“It’s about magnets, stupid,” Bill Clinton might have said today.
One of his successors, the 45th and 47th president of the US, said last week, as he met his South Korean counterpart: “They [the Chinese] have to give us magnets, if they do not give us magnets then we have to charge them 200% tariffs or something.”
A revealing lament in the unfolding trade impasse between Beijing and Washington. Tariffs ready “loaded” at astronomic levels were Beijing to be intransigent in releasing export permits. Or lifting the ban on key US buyers of rare earth magnets. The “dialogues” in London in June and in Stockholm at the end of July notwithstanding, vibes between the two nations remain belligerent.
Take the matter of trade barriers. While much of the discussion has focused on the reciprocal tariffs, the growing shifts in how export controls are used is a qualitatively different feature of this wave of diplomacy. Both sides have weaponised this form of licensing power at a nation-state level to bring the functioning of global supply chains to a screeching halt.
Since the early part of this year, China has instituted export controls over key materials and an export ban on dual-use materials, like rare earth magnets, to 16 US-based entities. These magnets are as well guarded as their applications are vast. They are used in headphones, MRI machines, wind turbine motors and, more importantly, missile and aircraft systems.
As recently as Friday, the US department of commerce’s Bureau of Industry and Security “closed a Biden-era loophole” that allowed a handful of foreign-owned but US-based companies to export semiconductor components and technology to China licence free under what the previous administration had called the “validated end user” programme.
These measures are not new. They are already used for safety, conservation, health and other reasons by many nations across the global trading system. For instance, the export of abalone or uranium here in SA, for conservation or non-proliferation reasons, is controlled. The measures are also used for industrial and market intelligence reasons in product markets of policy interest here in SA, as is seen with ferrous and non-ferrous scrap material or the recent cabinet approval for consideration of export control on chrome.
It is their contemporary use, however, in the “dark arts” of interstate rivalry, as one British publication noted, that is of interest. The rapid deployment of such measures to choke an adversary’s supply chains, not least of all those crucial to their ability to defend themselves, is a development we cannot overlook. Nor ignore.
Furthermore, through the use of export controls as a literal bargaining chip, rhetorical attitudes in Washington towards state intervention seem to be shifting. We are told President Donald Trump is considering a deal with Nvidia CEO Jensen Huang to allow the conditional sale of semiconductor chips to China in exchange for a share of the sales revenue after the granting of a licence to export. For a share of the action, Nvidia could be reasonably assured that new export permits would be approved by the US authorities.
It is a paradoxically revealing change. Whether as a “quasi-rent” as some have suggested, or as a bridge to state ownership in the US economy. It may be too soon to tell. However, what is clear is that much of the bipartisan support in the US for the growing use of restrictive trade measures has been about concerns that many US trading partners use state-owned enterprises as channels for subsidisation through cheap loans and other forms of targeted support.
An entire section of the US trade representative’s 2025 National Trade Estimate Report, a publication analysing the state of play in key trade agreements, laments China’s failure to “develop a market environment of fair competition for enterprises of all kinds of ownership” and the failure to provide these enterprises with “non-discriminatory treatment” in credit, tax breaks and other regulation.
Yet it seems the magnetic pull of finding rents or exploiting asymmetric dependencies for ascendancy in conflict or negotiation is too alluring to avoid. The rules linger somewhere in the shadows. It is open season.
• Cawe is chief commissioner at the International Trade Administration Commission. He writes in his personal capacity.
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