Trump threatens 200% tariff on China over magnet export curbs

U.S. President Donald Trump on Monday stateside warned of steeper tariffs on China if exports of rare-earth magnets were curbed, threatening a precarious trade truce between the world’s two largest economies.

“They have to give us magnets, if they don’t give us magnets, then we have to charge them 200% tariffs or something,” Trump told reporters after a meeting with South Korean President Lee Jae Myung at the White House on Monday.

Trump also said that airplane parts were a key leverage that Washington has to counter Beijing’s grip on rare earths: “200 of their planes were unable to fly because we were not giving them Boeing parts purposely because they weren’t giving us magnets.”

Boeing has been working toward a deal to sell as many as 500 aircraft to China, with both sides finalizing the details such as jet models, types and delivery schedules, Bloomberg reported, underscoring the role of airplane jets in a potential U.S.-China trade deal.

Trump’s statement comes at a time when China’s exports of rare-earth magnets have recovered to levels seen before Beijing imposed export curbs in April, according to the latest government data. Magnets shipped to the U.S. surged more than seven times — 660% — in June from the prior month, with volumes rising 76% on month in July.

China dominates rare-earth magnet production, controlling about 90% of global supply, and maintains a similar grip over the refining of the minerals used to make them.

That dominance has given Beijing significant leverage in its trade talks with the Washington, as the U.S. relies heavily on the rare-earth magnets for its large manufacturing sector, particularly automotive, electronics and renewable energy.

Henry Wang, founder and president of the Center for China & Globalization, a Beijing-based think tank, downplayed Trump’s “casual” remarks, saying the real test should be on both sides’ efforts in implementing their agreements.

“He’s bluffing. He always talks big on tariffs or potential punishment, but we shouldn’t get caught up in the rhetoric,” said Wang, who is also a former counselor for China’s state council.

In June, Washington and Beijing agreed on a trade framework that included easing controls on Chinese rare-earth exports as well as a rollback of some American tech restrictions for shipments to China.

U.S. and China have agreed to lowering tariffs on each other’s goods to around 55% and 32%, respectively. That a temporary truce is set to expire in mid-November.

China’s embassy in the U.S. did not respond to CNBC’s request for comments.

Senior Chinese trade negotiator Li Chenggang is reportedly heading to Washington this week for meetings with U.S. Trade Representative Jamieson Greer and senior Treasury officials, the Wall Street Journal reported Tuesday.

Whether the trade truce holds beyond its November deadline will hinge on continued bilateral engagement, said Alfredo Montufar-Helu, managing director at advisory firm GreenPoint, adding that Li’s upcoming meetings could lay the groundwork for higher-level negotiations and enduring solutions to ease the tensions.