[US-China New Cold War Era ③] Escalating Tariff War: US Solar Tariffs, China Rare Earth Export Ban

Anti-Dumping Tariffs on Solar Panels from Four Countries Including Cambodia Announced
U.S.: "Found Evidence of Subsidies from China"
China Strikes Back with Strategic Resource Export Bans
Key Materials for Electric Motors Included
Musk Also Stunned by China's Export Restrictions
Xi Jinping More Confident Than in First Term
Trump Considers '50% Tariff Cut' Card
Hopes for Reconciliation Begin to Emerge

Editor's NoteThe world has entered a new era of the "New Cold War." The United States and China, who have maintained a relationship as rivals and partners for decades, are now threatening each other's security and economies, bringing their swords to each other's throats. This comes just three months after the launch of the Trump administration. Amid what is effectively a trade embargo, the economic war is entering a new phase. Economic decoupling between the two countries, which together account for about 43% of global GDP, is already underway. Furthermore, the conflict is escalating into a full-scale confrontation encompassing supply chains, platforms, technology, and diplomacy. The Wall Street Journal (WSJ) reported, "A shadow of a new cold war has fallen due to the breakdown in U.S.-China relations," and warned that "as economic ties unravel, overall global security and economic stability will be at risk for years to come." In response, we are publishing a three-part series examining the realities and implications of the power struggle between these two superpowers in the military, technology, and economic sectors.

The United States and China, who have coexisted as inseparable trade partners for decades, are now heading down the path of "economic decoupling." Reuters described this as "no longer just a political slogan," while CNN likened it to "a very complicated divorce process." The two countries, having engaged in a tariff ping-pong with rates as high as 245% (U.S.) and 125% (China), are now weaponizing all trade items, including semiconductors, rare earth elements, ships, and solar panels, to pressure each other. However, there is now some anticipation of a possible "reconciliation mood," as President Donald Trump is reportedly considering a "50% reduction" in tariffs on Chinese goods.

U.S. Wields Economic Weapons: From Solar Panels and Ships to Semiconductor Export Sanctions

As criticized by the Chinese government, tariffs exceeding 100% are now so high that further increases are essentially meaningless. The latest move by the U.S. is anti-dumping tariffs on Southeast Asian solar cells and panels. On April 21, the U.S. Department of Commerce announced that products manufactured in Malaysia, Cambodia, Thailand, and Vietnam would be subject to these measures. The anti-dumping tariffs range from 6.1% to 271.28%, and countervailing duties range from 14.64% to 3403.96%. In particular, Cambodia was hit with a 3521% tariff for failing to cooperate with the investigation, according to the UK daily The Guardian. After a year-long investigation, the U.S. Department of Commerce stated, "We found that companies in these four countries have been receiving subsidies from China." This measure will be finalized after a review by the U.S. International Trade Commission (ITC) in June.

If this de facto expulsion is confirmed, companies that have benefited from the growth of the U.S. solar market are expected to suffer inevitable losses. Thanks to the Inflation Reduction Act (IRA) introduced under the previous Joe Biden administration, the U.S. solar market has experienced explosive growth. According to the U.S. Energy Information Administration's (EIA) Short-Term Energy Outlook (STEO) report published in October last year, the share of solar power in the U.S. energy mix is expected to increase from 4% in 2023 to 5% in 2024, and to 7% in 2025. In 2025, it is projected to approach the capacity of coal-fired power plants.

Last week, the U.S. Trade Representative (USTR) decided to impose port entry fees on all shipping companies using Chinese-built ships starting in October, as a measure to counter China's shipbuilding and shipping industries. The USTR stated that it would collect an entry fee of $50 per ton on ships operated or owned by Chinese companies, with annual increases to reach $140 per ton by 2028.

Additionally, President Trump has continued the semiconductor chip export restrictions against China, a policy carried over from the previous administration. This is virtually the only area where the Trump administration, which aims to erase Biden's legacy, has maintained the previous government's approach. Semiconductor manufacturers such as Nvidia, AMD, and Intel have become targets. These companies must obtain U.S. government approval to export semiconductor chips to China. In Nvidia's case, there is even an investigation into whether it violated regulations by supplying semiconductor chips to Chinese AI startup Deepseek. The CIA has also investigated whether Nvidia circumvented regulations by routing shipments through Singapore.

China Weaponizes Resources... Musk Also Stunned by Rare Earth Export Ban

China has responded with export restrictions on strategic resources. What began earlier this year with three items, including tungsten, has now expanded to seven types of heavy rare earth elements. Even Elon Musk, CEO of Tesla?once called President Trump's "first buddy"?was reportedly stunned by the rare earth export ban. These materials are essential for magnets used in various electric motors. These electric motors are key components in electric vehicles, drones, robots, missiles, and spacecraft, and are also used in internal combustion engine vehicles. In addition, heavy rare earth elements are used in chemicals for manufacturing jet engines, laser equipment, automotive headlights, and spark plugs, and are also key materials for capacitors used in AI servers and smartphone chips.

By controlling exports not only to the U.S. but to countries worldwide, China is sending a subtle warning to all nations while also avoiding World Trade Organization (WTO) sanctions that could result from targeting specific countries. This is one reason why, even as the U.S. holds trade talks with 34 countries this week alone, many nations are hesitant to side with Washington. President Xi Jinping also visited Vietnam, Malaysia, and Cambodia as his first diplomatic tour this year, seeking to "build his own bloc."

Since relations soured, China has openly excluded American companies. It has created a "blacklist" that includes U.S. big tech companies and restricts the export of dual-use goods. Boeing, the leading U.S. aircraft manufacturer, has lost China as a major customer and has had to adjust its business portfolio. The Chinese government has also restricted imports of American films, dealing a severe blow to Hollywood.

Leaders of Both Nations Clash in a 'Chicken Game'... Xi Jinping Prepared for Seven Years

What is causing global anxiety is that the leaders of both countries are engaging in a "chicken game," recklessly undermining their own economies. In particular, the world's media is paying attention to President Xi Jinping's changed attitude compared to the first Trump administration. France 24 reported, "President Xi Jinping has spent seven years diversifying export destinations and reducing dependence on the U.S.," and pointed out, "Unlike in the first term, there are no 'adults in the room' in the U.S." The "adults in the room" refers to figures such as John Kelly, former White House Chief of Staff; Jim Mattis, former Secretary of Defense; and Herbert R. McMaster, former National Security Advisor, who checked President Trump's excesses during his first term.

Although President Trump boasted from the start of his term about engaging in dialogue with China, he reportedly has yet to speak with President Xi Jinping. He has repeatedly told the American media, "I will negotiate with China soon" and "I am waiting for a call from China," but China has remained silent in response.

However, recently, President Trump has shown signs of change. On April 22, he acknowledged that the additional tariffs on Chinese goods, which reach as high as 245% by item, are "very high," and stated that if negotiations take place, "they will not remain that high and will be significantly lowered." The next day, on April 23, he said, "I will decide on the tariff rate for China within the next two to three weeks." The Wall Street Journal (WSJ) reported that the administration is considering reducing tariffs by more than half, to between 50% and 65%. There are also reports that the administration is considering imposing differentiated tariffs on Chinese goods by item, based on whether they pose a national security threat.