{"id":21631,"date":"2026-08-05T07:03:55","date_gmt":"2026-08-05T01:18:55","guid":{"rendered":"https:\/\/eng.dragonmedia.com.np\/?p=21631"},"modified":"2026-08-05T07:03:55","modified_gmt":"2026-08-05T01:18:55","slug":"beyond-rare-earths-why-the-us-tariff-war-against-china-reached-its-limits","status":"publish","type":"post","link":"https:\/\/eng.dragonmedia.com.np\/?p=21631","title":{"rendered":"Beyond Rare Earths: Why the US Tariff War Against China Reached Its Limits<\/strong>"},"content":{"rendered":"

# Prem Sagar Poudel<\/strong><\/p>\n

The United States raised tariffs on imports from India and dozens of other trading partners. This led to an important question. Why could Washington not apply the same approach to China?<\/p>\n

The simplest answer is that China controls rare earth resources. The complete answer is much broader. It extends across an entire industrial ecosystem.<\/p>\n

The United States was not unable to raise tariffs on China. It pushed additional duties on Chinese goods to levels that threatened to bring normal trade to a halt. However, maintaining such a policy became increasingly difficult.<\/p>\n

The cost did not remain confined to Chinese exporters. It also affected American manufacturers, consumers, farmers and global production networks.<\/p>\n

China\u2019s real strength stretches from mining and processing to industrial components, technological manufacturing and global markets. That strength becomes even more significant because of the deep economic interdependence between China and the United States.<\/p>\n

One linguistic distinction is also necessary. A tariff is not an income tax. It is a customs duty imposed on imported goods. The formal payment is made by the importer at the US border. The cost is then distributed among suppliers, businesses, retailers and consumers.<\/p>\n

China Was Not Exempted<\/strong><\/h3>\n

On July 31, 2025, the United States announced revised reciprocal tariff rates for several trading partners. A rate of 25 percent was assigned to India.<\/p>\n

China\u2019s absence from that list did not mean that it had received an exemption. The White House order preserved the separate tariff and negotiation framework established with China in May 2025.<\/p>\n

By that stage, the tariff conflict between the United States and China had already reached an exceptional level.<\/p>\n

According to the White House, the combined rate on certain Chinese products reached as high as 245 percent when existing and newly imposed duties were added together.<\/p>\n

China also raised retaliatory tariffs on some American goods to as much as 125 percent. It introduced company listings, export controls and other regulatory measures.<\/p>\n

Following the Geneva understanding of May 12, the United States removed or suspended 115 percentage points of the newly imposed reciprocal tariffs. A reciprocal tariff rate of 10 percent remained.<\/p>\n

The 20 percent fentanyl related tariff and older Section 301 duties remained separate.<\/p>\n

China also reduced much of its additional tariff rate to 10 percent. It began withdrawing or suspending several non tariff measures.<\/p>\n

This did not mean that the United States lacked the ability to confront China. Both sides returned to negotiations because extreme tariffs were beginning to obstruct ordinary trade.<\/p>\n

The central question is therefore not whether tariffs can be imposed on China. The real question is how high those tariffs can be set and how long they can be maintained.<\/p>\n

The Tariffs of 2025 and 2026 Were Not the Same Policy<\/strong><\/h3>\n

The reciprocal tariffs imposed in 2025 were based on the International Emergency Economic Powers Act.<\/p>\n

On February 20, 2026, the US administration ended the collection of additional tariffs imposed under that legal authority. This included the reciprocal tariffs and the fentanyl related duties on China.<\/p>\n

National security related metals tariffs imposed under Section 232 were not affected. Other tariffs imposed under Section 301 also remained in place.<\/p>\n

In July 2026, the Office of the United States Trade Representative launched a separate action under Section 301.<\/p>\n

This measure concerned economies that had failed to establish or effectively enforce restrictions against imports produced through forced labour.<\/p>\n

A tariff rate of 10 percent was assigned to India and 16 other economies. China and many other economies were placed under a rate of 12.5 percent.<\/p>\n

Certain raw materials and essential goods were exempted.<\/p>\n

The 25 percent rate announced for India in 2025, the later negotiated rate of 18 percent and the 10 percent tariff introduced in July 2026 were therefore not the same measure.<\/p>\n

