened export controls on rare earth elements.
Treasury Secretary Scott Bessent said this week that the United States government has a dozen different countermeasures that it is prepared to deploy, noting that the administration hopes it doesn’t have to pull those “significant levers” and expressed optimism about de-escalation.
“We have plenty of straight brute-force countermeasures we can pull,” Bessent cautioned during an appearance on Fox Business.
RARE EARTH STOCKS SOAR AS CHINA TIGHTENS SUPPLY IN TRADE ESCALATION WITH TRUMP
The Washington Examiner asked the Treasury Department to delineate the 12 countermeasures, but didn’t receive responses.
Bessent this week specifically mentioned natural resources used in the production of plastics, jet engines and related parts, and the hundreds of thousands of Chinese students studying in the U.S. as pressure points for Beijing.
Richard Stern, acting director of the conservative Heritage Foundation’s Institute for Economic Policy Studies, told the Washington Examiner that, when it comes to countermeasures, the U.S. is trying to figure out which U.S. products are more important to China’s industrial processes than they are to U.S. exporters.
“I think that’s really kind of the long and short of it, in some ways, is you’re really looking at both countries trying to figure out: What are those pressure points, where it’s less important to our exporters and it’s more important to their importers?” Stern said.
China recently announced tightened export controls on rare earth elements and similar technology. The further restrictions on rare earths are notable, as they are key inputs for technology that the U.S. needs to be competitive, including semiconductor chips and clean energy.
Earlier in the year, as trade disagreements between the two countries escalated, the U.S. also moved to stop certain software from flowing into China, including from companies like Cadence, Synopsys and Siemens EDA, that is used to design semiconductor chips. Further restricting U.S. software exports could be another useful countermeasure.
Another area of countermeasures that can be deployed involves the U.S. financial services market.
Bessent was asked in April about delisting Chinese stocks from domestic exchanges and replied that “everything is on the table.” The secretary has also mentioned the market for initial public offerings of companies as another possible point of weakness for China.
There are a large number of Chinese students studying abroad in the U.S. Some think that restricting those students, or threatening to do so, could be another way for Washington to push back on Beijing amid the trade escalation.
“We have 300,000, 400,000 Chinese students studying here as opposed to … 800 American students who study in China, so that’s substantially imbalanced,” Bessent mentioned on Monday.
There has also been talk of further restrictions on ingredients used to manufacture certain plastics and silicon. Silicon is a component in the chipmaking process.
“And a chunk of it deals with making heavy machinery, lithographic machinery that’s used to make chips,” Stern said.
Additionally, the U.S. is the world’s leading producer of aerospace equipment. Threatening to withhold exports of jet engines and certain parts could be another way to push China to acquiesce and ease off its rare earth export controls.
Trump and Bessent hope to make a deal with China, given the geopolitical importance of these rare earth elements to Washington and the U.S. national security apparatus.
China has dominated the rare earths market for years and accounts for some 80% of U.S. imports of rare earth metals and compounds. Demand for rare earths is growing quickly as clean energy products like wind turbines and electric cars become more popular.
Despite the threats of countermeasures, administration officials have said that they hope that the trade dispute will be sorted out without damaging measures.
“At some level, both countries have a lot to lose, both countries have a lot to gain by setting themselves up in a more secure fashion,” Stern said. “So I do think we’ll get a deal at the end of the day, but I think there probably will be a certain amount of negotiation or wrestling in between.”
BESSENT EXPECTS TRUMP TO MEET WITH XI IN SOUTH KOREA DESPITE TRADE DISPUTE
Amid the dispute, Bessent said he still expects President Donald Trump to meet with Chinese President Xi Jinping in South Korea in the coming month.
“He will be meeting with party chair Xi in Korea — I believe that meeting will still be on,” Bessent said.
