China Calls On U.S. to Immediately Rectify ‘Wrong Practices’ In Trade Brouhaha

Treasury Secretary Scott Bessent (L) and U.S. Trade Representative Jamieson Greer deliver remarks on the sidelines of the IMF/World Bank annual meetings. (Brendan Smialowski / AFP / Getty Images)

Key Points

• China’s Ministry of Commerce said that recent U.S. actions harmed its interests and bilateral trade discussions.
• Beijing clarified its export restrictions on rare earth products, saying they are not a ban and adding that it will approve compliant non-military export applications.
• China expressed willingness to resume negotiations with the U.S. through “equal-footed dialogue” to address mutual concerns.

China’s Ministry of Commerce on Thursday pushed back against the U.S. characterization of what led to the latest escalation in trade tensions, and called on the U.S. to reconsider its recent tariff threats and restrictions while stressing Beijing is still willing to continue negotiations.

The U.S.-China rivalry exploded this past week with a trade version of “he started it first,” as officials from both countries took a hardline against each other while also stressing they still wanted to talk.

During a press conference, a Ministry of Commerce spokesperson on Thursday defended China’s recent moves, including yet-to-be implemented export restrictions covering a large swath of the global supply chain for critical minerals.

The spokesperson pushed back against the characterization Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer offered Wednesday about the source of the unraveling of the fragile détente previously reached between the two rivals.

The spokesperson characterized China’s recent moves as reactive, noting that the U.S. rolled out 20 measures to suppress China in just over 20 days after what both sides had described as constructive talks in Madrid.

Those actions included the U.S. “affiliates rule” unveiled in late September by the Commerce Department shortly after the meeting that expanded the universe of Chinese companies on a U.S. entities list to encompass thousands of enterprises that would be blacklisted.

“These measures have seriously harmed China’s interests and undermined the atmosphere of the bilateral trade discussions,” the spokesman said. He added that Beijing hopes the U.S. values the outcomes achieved in the economic and trade talks and called on the U.S. to ”immediately rectify its wrong practices.”

The Treasury Department didn’t immediately respond to a request for comment.

On Wednesday, Bessent and Greer described China’s new export restriction regime as trying to put a chokehold on the global supply chain of critical minerals that go into everything from laptops to defense equipment. The plan, announced last week, was the reason President Donald Trump threatened additional 100% tariffs on Chinese goods. On Thursday, Beijing said the U.S. version of the controls it unveiled “seriously distorts and deliberately exaggerates” the measures, which it stresses are not intended as a ban.

The spokesman clarified that the foreign-made rare-earth products subject to control would be limited to rare earth magnets and related components that are already on its restricted exports list and said all compliant export applications for non-military use would be approved. China said it would shorten review timelines for licenses to allow the sale of these minerals and consider exemptions.

The clarification could help de-escalate the situation in the interim. Analysts didn’t expect Beijing to repeal the restrictions but to take efforts to soften them and bolster its licensing process.

That said, these types of export controls—not tariffs—lie at the center of the trade conflict and are unlikely to be resolved anytime soon as both sides use them as a source of leverage in their growing rivalry.

China is also increasingly taking a page from the U.S. trade and technology restrictions playbook. In early September it unveiled anti-discrimination probes into U.S. trade policy around chips and suspected dumping of analog chips.

“We now are a bit on the backfoot in how we respond. Those economic weapons that China had latently [on critical minerals] it is now using actively as part of the escalation,” said Emily Kilcrease, director of energy, economics and security at the Center for a New American Security and formerly deputy assistant at USTR, at the Institute for International Finance’s annual meeting on Wednesday.

Whereas national security issues—such as export controls—had previously been kept out of trade discussions and not used as a bargaining chip, these two are now intermingled in discussions, complicating the situation and giving China more space to negotiate, according to Kilcrease.

And despite Beijing’s pushback Thursday, the spokesman stressed China was ready to get back to negotiations to address each side’s concerns through “equal-footed dialogue,” mirroring Bessent and Greer’s comments about continuing to talk with their counterparts.

That has for now calmed investors who are still looking for some sort of off-ramp that allows for Chinese leader Xi Jinping and Trump to meet at the end of the month in South Korea to stabilize the relationship. The two sides have already had working-level discussions this week, and analysts expect continued efforts over the next two weeks to get a meeting between the leaders firmed up.

But trade and national security experts stress caution. “Even with a successful summit (between Xi and Trump), we should treat any truce as fragile,” Kilcrease said.

Write to Reshma Kapadia at reshma.kapadia@barrons.com