They had different legal foundations, objectives and areas of application.<\/p>\n

The claim that the United States could not impose tariffs on China is therefore inaccurate. China was placed under a separate legal and negotiating framework.<\/p>\n

The Cost of High Tariffs Does Not Remain in China<\/strong><\/h3>\n

Political language often presents tariffs as a price paid by a foreign country.<\/p>\n

In practice, the Chinese government does not pay the duty at a US customs office. The American importer pays it.<\/p>\n

The importer may attempt to recover part of the cost by demanding a lower price from the Chinese supplier. It may absorb part of the cost through reduced profit margins. The remaining burden may be transferred to American manufacturers, retailers or consumers.<\/p>\n

A Federal Reserve study published on March 5, 2026, found that the prices of imported retail goods originating in China had increased by about 8.5 percent year on year by December 2025.<\/p>\n

The study estimated that approximately 30 percent of the tariff cost had been passed on to consumers.<\/p>\n

Imports from China do not consist only of toys, clothing and household equipment. They also include chemicals, machinery, electrical materials and industrial components used by American factories.<\/p>\n

When these inputs become more expensive, the cost of production in the United States rises.<\/p>\n

High tariffs can therefore weaken domestic manufacturers rather than strengthen them. Production becomes more expensive and export competitiveness may decline.<\/p>\n

Why China Is Different from Other Trading Partners<\/strong><\/h3>\n

China\u2019s first advantage is industrial scale.<\/p>\n

China is not merely an exporter of individual products. It is a central part of production chains that extend from raw materials to finished goods.<\/p>\n

It has a major presence in industrial chemicals, processing, machinery, electrical equipment, batteries, electronics and components.<\/p>\n

A single supplier can be replaced. An entire industrial system cannot be replaced immediately.<\/p>\n

China\u2019s second advantage is its domestic market.<\/p>\n

China is an important customer for American agricultural products, energy, aircraft, semiconductors and other high value goods.<\/p>\n

When China reduces purchases, the impact does not appear only in national trade statistics.<\/p>\n

States that depend on soybean, corn and wheat production can be directly affected. Ports, transport companies, processing industries and individual corporations can also face immediate pressure.<\/p>\n

Such economic effects can quickly become domestic political issues in the United States.<\/p>\n

China\u2019s response therefore does not remain within the boundaries of foreign trade.<\/p>\n

Its third advantage is its ability to use non tariff measures.<\/p>\n

China does not have to rely exclusively on customs duties. It can use export licences, customs inspections and security reviews.<\/p>\n

Companies can be added to regulatory lists. Competition investigations can be launched. Government procurement and market access can also be restricted.<\/p>\n

These measures can be directed at particular companies or industries. Their commercial and political impact may therefore be sharper than that of a general tariff.<\/p>\n

China\u2019s fourth advantage is an asymmetry of time.<\/p>\n

China can tighten export licences for strategic materials within days to weeks.<\/p>\n

Developing a new mine can take years. Establishing a processing facility requires additional time. Environmental approval, investment and skilled workers are also necessary.<\/p>\n

This large gap between China\u2019s ability to act and the ability of other countries to create alternatives is an important source of negotiating power.<\/p>\n

The Real Importance of Rare Earth Elements<\/strong><\/h3>\n

Public debate often uses the expression rare metals. The more precise issue concerns rare earth elements, their processing and the production of high performance permanent magnets.<\/p>\n

According to the International Energy Agency, China accounted for about 60 percent of global mining of magnet related rare earth elements in 2024.<\/p>\n

Its share of processing was 91 percent. Its share of sintered permanent magnet production reached 94 percent.<\/p>\n

This means that China\u2019s decisive influence is not based on mining alone.<\/p>\n

The ability to separate minerals, refine them and convert them into metals is equally important. The production of alloys and high quality magnets is even more significant.<\/p>\n

These magnets are used in electric vehicles, wind turbines, industrial motors and robots. They are also required in data centres, medical equipment, aerospace technology and security systems.<\/p>\n

In April 2025, China imposed export controls on seven rare earth elements and related products.<\/p>\n

The International Energy Agency reported that some vehicle manufacturers in several countries were later forced to reduce production or temporarily halt operations.<\/p>\n

