China’s Commerce Ministry last Thursday expanded extraterritorial export controls on rare earth elements, mirroring the US foreign direct product rule by restricting US-linked tech and banning military-use exports. This move directly counters US curbs on advanced chips and signals that while America limits China’s current tech access, Beijing can disrupt tomorrow’s global semiconductor, EV, and defence supply chains.
President Trump retaliated with threats of a cancelled Xi meeting, 100% tariffs, and software export bans from November 1, but both sides left room for de-escalation ahead of potential APEC talks and the November 10 tariff truce expiry. This is viewed as President Trump’s negotiating leverage tactic to avoid a pre-2026 midterm trade war, with conciliatory signals from US officials and even the President himself.
Equity markets have plunged, boosting gold and Treasuries, while the US dollar sold off amid supply chain fears. Though Treasury bids have puzzled analysts, the dollar risks further weakness from Fed dovishness.
The euro has since recovered as a safe haven amid US risks and French stability, though it remains capped for now by German weakness. Japan’s LDP–Komeito alliance collapsed over scandals undermining PM hopeful Sanae Takaichi and delaying BOJ hikes. Meanwhile, the Australian dollar faces trade headwinds tied to China despite RBA caution.
Exclusive FX research from LMAX Group Market Strategist, Joel Kruger
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