Halting rare earths exports to pausing Boeing imports: How China is hitting the US where it hurts most

The US-China trade war continues to escalate. With Beijing not backing down, the US has slapped 245 per cent tariffs on goods from the Asian country. China raised duties on US goods to 125 per cent last week, and is now in action mode.

It is hitting the US where it hurts. After all, America relies more on China than China relies on it, according to an analysis by Goldman Sachs. Chinese imports to the US account for 14 per cent of all imports, while US exports to China make up six per cent of total goods imported by the Asian giant.

While Trump is waiting for Xi Jinping to request a call, Beijing seems to have other plans. China has suspended the export of rare earth minerals and has stopped taking delivery of US-made Boeing jets. That’s not all. It has also restricted the import of Hollywood films.

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We look at how China is standing up to “bully” Trump and how this could impact the US.

The restrictions on rare earths

China has announced restrictions on the export of seven rare earth elements – a group of 17 elements – that are used in a wide range of products, including consumer electronics, electric vehicles, aircraft equipment, oil refineries and military applications such as missiles and radar systems.

Magnets from rare earths enable motors and generators used in smartphones like the iPhone, jet engines, cars, MRI machines, wind turbines, robots and spacecraft. They are also essential components of weapons like F-35 fighter jets , submarines, and drones.

The shipments of these critical minerals were halted at many Chinese ports on April 4.

While rare earths are abundant and found in many countries, extracting and processing them is difficult, expensive, and harmful to the environment. Not only the US but many other trading partners depend on Beijing to supply the processed minerals. China is responsible for 61 per cent of global mined rare earth production and controls more than 90 per cent of the processing.

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However, the rules have changed. Exporters must now apply to the Chinese Ministry of Commerce for licenses, a relatively opaque process that can range from six or seven weeks to several months. Reuters reported. It will be difficult for US clients to get export licenses given the escalating trade war between the economies.

Restrictions on rare earths will have a big effect on the US. It could threaten Washington’s military capabilities as these elements are crucial for defence technologies. It could also lead to shortages in the tech, automotive and aerospace sectors.

“It’s China showing that it can exert incredible economic might by being strategic … and surgical and really hitting American industry right where it hurts,” Justin Wolfers, a professor of economics and public policy at the University of Michigan, was quoted as saying by CNN.

China’s decision could leave the US scrambling. If China decides to completely shut down these exports, America will be incapable of filling the cap, according to the Center for Strategic and International Studies (CSIS). “There is no heavy rare earths separation happening in the United States at present,” the think tank noted, adding that development of these capabilities is underway.

Trump is also concerned. On Tuesday, the president ordered a probe into the potential tariffs on critical minerals to study their impact on the country’s reliance and security.

“The dependence of the United States on imports and the vulnerability of our supply chains raises the potential for risks to national security, defence readiness, price stability, and economic prosperity and resilience,” Trump said in an executive order.

A halt on Boeing deliveries

China has ordered its airlines to pause all incoming deliveries of US-made Boeing aircraft . This puts deals worth billions of dollars in limbo, as three main Chinese airlines were expected to take delivery of 179 planes between now and 2027. The plan has now been put on hold, reports Bloomberg.

Chinese carriers have also been asked to halt the purchase of equipment and parts from US companies.

The decision comes as a serious blow to Boeing and other manufacturers amid the escalating trade war between the US and China.

Boeing shares have taken a hit in recent fluctuations in financial markets because of tariff-related uncertainty. The company has lost seven per cent in market value this year. The firm’s shares also fell on Tuesday following the report on China halting deliveries.

While Chinese authorities have not made any remarks, Trump said in a social media post that China “just reneged on the big Boeing deal, saying that they will ‘not take possession’ of fully committed to aircraft.”

Restrictions on Hollywood movies

Hollywood is one of America’s biggest exports. After Trump imposed 125 per cent tariffs on Chinese products last week, China said it would curb the number of US films screened in the country.

“The wrong action of the US government to abuse tariffs on China will inevitably further reduce the domestic audience’s favourability towards American films. We will follow the market rules, respect the audience’s choice, and moderately reduce the number of American films imported,” the China Film Administration said in a statement last Thursday (April 10).

The move came after two influential Chinese bloggers proposed a heavy reduction in the import of US movies.

If the restrictions continue, it is likely to impact big American studios. Nine Hollywood movies generated more than $100 million at the Chinese box office in 2019. That year, Avengers: Endgame went on to become the sixth-highest grosser in the Chinese film industry, collecting more than $600 million. In the last five years, eight American films have generated more than $100 million, and only one has topped $200 million, according to data from Box Office Mojo.

It’s a big market, and although the Chinese box office, once a much sought-after space for American cinema, has seen a pivot towards local films, Hollywood is likely to lose millions in revenue.

For now, China does not appear to be in the mood to budge. Trump is waiting for his big trading partner to make the first move. White House Press Secretary Karoline Leavitt quoted the US president as saying that “the ball is in China’s court”. The world is watching to see which of the two economies – the world’s biggest – blinks first.

With inputs from agencies