In October 2025, China announced that controls would be extended to five additional elements.<\/p>\n

Processing equipment and technology were also included in the proposed measures. Certain products manufactured abroad with Chinese inputs would also have been covered.<\/p>\n

In November 2025, however, these expanded measures were suspended for one year.<\/p>\n

The additional controls announced in October were therefore not fully in force. The earlier controls introduced in April remained separately important.<\/p>\n

Rare earth elements are China\u2019s most visible strategic instrument. They are not its only decisive source of power.<\/p>\n

Their significance comes from a wider industrial ecosystem that connects minerals, energy, processing, technical skills, equipment and final production.<\/p>\n

Risk Reduction or Trade Rerouting?<\/strong><\/h3>\n

The United States has attempted to reduce its direct dependence on China.<\/p>\n

It has promoted supply diversification and the relocation of production to friendly or partner countries.<\/p>\n

Some results are visible. China\u2019s direct share of US imports has declined. Mexico, Vietnam and other economies in Southeast Asia have gained a larger role.<\/p>\n

However, a decline in direct imports from China does not mean that Chinese industrial participation has disappeared.<\/p>\n

A Federal Reserve study published in June 2026 found that about 53 percent of the additional market share gained by Mexico after the earlier US tariffs on China was linked to the tariff shock.<\/p>\n

This included direct rerouting, Chinese production in Mexico and the relocation of production to other countries.<\/p>\n

The study estimated that about 25 percent of the increase was directly connected to Chinese production.<\/p>\n

This does not mean that all goods merely received a different label before entering the United States. Genuine relocation of production also occurred.<\/p>\n

China, however, did not disappear from the supply chain.<\/p>\n

Chinese investment, equipment, raw materials and intermediate goods could remain embedded in production conducted in third countries.<\/p>\n

The American strategy of risk reduction is therefore not a complete failure. It has helped develop alternative production centres and reduced some forms of direct dependence.<\/p>\n

Yet a change in the country of final assembly does not necessarily remove Chinese industrial involvement.<\/p>\n

The more accurate description is not complete economic separation. It is a combination of production relocation, trade rerouting and supply chain reorganisation.<\/p>\n

India as an Alternative Partner<\/strong><\/h3>\n

India\u2019s position is different from that of China.<\/p>\n

India has a vast market. It also has a strong base in technical labour, pharmaceuticals and services.<\/p>\n

Its strategic importance in the Indo Pacific has increased.<\/p>\n

However, India does not yet possess the same capacity as China to disrupt global industrial supply chains.<\/p>\n

In 2025, the United States announced a reciprocal tariff rate of 25 percent for India.<\/p>\n

An additional 25 percent duty was also imposed in connection with India\u2019s purchases of Russian oil.<\/p>\n

Under an understanding reached in February 2026, the United States removed the additional Russia related tariff. It also announced that the reciprocal rate would be reduced from 25 percent to 18 percent.<\/p>\n

India agreed to reduce tariffs on American industrial and agricultural goods. The two sides also addressed non tariff barriers.<\/p>\n

India proposed increasing purchases of American energy, technology and other products.<\/p>\n

The two countries also agreed to cooperate on investment screening and export controls. Technology cooperation and supply chain resilience were included in the discussions.<\/p>\n

This broader negotiating package strengthened India\u2019s bargaining position. Military partnership alone did not produce the agreement.<\/p>\n

India can become an alternative production centre and strategic partner for the United States.<\/p>\n

China represents a different kind of power.<\/p>\n

It competes with the United States at the economic, industrial, technological and geopolitical levels.<\/p>\n

Negotiations with China therefore extend far beyond ordinary questions of market access.<\/p>\n

The Strengths and Limits of Both Sides<\/strong><\/h3>\n

Recognising China\u2019s industrial influence does not mean that the United States is powerless.<\/p>\n

The United States has a vast consumer market. It has financial influence based on the dollar.<\/p>\n

It also possesses advanced universities, research institutions and technology companies.<\/p>\n

The United States remains strong in chip design, semiconductor manufacturing equipment and industrial software. It also has considerable influence in artificial intelligence and intellectual property.<\/p>\n

Washington has used export controls to restrict China\u2019s access to advanced semiconductor technology.<\/p>\n

