US treasury secretary Scott Bessent has accused China of trying to hurt the world’s economy after Beijing imposed sweeping export controls on rare earths and critical minerals, hitting global supply chains.
Bessent said that China’s introduction of the controls – three weeks before US President Donald Trump is expected to meet his Chinese counterpart Xi Jinping in South Korea – reflected problems in its own economy.
“This is a sign of how weak their economy is, and they want to pull everybody else down with them,” Mr Bessent said on Monday.
“Maybe there is some Leninist business model where hurting your customers is a good idea, but they are the largest supplier to the world,” he added. “If they want to slow down the global economy, they will be hurt the most.”
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Mr Bessent added: “They are in the middle of a recession/depression, and they are trying to export their way out of it. The problem is they’re exacerbating their standing in the world.”
The US treasury secretary comments came days after China unveiled expansive restrictions on rare earths and critical minerals supplies, prompting Trump to threaten an additional 100 per cent tariff on imports from China from November 1st.
Futures tracking the S&P 500 were down 1.3 per cent on Tuesday while those for the Nasdaq were 1.6 per cent lower. Global markets have whipsawed in recent days after the flare-up between the US and China reignited fears of a return to the global trade war that rocked markets earlier this year.
One person familiar with the situation said the US had drafted countermeasures it would take if the two sides did not reach agreement. The person said the US would prioritise the issue when G7 ministers met in Washington this week for World Bank-International Monetary Fund meetings.
Two other people familiar with the situation said the US was considering requiring companies exporting any software to China to obtain a licence, which could have a dramatic impact on Chinese industries.
US officials were taken aback by what they considered China’s disproportionate move to restrict critical minerals supplies, ahead of the South Korea summit during the Asia-Pacific Economic Cooperation meeting in late October.
But they said Li Chenggang, the top trade negotiator for vice-premier He Lifeng – Mr Bessent’s counterpart – had issued threats to Washington in the summer.
“In August, Li Chenggang previewed many of China’s current lines of attack that played out over the last week,” a senior US official said. “He was pretty unhinged and very aggressive in stating that the US would face ‘hellfire’ if things didn’t go his way.”
Mr Li did not specifically mention rare earths, but “he said we will retaliate beyond all expectations”, the official added. “China is trying to backfill a narrative when, in fact, Li previewed it months ago.”
Earlier on Monday, Mr Bessent said it was possible Mr Xi was unaware of the rare earths announcement. The senior US official said there was a fight between government agencies in Beijing that was affecting US-China negotiations.
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“We think there’s an internal dynamic between the finance ministry and the commerce ministry. Their commerce department – including Li – is much more provocative,” the senior official told the FT.
“The hardliners are the Ministry of Commerce and the Ministry of State Security, and the MSS has taken a much greater role in the economy,” the official added.
China has blamed Washington for the escalation. On Sunday, it cited recent actions by the US, including the commerce department putting thousands of subsidiaries of Chinese companies on a trade blacklist.
A second senior US official said Beijing was using the US commerce department action, which was introduced in late September, as a “total pretext” to proceed with a policy that had been in the works for some time.
“They could not pull something so elaborate together in two weeks,” he said, referring to Beijing’s rare-earth export controls. “The thing that was surprising is that they would do something that was so disproportionate. We are trying to stay proportional. They are not.”
The first US official said Mr Trump decided to publicly criticise China on Friday after Beijing refused to engage in discussions.
“We essentially had a 36-hour period after it came out where we expressed interest in talking to them. But they didn’t want to talk, so we took it public, and then suddenly they wanted to talk,” said the first US official.
US and Chinese officials met in Washington on Monday following what Bessent had described as “substantial communication” between the countries over the weekend.
Bessent is expecting to meet He one more time before Mr Trump and Mr Xi see each other in South Korea on October 29th.
One person familiar with the situation said China had originally wanted the Bessent-He meeting to happen after Apec. But he said China had now “changed its tone” and wanted the two officials to meet before Mr Trump and Mr Xi do.
The second US official said the administration was not concerned that Mr Trump’s new proposed tariffs on China would trigger the kind of market turmoil that followed his sharp escalation of levies to 145 per cent in April.
“Now we’re in a much more stable situation with the rest of the world, and also our trade deficit with China has already declined by 25 per cent this year,” said the official. “We also have much more leverage in terms of the unity with the western and Asian democracies.”
On Sunday, Mr Trump posted on Truth Social that Mr Xi had suffered a “bad moment” and that the US wanted to help China. Some observers interpreted the post as Mr Trump softening his tone. But one person familiar with the matter said he was “trolling” the Chinese leader.
China on Tuesday struck a more conciliatory note, urging the US to “take steps towards co-operation” with Beijing, and noted that the two sides held talks on Monday. – Copyright The Financial Times Limited 2025
