By
Siddharth Shankar
Africa-Press – Eritrea. Tariffs are an economic instrument aimed towards curbing unrestricted imports of foreign goods and strengthening an environment that promotes domestic production of the previously import-dependent commodities in a country. This measure is usually seen as an effort to boost their terms of trade with their relatively higher trade deficit partners and boost regional labor and productivity.
In the era of shifting global economic dynamics between globalization and the so-called “neo-protectionism” as a strategy adopted by the international economies, the Global North bloc led by the United States has spearheaded their geoeconomic approach of propounding their conservative ideologies turned economic policies. This approach is aimed at the promotion of their regional interests with little respite to the mechanism of monitored free trade as regulated by the international organizations, which has been the new normal of global affairs. This worldview has been coined the term “Trump-o-nomics” as the new economic and foreign policy of the United States.
With the return of Donald Trump as the 47th President of the United States of America in January 2025, the international politico-economic order that is supposedly led by the so-called ‘liberal West’ has marked a complete ideological shift. Through the lens of observation, a general assumption of a neo-realist world has been reformed from the international affairs of the 21st century, where the liberal ideas of political and socioeconomic freedom as well as collective security have been overshadowed by the element of national security and domestic growth prosperity.
The United States under President Trump would expect nothing less than the prioritization of American people, employment, and economic growth towards a better American Dream 2.0 led by the neorealist elements of bandwagon and the role of international alliances in the political front while the increased adoption of economic realism elements of competitive protectionism and rapid industrialization in the economic dimension of the American economy.
Current Scenario
The ‘situationship’ between the Trump-led United States and the Xi-led Chinese economies has been aggravated ever since the implementation of the US tariff hikes in the early weeks of April 2025 with the imposition of initial reciprocal tariffs of 56% against the Chinese exports of key Rare Earth Elements (REEs), heavy metals that included terbium, germanium, yttrium, and dysprosium. These minerals usually cater to the manufacture of electric vehicle (EV) battery components and storage cells, the phosphorescent properties of smart mobile screens, as well as a significant portion of the military equipment that is heavily depended on by the United States (US) military.
In his efforts to promote his long-standing vision of an “America-First” policy stance, the administration has placed all their bids into the protectionist window that characterized the then isolationist policy of the early 20th century United States with the thought of noting a so-called scare in the global ‘free trade’ landscape that bound the West with the East together in a century’s new phase characterized by two conflicts—one in Eurasia and the other in the Middle East.
In response to his 56%, China had imposed a retaliatory rate of 45% on all the US exports, which also included sugarcane, livestock, critical automobile component parts, and fertilizers. China’s retaliation had left the US economy unscathed in their efforts to escalate the trade war with tariffs having reached 156% imposed by the United States, while the increase in China’s rates from 45% to 146% had reflected a no-nonsense attitude of the President of the People’s Republic.
Come May, the trade war had shown a certain sign of de-escalation in the bilateral imposition of tariff rates and a brief period of “cool-off” where a couple of diplomatic engagements between the officials of President Trump and the Xi administration had raised hopes towards a return to economic normalcy among their respective statesmen. It is, currently, in this phase of economic showdowns that the world’s top two largest economies (in terms of GDP growth) are projected to pull through their diplomatic strings and restore their respective markets and business opportunities to the pre-reciprocal tariff phase of growth trajectory.
Assessment
The economic standoff that had led to the sudden trade war escalation in the month of April had involved both economies pulling their respective ‘sectoral export strings’ towards a stalemate that had, eventually, induced both respected administrations to proceed with the diplomatic option that involved bilateral communication among the top leadership.
In the context of China, it had implemented its immediate ban on the export of a selective list of heavy REEs and critical minerals—germanium, gallium, antimony, and terbium. The global mineral export ban may have resulted in a brief phase of the global market facing a huge crash in their prices, especially the business sectors that included automobiles, television, and pharma, as well as the Android mobile manufacturing sector. Their share of China’s critical mineral imports had contributed close to 37% of their reduction in additional production, holding as well as maintenance costs in their respective supply chains.
In response to the Chinese actions, Trump retaliated with an immediate action towards a pause in the sales of critical technologies in the production of semiconductors and a halt in the scramjet engine components as well as the heavy machinery that makes up a significant portion of China’s manufacturing capabilities. This particular period of a so-called economic détentebetween the two economies paved the way for exploring opportunities to diversify their respective supply chain channels of procurement, manufacturing, and distribution (Jackson, Lv, Onstad, & Scheyder, 2025).
Hence, the adage goes true that in every adversity, there entails an opportunity to restore and start afresh. This phase of April-May has reflected the volatility of the global supply chain environment to be both foolproof and also flawed in their international trade and national security dimension.
Business Implications
The volatility of the international financial markets provides a sharp reflection of the impact that trade disruptions among the two largest economies could shift figures to a sudden decline in the global market indices, an indication of deep business sentiments over critical declines in supply chain developments. Trade flow declines in critical minerals have implied the halt in the availability of ease in manufacturing costs and raw materials availability.
Global sectoral giants, which include Apple Inc., John Deere, and Foxconn, have resorted to friend-shoring as well as near-shoring their manufacturing and production capacities to destinations that include India, Vietnam, Mexico, and Indonesia among their business options.
China’s diplomatic reach in Southeast Asia, especially the Association of Southeast Asian Nations (ASEAN) member countries, has reflected a mutual convergence of the Southeast Asian manufacturing environment being a suitable host to both the United States and Chinese business opportunities, corroborated by the ease in manufacturing and maintenance costs alongside a rising domestic consumption of their respective supplies.
Recommendations
It is evident that trade disruption has resulted in the diversification of the supply chain channels east as well as southeastward in a direction characterized by low production, manufacturing, holding, and maintenance costs, as well as a significant share of rich critical mineral ores that have found their path to proximity in American and Chinese extractive industrial deposits.
In Asia, India holds a significant portion of American manufacturing companies formerly present in Southern China that cater to a comparatively larger consumer audience alongside relatively easier manufacturing & maintenance costs. India’s Critical Minerals Mission, announced in April 2025, would cater to a strategy of self-reliance in the exploration of REEs and key minerals while also enhancing mineral partnerships with its allied member countries towards boosting mineral cooperation, security, and mutual development.
The Critical Minerals Mission would benefit key sectoral conglomerates in the automobile, semiconductor, and defense equipment industries, as well as the smart mobile sector, despite the recent warning given by the US administration to their domestic manufacturers to halt manufacturer bases and return to America or face the threat of a backlash in tariffs.
In response, Apple Inc. on 25 May was smart to call out Trump’s farcical threat to hinder their marginal profits and production while maintaining their efforts to build their support/destination economies while also indicating the flexibility of the current global supply and value chain channels to disruptions in geoeconomic instruments and geopolitical dynamics.
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