China Is Holding The Best Cards In Trump's Trade War Game

 

There is a metaphor that Trump likes to use. It is about who "has the best cards" is a situation. He used it against President Zelensky in his White House meeting - claiming Zelensky had no cards.

When Trump initiated his Trade War against China by imposing massive tariffs on goods they import to the U.S., Trump ugly thought he was holding the best cards. He was convinced that China needed the U.S. market, and would quickly fold and agree to some tariff rate. He was wrong.

It turns out that China was not hurt by the tariffs as much as some thought they would be. While their exports to the United States have dropped sharply, they still have the rest of the world to buy their exports.

And China has an ace in the hole - and it may be the most powerful card in the deck (and one Trump had neglected to even consider).

China exports 90% of the world's processed rare earth minerals and magnets. And the United States needs those for semiconductors, medical imaging chemicals, cars, robots, offshore wind turbines, and a wide range of military hardware.

China not only responded to Trump's massive tariffs with high tariffs of their own, but they also immediately stopped all rare earth minerals shipments to the United States.

Trump than agreed to an agreement with China to lower the tariffs significantly and engage in trade talks. He thought that would get China to resume the rare earth exports. It didn't.

The trade talks continue. But the rare earth exports are still banned by China. China is smart. They know that's the best card they have to play - and they're not going to play it until they have a good deal (either no tariffs or very low tariffs).

Trump's trade war attack on China was a serious blunder. China is holding the best hand, and Trump is holding the losing hand.

Trump will eventually try to save face by claiming he forced China to agree to a deal that favors the United States. But it won't be true. He "doesn't have the cards" to do that.