If international trade is a game of chess, China has the U.S. in check — with few good options for the next move.
Why it matters: The trade war has exposed just how deeply the U.S. economy is at the mercy of an accident of geology — China's supply of the rare earth minerals that power our modern high-tech society.
The big picture: China's control of the global rare earths supply has left the U.S. playing defense in a trade war of its own design.China loosening up on rare earths exports was a key part of the trade truce the two countries struck in mid-May. But its slow-walking of those exports is now at the heart of another breakdown in the relationship.
Between the lines: President Trump says he and China's President Xi Jinping spent 90 minutes on the phone Thursday discussing trade."There should no longer be any questions respecting the complexity of Rare Earth products," Trump said — though what that means for exports, as a practical matter, wasn't immediately clear.
Whatever leverage the Trump administration thought it had going into a spree of "90 deals in 90 days" has thus far not delivered much, and now courts are threatening to stand in the president's way.
State of play: The U.S. economy has been resilient thus far, defying predictions of immediate tariff chaos. But new signs suggest private-sector hiring is weakening, and supply chains are breaking down.Consumer prices are starting to rise, manufacturers' profits are being squeezed, and the specter of inflation looms larger by the day.
Factories are beginning to shut down because they can't get the necessary components, and some companies are reportedly considering the extraordinary step of shipping their unfinished products to China to add the components there.
None of that was the point of the trade war; most of it is the exact opposite.
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