U.S.-China Trade War Escalates: Reciprocal Tariffs and Rare Earth Restrictions Threaten Technology Sector

In early April 2025, the United States and China intensified their trade conflict, implementing reciprocal tariffs and export restrictions that threaten to disrupt global supply chains, particularly in the technology sector.

On April 2, 2025, President Donald Trump announced a "reciprocal tariff" strategy, imposing a baseline 10% tariff on all imports, with additional country-specific tariffs, including a 34% tariff on Chinese goods, effective April 5, 2025. This move aimed to address the persistent U.S. trade deficit and encourage domestic manufacturing. (source)

In retaliation, China announced on April 3, 2025, that it would impose additional tariffs of 34% on all U.S. goods, effective April 10, 2025. Furthermore, China implemented export restrictions on critical rare earth minerals, including samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium, effective April 4, 2025. These minerals are essential for manufacturing various high-tech products, including electric vehicles and defense systems. (source)

These developments have raised concerns about supply chain disruptions and increased production costs within the technology industry, given the reliance on these critical materials.

Background on U.S.-China Trade Relations and Tariffs

The United States and China have a history of trade disputes, often centered around tariffs and trade imbalances. In April 2025, President Donald Trump announced a "reciprocal tariff" strategy, imposing a baseline 10% tariff on all imports, with additional country-specific tariffs, including a 34% tariff on Chinese goods, effective April 5, 2025. This move aimed to address the persistent U.S. trade deficit and encourage domestic manufacturing. (source)

In response, China announced on April 3, 2025, that it would impose additional tariffs of 34% on all U.S. goods, effective April 10, 2025. Additionally, China implemented export restrictions on critical rare earth minerals, including samarium, gadolinium, terbium, dysprosium, lutetium, scandium, and yttrium, effective April 4, 2025. These minerals are essential for manufacturing various high-tech products, including electric vehicles and defense systems. (source)

Impact on the Technology Sector

The technology industry heavily relies on rare earth minerals for the production of various high-tech products, including electric vehicles, smartphones, and defense systems. China's export restrictions on these critical minerals have raised concerns about supply chain disruptions and increased production costs within the technology industry. Experts warn that the escalating trade war between the U.S. and China poses a significant threat to America's electric vehicle (EV) industry, given the U.S.'s dependence on China for vital raw materials and components. The imposition of higher tariffs on Chinese imports could severely disrupt supply chains, potentially leading to a reduction of up to 2 million annual vehicle sales in the U.S. (source)

Government and Industry Responses

In response to China's export restrictions, the U.S. government has taken steps to secure domestic supply chains for critical minerals. On April 15, 2025, President Donald Trump ordered a national security investigation into the potential imposition of tariffs on all critical mineral imports to the United States. Invoking Section 232 of the Trade Expansion Act of 1962, the order covers key minerals including cobalt, nickel, uranium, copper, and the 17 rare earth elements, which are essential for the defense, energy, electric vehicle, and electronics sectors. The move aims to counteract America's significant dependency on foreign, particularly Chinese, sources for vital minerals. (source)

Industry leaders emphasize that securing raw materials alone is insufficient without the ability to process and utilize them domestically. As a result, breaking China's grip on the EV supply chain will be a challenging and prolonged endeavor. (source)

Historical Context and Previous Incidents

China has previously implemented export restrictions on critical minerals. In December 2024, China banned the export of gallium and germanium, which are vital to many electronics and defense applications, and increased export restrictions on graphene. These actions were part of a broader strategy to manage the flow of critical minerals and respond to U.S. technology restrictions imposed on China. (source)