Bangkok: Deputy Finance Minister Woraphat Thanyawong has expressed concerns over the potential onset of a new trade war between China and the United States, following threats from former President Donald Trump to impose a 100% tariff on Chinese imports.
According to Thai News Agency, Trump’s announcement includes plans to enforce export controls on software and other critical goods by November 1, 2025, unless China alters its trade policy.
China has recently implemented export controls on rare earths and other minerals, pivotal in high-tech industries, causing global supply chain disruptions. This move is perceived as China’s strategic utilization of its dominance in rare earths, which account for over 70% of global production. These minerals are essential for clean energy, chips, electric vehicles, and modern weapon systems, posing a significant challenge to the US and its allies.
The financial markets reacted swiftly to Trump’s announcement. The S and P 500 saw a 2.7% decline, while the Nasdaq Composite experienced a sharp 3.6% drop. The yield on the 2-year US Treasury note fell to a three-week low, and the dollar weakened by 0.7% against major currencies. This market volatility indicates apprehension about a potential “full-blown trade war” that could heavily impact global commerce.
Diplomatic relations are also at stake, as Trump hinted at the possibility of canceling a summit with Chinese President Xi Jinping during the upcoming APEC meeting in South Korea. Despite later remarks suggesting the summit might proceed, the situation underscores renewed tensions between the two leaders.
Historically, the US and China have engaged in a tariff battle with the US previously imposing a 145% tariff on Chinese imports, to which China responded with a 125% tariff on US goods. The existing ceasefire, maintaining current tariffs, is set to expire in mid-November, raising fears of a more severe “Trade War 2.0.”
The strategic dimensions of this conflict involve China leveraging its natural resources, while the United States employs tariffs and technology controls as retaliatory measures. This standoff could extend to allies like the EU, Japan, and ASEAN, affecting global supply chains in the EV, chip, and clean energy sectors.
The policy implications are significant. The risk of a protracted trade war looms as both nations resort to strategic measures beyond tariffs. Rare earths have emerged as a pivotal ‘strategic resource’ in the power dynamics between superpowers. The fragility of high-tech product supply chains poses direct threats to countries reliant on these imports.
For the Asia-Thailand region, particularly ASEAN countries, there is an urgent need to assess the impact on the EV industry, electronic components, and exports to the US and China, and to devise strategies to mitigate supply chain risks.