Trade War Monitor, May 29: Chinese hail court for blocking Trump’s tariff onslaught

02 Jun 2025

By Lu Zhenhua

China accounts for the world’s largest proven reserves of rare earth oxides — 44 million tons, or 49% of the global total
China accounts for the world’s largest proven reserves of rare earth oxides — 44 million tons, or 49% of the global total

On Thursday morning in Beijing, as news came in that a U.S. federal court ruled President Trump had overstepped his authority to impose “Liberation Day” tariffs, Chinese readers hailed the fact that America’s constitutional checks and balances were still working.

Specifically, the court order halts Trump’s 30% tariffs on China, the 25% tariffs on some imports from Mexico and Canada and the 10% universal tariffs on most imports into America. However, it does not affect the 25% tariffs on autos, auto parts, steel or aluminum. Observers will be watching to see how the court order affects trade talks between Washington and its trading partners, including China.

Trump’s use of tariffs to reshore American manufacturing also faces hurdles. Shifting tariffs and the retreat from Biden-era subsidies, combined with skilled labor shortages are complicating strategies for semiconductor, pharma and auto industries.

We will continue to closely monitor this economic warfare so our readers are better prepared for the impacts to come.

Industrial gains

China’s industrial profits grew at a faster pace in April, despite the surge in import taxes following the U.S. imposition of “reciprocal tariffs” early in the month.

The country’s major industrial enterprises saw profits grow 3% year-on-year, up 0.4 percentage points from March, official data released Tuesday show. Industrial profits have recovered steadily through the first four months, up 1.4% year-on-year, following a 0.8% increase in the first quarter that reversed a 0.3% slide in the first two months.

This growth has largely been driven by private sector companies resuming profit growth, while state-owned enterprises have seen profits trending down. However, trade tensions and constraints such as insufficient demand and falling prices remain threats to Chinese industry.

Yuan rebounds against Dollar

China’s central bank is dialing back efforts to support the yuan as expectations grow that the currency will strengthen amid signs domestic and external economic pressures are easing and the recent slide in the U.S. dollar may continue.

The yuan has been on an upward trajectory this month as sentiment improved after policymakers announced more measures to support economic growth and Washington and Beijing suspended some of their tit-for-tat tariffs for 90 days.

The onshore yuan, also known as the CNY, and its offshore counterpart, the CNH, have both appreciated against the U.S. dollar by roughly 1% so far in May. The CNY strengthened to around 7.16 per dollar at one point on Monday, the strongest since November, before ending the day slightly weaker.

China’s rare earth dominance

Rare earth elements, often described as “industrial vitamins” of modern technology, are critical to industries ranging from renewable energy and precision manufacturing to national defense. China holds a commanding position in this field, thanks to its dominance in global reserves and a uniquely comprehensive industrial ecosystem.

According to 2023 data from the U.S. Geological Survey, China accounts for the world’s largest proven reserves of rare earth oxides — 44 million tons, or 49% of the global total. More importantly, it is the only nation with a fully integrated supply chain for all 17 rare earth elements, covering everything from mining and processing to refining and advanced applications.

This rare combination of resource abundance and industrial capacity gives China a distinct edge in global technological competition and supply chain security. The industry now stands at a crucial turning point, offering China a strategic opportunity to solidify its influence in key markets.

Self-reliance drive

Chinese chipmaker Hygon Information Technology Co. announced it plans to acquire server manufacturer Dawning Information Industry Co., or Sugon, as Beijing ramps up its push towards tech self-reliance amid rising geopolitical tensions.

In a letter of intent signed between the two companies, the acquisition will be completed via an all-share swap, Hygon said in a filing to the Shanghai Stock Exchange Monday. The company said it intends to issue A-shares to Sugon’s A-share shareholders, along with a private placement to raise extra funds, without revealing the terms of the deal.

Hygon said the merger aims to “seize new development opportunities in China’s rapidly evolving information technology sector and to bolster its core business capabilities.” Trading in both companies’ shares was halted Monday.

European firms in China

European companies’ optimism about their prospects in China has dropped to its lowest level on record, weighed down by a faltering economy and rising geopolitical tensions, according to a new survey.

The poll, conducted by the European Union Chamber of Commerce in China and consultancy Roland Berger in January and February, covered 503 of the chamber’s members. The findings, released Wednesday, highlight growing challenges for foreign firms in the world’s second-largest economy.

Only 29% of respondents said they were optimistic about their growth in China over the next two years — the lowest on record and down from 32% last year. Just 12% expressed confidence in their profitability during the same period, another historic low and a 3-percentage-point decline from 2024.

Contact editor of the Trade War Monitor Lu Zhenhua (zhenhualu@caixin.com)

caixinglobal.com is the English-language online news portal of Chinese financial and business news media group Caixin. Global Neighbours is authorized to reprint this article.

Image: LogO – stock.adobe.com