On the 9th, China announced a series of export control measures concerning rare earths and other materials, to which the United States immediately responded, further escalating the US-China trade war. The Wall Street Journal stated that China is adopting a tough stance in trade negotiations because it believes that the escalating trade war will affect the US stock market, forcing US President Trump to be willing to negotiate.
The Wall Street Journal reported on the 15th that, amid a deadlock in trade talks with the United States, China believes it has found America’s Achilles’ heel—Trump’s obsession with the stock market.
The report points out that Trump often uses the stock market as a barometer of his economic management, attributing market highs to government deregulation and tax cuts. Conversely, when the stock market is volatile, especially as a result of his aggressive trade policies, he tends to withdraw or change his strategy.
Last Friday, the US stock market reacted sharply and negatively to China’s new rare earth restrictions and the possible US retaliation.
The report states that, according to individuals close to Beijing’s decision-making circle, Chinese President Xi Jinping believes that the US economy cannot withstand a prolonged trade conflict with China because the escalating trade war will severely damage the markets, just as when Trump announced “Liberation Day” reciprocal tariffs in April of this year and China retaliated.
Related sources add that China is confident Trump will ultimately yield and make concessions, based on the US-China trade truce agreement reached in May this year. At that time, Trump had threatened to impose tariffs exceeding 100% on Chinese products, but China used restrictions on rare earth exports to force Trump to back down.
The report notes that although the Chinese economy is also in long-term decline, with a collapsing real estate market, mounting debt, and weakening consumer confidence, Xi Jinping is not significantly affected by market downturns.
Insiders have revealed that US Ambassador to China David Perdue has been working to arrange a call between US Treasury Secretary Bessent and Chinese Vice Premier He Lifeng.
Currently, attention is turning to the anticipated meeting between Trump and Xi at the end of this month during the APEC summit in South Korea.