Welcome to Foreign Policy’s China Brief.
The highlights this week: China announces major rare-earth export controlsWashington and Beijing begin charging steep tit-for-tat port feesand a British espionage case involving China collapses.
Chinese Export Controls Put Pressure on U.S. Trade Strategy
After China announced major new export controls on rare earths and related products last Thursday, U.S. President Donald Trump responded by promising 100 percent tariffs on all products from China starting Nov. 1. Trump adopted a more conciliatory tone after seeing U.S. markets fall on Friday, but his threat remains in place.
China’s export controls, which apply to all countries, are a blow to both U.S. defense supply chains and global industry. As RAND analyst Gerard DiPippo points outChina’s latest moves are part of a broader system of controls built to mirror the U.S. sanctions regime. China is using the same rules on foreign direct products that the United States has applied since 1959.
Realizing how powerful the U.S. economic security regime was arguably drove China to create a system of its own, and Trump’s bluster is unlikely to dissuade Beijing from making further use of such a powerful tool.
China’s next moves will depend on how its leadership reads Trump. A serious, sustained threat to reimpose tariffs is a very different thing from another round of “Trump always chickens out”—the notion, which Chinese commentators have already latched on tothat the U.S. president abandons threats as soon as he faces consequences for making them.
Traders certainly seem to be thinking along those lines, with markets rebounding since Trump took a softer tone.
Trump still wants a meeting with Chinese President Xi Jinping, and behind the scenes, U.S. officials seem to be keeping diplomatic channels running. On Monday, U.S. Treasury Secretary Scott Bessent said China had “substantially de-escalated,” despite Beijing not changing its public position on the exports.
The problem for the Trump administration is that trade threats will likely hurt the United States more than China. Since Trump launched the trade war this year, Chinese exporters have had considerable success finding new markets. Last month, China’s year-over-year exports to the United States fell by 27 percentbut exports as a whole were still up by 8.3 percent.
In contrast, U.S. farmers have not found new buyers for their soybeans—while Brazilian producers have stepped inperhaps permanently, as a replacement in the Chinese market. This year has also exposed how many U.S. businesses are dependent on China. The holiday season is coming, and price spikes could cause consumer anger: Between 73 and 78 percent of toys and 85 and 90 percent of Christmas goods sold in the United States are made in China.
Beijing is reportedly confident that it won the first round of the trade conflict with Washington; this latest exchange is unlikely to convince Chinese officials otherwise.
China’s rare-earth stranglehold will thus remain a serious constraint on U.S. action. The United States ignored more than a decade of warnings about this problem. Now, the U.S. Defense Department is scrambling to build a $1 billion critical minerals stockpile, which will be difficult to do without Chinese sources.
A better strategy might be to heed the advice of former Chinese Finance Minister Deng Xiaoping: Hide your strength and bide your time. Breaking China’s grip on rare earths is possiblebut visibly panicking about it could encourage Beijing to act while it still holds the upper hand.
What We’re Following
Port wars. Another U.S.-China struggle is playing out at sea. Beginning on Tuesday, the United States is charging additional port fees for ships built, owned, or operated by Chinese firms. The current fee for Chinese-owned or -operated ships is $50 per ton and will rise to $140 per ton by 2028. China has imposed similar tit-for-tat measures on U.S.-linked ships but has exempted ships built in China.
The impact could be painful for both shipping and trade. Even a small container ship can weigh 20,000 tons. For large ones that weigh more than 200,000 tons, total port costs could start as high as $10 million. As with tariffs, these costs are likely to be passed on to consumers.
Through these port fees, the Trump administration hopes to bring shipbuilding back to the United States, but it has a long way to go. China currently dominates the shipbuilding market, accounting for a 53.3 percent share, followed by South Korea (29.1 percent). The United States, meanwhile, makes up only 0.1 percent of the market.
China is taking additional strides to widen its lead, announcing new measures this week targeting South Korean shipbuilders tied to the United States.
U.K. spy case. The British government’s case against two U.K. citizens accused of spying for China collapsed last month, reportedly because the government refused to formally classify China as a national security threat. The Crown Prosecution Service asked the government for evidence of that classification for months but received no response.
That is strange, given that Britain’s MI5 recently warned that members of Parliament are being targeted by Chinese spies. For the last two decades, British policy toward China has reflected thwarted economic hopes and frequent diplomatic clashes, especially over Hong Kong.
It’s not clear whether government obfuscation in this case was deliberate or incompetent. Despite opposition leader Kemi Badenoch attempting to blame the Labour government, the case began in 2023 when Conservatives were still in power.
The NBA returns. After six years of ruptured relations largely tied to freedom of speech concerns, a more cautious National Basketball Association (NBA) is returning to China—the U.S. league’s most important overseas market. The Brooklyn Nets and the Phoenix Suns will play two preseason games this weekend in Macao, the semiautonomous territory in China’s south known for its casinos.
FP’s Rishi Iyengar writes about the fraught history of this relationship—and what comes next.
FP’s Most Read This Week
Tech and Business
EV fires. Like many firms in China, phone giant Xiaomi got into the electric vehicle race last year. But it’s now facing a public relations crisis after images of one of its signature SU7 models engulfed in flames circulated on Chinese social media. The footage was captured after a fatal collision in Chengdu in which the vehicle’s doors could not be opened to rescue the person inside. On Monday, Xiaomi’s stock dropped by more than 5 percent.
EV-linked fires have become a major issue in China, and the solutions so far—including one system that violently ejects batteries from the vehicle—seem more dangerous than the problem itself. Fires among charging vehicles have prompted bans in some apartment complexes, though e-bikes have so far proved to be a bigger danger than cars.
Vertical dramas. Chinese cultural exports are notoriously lacking despite the country’s size, but Western media producers are investing in a new video format that was pioneered in China: vertical dramas. With episodes as short as a minute, vertical dramas are designed to be watched on phones by an audience loyal to short-form video apps such as Douyin and TikTok.
The first few episodes of vertical dramas are often free, but viewers must pay fees to keep watching once they’re hooked. This model has created a $7 billion market in China that Western studios want to imitate in their own countries. This is somewhat baffling to me because the few free episodes I’ve watched seem poorly produced and full of cliches.
Notably, the U.S. firm Quibi tried a similar approach a few years ago, but it was a flopburning through $1.75 billion in capital investment before shutting down two years after its founding. Maybe it was just ahead of its time, or maybe even its eight- to 10-minute episodes were still too long for an audience with atrophied attention spans.
