The Chairman strikes back: Xi Jinping lands sharp blows in US-China trade war, Plus businesses scramble as China weaponizes rare earth dominance -- China Boss News 4.11.25

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What happened?

When Donald Trump fired another tariff broadside at China, few expected Beijing to shrug it off.

But fewer still foresaw how calibrated—and disruptive—the response would be.

China’s retaliation struck at markets, multinationals, and the illusion of US leverage.

Trump’s move was classic MAGA-era theater: sweeping tariffs on over $100 billion in Chinese semiconductors, EV components, and green tech, reminiscent of his first term in 2018.

Only this time, China didn’t blink. Within hours, Beijing rolled out a counteroffensive:

• Export controls on rare earths vital to US tech and defense,

• Tariffs on US agriculture—a precision strike at Trump’s electoral base,

• A blacklist of “unreliable” US firms, sending chills through Silicon Valley,

• and reciprocal 34% tariffs on all US imports from April 10.

It was clear President Trump was knocked off balance. He lashed out as markets crashed, accusing China of having "panicked" and "played it wrong," and threatened to slap an additional 50% tariff on Chinese goods if Beijing didn’t roll back its 34% retaliatory tariffs by April 8.

But Beijing further escalated with a hike that brought its tariffs on US products up to 84%.

On Wednesday, Trump responded by increasing tariffs on Chinese imports to a cumulative rate of 145%, comprising a base 10% tariff, an additional 125% specific to China, and a 10% levy related to fentanyl concerns.

At time of post, China had raised tariffs on US goods from 84% to 125%, targeting key exports such as soybeans, aircraft, and pharmaceuticals.

It also suspended imports of certain US agricultural products and imposed additional restrictions on rare earth mineral exports. ​

Why it matters.

Totalitarians blink less

Strangely, Trump's decision to dramatically increase tariffs on goods from China followed a 90-day suspension of his recent tariffs imposed on most countries.

Focused on Beijing's retaliation, however, I was struck by its confidence.

For once, there was no cartoonish CCP tirade or tantrum, only a well-timed and -delivered surgical strike.

It shows what China can do once it makes up its mind.

China didn't just wake up to Trump's tariff tantrum; it has been considering that eventuality all along. Beijing had already tightened control over rare earth exports and stress-tested its supply chains in anticipation of a Trump comeback in 2024.

At home, billions have been poured into tech self-sufficiency and domestic demand. Meanwhile, China has diversified its trade routes across the Global South, leveraging the world's largest free trade agreement, the Regional Comprehensive Economic Partnership (RCEP), and bonding new zones to soften a potential US blow.

Financially, the central bank has buffered reserves, eased capital controls, and let the yuan drift just enough to absorb shocks—without triggering panic.

Xi Jinping, for his part, is uniting the country around a single American villain, spinning the trade war as a patriotic showdown. State media is mocking Trump and framing his tariffs as Western bullying, while assuring its local audience that China's response is measured and resolute.

Veteran China watcher and economist George Magnus says a deal will eventually happen. But who blinks first—and at what cost—is the trillion-dollar question.

Autocracies may look fragile, but they have key advantages in economic conflict: no elections, no free press, and no divided legislature. That makes China harder to pressure and more patient by design.

Trump needs a win. Xi just needs time. And that, friends, is the potentially game-changing asymmetry in this titanic showdown.

Here's how it works

No elections, no problem

Trump's poll numbers rise and fall with commodity prices and job losses. Xi, unburdened by voters or watchdogs, can wait out the storm. His regime isn't accountable to CNN or swing-state polling.

Narrative control

In America, angry farmers can go viral. In China, they disappear into the static. Economic pain becomes a patriotic duty. The Party reframes suffering as strength. Trump tweets. Xi silences his critics.

Centralized tools

Beijing doesn't have to ask permission to inject liquidity or hand out subsidies. It can mute layoffs, redirect exports, and manage pain like a command center. Trump wrestles with Congress. Xi gives orders.

Nationalism as armor

For Xi, trade isn't economics—it's sovereignty, honor, and historical justice. That makes compromise politically radioactive. Fragile? Yes, but also deeply entrenched.

Strategic patience

In Beijing, the strategy doesn't change every four years. The same officials steer the ship. In D.C., the wheel jerks with every election. Allies notice, and so do corporations.

