Retaliation or escalation? Trust between the U.S. and China is fading fast, analysts say

The flare-up in tensions between the U.S. and China over the weekend highlights the deepening mistrust dividing the world’s two biggest economies. In the two days after Beijing ended its Golden Week holiday on Wednesday, the country announced a new framework for restricting rare earths exports, placed more U.S. companies on a blacklist and charged U.S.-linked ships with fees for docking at Chinese ports.

U.S. President Donald Trump then threatened 100% more tariffs on Chinese goods, a move which was followed by Beijing asserting its rare earths restrictions are a “legitimate” measure.

“The root cause of the tension is due to a lack of mutual trust,” Larry Hu, chief China economist at Macquarie, said in a note Monday. “During the London talks in June, both countries agreed to a deal involving ‘rare earth for tech,’” he said. “Unsurprisingly, both feel betrayed when they perceive the other as acting in bad faith.”

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