Licences are required for certain manufacturing equipment, software and high performance computing products.<\/p>\n

This is one of the principal American counterweights to China\u2019s industrial influence.<\/p>\n

China also faces serious challenges.<\/p>\n

Domestic demand remains comparatively weak. Adjustment in the property sector has continued for an extended period.<\/p>\n

Local debt, demographic pressure and dependence on exports are additional concerns.<\/p>\n

A prolonged trade conflict could affect employment and the use of industrial capacity.<\/p>\n

The International Monetary Fund\u2019s July 2026 update projected that China\u2019s economy would grow by 4.6 percent in 2026.<\/p>\n

Uncertainty in global trade and energy markets remained important risks.<\/p>\n

The strengths of the two countries are therefore concentrated in different areas.<\/p>\n

The United States has influence through finance, advanced technology and international partnerships.<\/p>\n

China has power through manufacturing, processing and its ability to create supply disruptions.<\/p>\n

Neither side possesses decisive superiority in every field.<\/p>\n

The Likely Direction in 2027 and 2028<\/strong><\/h3>\n

A complete economic separation between the United States and China remains unlikely over the next two years.<\/p>\n

Separation may intensify in strategically sensitive sectors. Managed interdependence may continue in ordinary trade.<\/p>\n

Controls are likely to remain strict in advanced semiconductors, artificial intelligence and technologies with potential military applications.<\/p>\n

Critical minerals and data infrastructure will also remain major areas of competition.<\/p>\n

However, completely stopping trade in consumer goods and intermediate materials would be extremely costly for both economies.<\/p>\n

The International Monetary Fund\u2019s July 2026 World Economic Outlook update projected that global trade growth would fall from 5 percent in 2025 to 3.5 percent in 2026.<\/p>\n

It projected a recovery to 4.3 percent in 2027.<\/p>\n

This does not suggest that global trade is ending. It suggests that trade routes and production networks are being reorganised.<\/p>\n

New rare earth projects are being developed outside China. The pace of building alternatives, however, remains insufficient.<\/p>\n

According to the International Energy Agency, announced projects outside China may provide only about 50 percent of the required mining capacity by 2035.<\/p>\n

They may provide about 25 percent of the required processing capacity. Their share of magnet production may remain below 20 percent.<\/p>\n

China\u2019s industrial influence is therefore unlikely to disappear by 2027 or 2028.<\/p>\n

Continued investment by the United States and its partners may gradually reduce China\u2019s concentration of power.<\/p>\n

A gradual weakening of influence and immediate replacement are two different outcomes.<\/p>\n

Conclusion: Not Rare Earths Alone, but Integrated Industrial Power<\/strong><\/h3>\n

The United States was not unable to raise tariffs on China.<\/p>\n

It pushed tariffs to levels that threatened to bring normal trade close to a standstill.<\/p>\n

The resulting cost did not remain confined to China.<\/p>\n

American consumers, factories, farmers and retailers were also affected.<\/p>\n

China\u2019s dominance in rare earth elements is a highly effective strategic instrument. It is not the only decisive source of Chinese power.<\/p>\n

Its real influence lies in a complete industrial ecosystem.<\/p>\n

Mineral extraction, processing and industrial chemicals form the foundation. Alloys, magnets, batteries and components are also part of the system.<\/p>\n

Equipment, manufacturing capacity and access to global markets complete the structure.<\/p>\n

The United States also possesses powerful instruments.<\/p>\n

Technology, finance, markets and international partnerships are its principal sources of influence.<\/p>\n

China has the ability to create targeted pressure through manufacturing, agricultural purchases and supply chains.<\/p>\n

For this reason, the trade competition between the United States and China is not a simple contest in which one side can easily defeat the other.<\/p>\n

Both possess the ability to inflict serious damage on their rival. Yet the consequences of extreme measures also return to their own economies.<\/p>\n

China\u2019s true strength is an integrated industrial power that extends from the mine to the global market.<\/p>\n

That power is exercised through time, scale and strategic restraint.<\/p>\n

About the Author: Prem Sagar Poudel is a senior journalist and international relations analyst from Nepal. He has conducted in-depth studies on Nepal-China relations, the geopolitics of the Himalayan region, and Asian security issues.<\/em><\/strong><\/p>\n

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