Why Xi might blink first

China moves slowly, but it moves in one direction. And that consistency can give it quite a bit of resilience compared to the US.

But no amount of sanctions planning can foresee all developments.

Just as Russia's central bank governor last week warned that the sharp plummet of global oil prices triggered by Trump's new "reciprocal tariffs" is a significant risk to the Russian economy, so, too, is China vulnerable.

China is already flirting with deflation. Falling oil prices can:

• Suppress overall price levels (PPI, CPI).

• Signal weak global demand—not just a supply glut.

• Undermine stimulus efforts if businesses and consumers expect prices to keep falling.

In short: cheap oil + weak consumer demand = a looming economic stagnation trap.

And even as China's Ministry of Commerce has vowed to "fight to the end," everyone has a breaking point, including those crusty old Leninnists welded into their Beijing perches.

To play the devil's advocate, we can explore China's other building pressures. Read why I call them "inescapable" here.

A fragile recovery

China's post-COVID bounce never materialized. Growth is weak, consumer confidence is brittle, and the property sector is still in slow motion. Youth unemployment is so bad that Beijing stopped reporting it.

Tariffs make that worse. And economic pain, not ideology, threatens the CCP's legitimacy.

Investor flight

Foreign capital is leaving—slowly but steadily. Companies are hedging bets, diversifying to India, Vietnam, and Mexico. Escalation accelerates the exodus—not in theory but in boardrooms.

Xi knows that the longer this drags on, the harder it will be to reverse.

Diplomatic dead ends

Trump may alienate allies—but China isn't making friends either. The EU is souring on Chinese EV overcapacity. Japan and Korea are doubling down on US ties. Even Belt and Road partners are increasingly wary.

Plus, a prolonged trade war risks deepening China's isolation just when it needs global buy-in.

Dollar dependence

Yes, China is testing alternatives, but the global economy still runs on dollars. Xi saw what US sanctions did to Russia.

If tariffs snowball into financial pressure or secondary sanctions, Beijing could face a liquidity crisis it can't print its way out of.

Fewer exits

Here's the paradox of China’s autocratic advantage: Trump can pivot on a whim, but Xi can't. The more rigid the regime, the harder it is to de-escalate, which is exactly why Xi might blink early—before it's too late to do so on his own terms.

Social stability: the real red line

Xi is insulated—but not immune. The 2022 COVID protests proved how fast public anger can erupt. If tariffs fuel inflation, weaken the yuan, or spike unemployment, the CCP's biggest fear re-emerges: losing control.

And no narrative is strong enough to paper over panic.

As you can see, this is quite the superpower contest, with the entire global economy hanging in the balance.

By tightening the screws on gallium and germanium, China reminded Washington that its "supply chain resilience" is more slogan than shield.

And farmers, already scarred by round one, are back in Beijing's sights. China’s tariffs aren't just economic—they're electoral. They hit the map in the middle of Red Country, right where, for Trump, it hurts.

Furthermore, the "unreliable entities" list doesn't come with rulebooks. There are no fines or raids—just a lingering fog of risk. US firms, like Boeing and Intel, now navigate a Chinese market that could freeze them out at will.

Yet, as Xi projects strength, beneath the surface, the cracks are spreading: a faltering recovery, spooked investors, and global skepticism hardening into policy.

And, ultimately, the power of mass frustration with no pressure valve in a country of over a billion people cannot be underestimated.

In that sense, Xi’s greatest risk isn’t Washington. It’s China’s silent, undemocratic majority.

So, if the Chairman blinks, it will be to avoid cratering himself and the 75-year-old People’s Republic of China. 🇨🇳 🕳

This Week's China News

The Big Story in China Business

CHINA WEAPONIZES RARE EARTH DOMINANCE: In the latest episode of "As the Trade War Turns," China has decided to weaponize its dominance in rare earth elements (REEs), imposing export controls on critical minerals like samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium.

Unfortunately, those elements are also the lifeblood of modern technology, essential for everything from smartphones to missile systems.

A full list of the alloys, compounds, and mixtures associated with the REEs is here (in Chinese): https://archive.ph/weFhz.

The metals, essential for everything from precision missiles to EV motors and MRI machines, now require an export license under China's Export Control Law.

While not a full export ban, the licensing regime is expected to curtail supply and sharply inject volatility into already-tense markets.

Prices are poised to spike, with some analysts warning of potential 500% surges.