How scared should you be of 'the China squeeze'?

CHINA BEATS you with trade; Russia beats you with war," mused President Donald Trump on August 11th. His reflection came mere hours before he extended a fragile trade truce with China for another 90 days.

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CHINA BEATS you with trade; Russia beats you with war," mused President Donald Trump on August 11th. His reflection came mere hours before he extended a fragile trade truce with China for another 90 days. After months of tit-for-tat tariffs, the Sino-American trade war has settled into uneasy stasis. But China is using the time to hone a sophisticated arsenal of devastating economic weaponry. Even as the sides contemplate a broader deal to stabilize the planet's most important trading relationship—worth $659bn each year—China knows that its power is not in what it buys, but in what it sells.

That is a far cry from the last time President Xi Jinping and Mr. Trump went head-to-head on trade in 2019. Mr. Xi agreed to buy more American goods in a deal much criticized in China. It fitted a clumsy pattern. Back then China tended to punish transgressions by cutting access to its consumer market, such as for Australian wine or Lithuanian beef. No longer. Now Mr. Xi's economic weaponry squeezes supply chains and the foreign industries which depend on them.

Chinese victories have piled up in recent months. First came Mr. Xi's masterstroke in April: retaliating against American tariffs by choking off supplies of Chinese-refined rare-earth minerals and magnets critical to American industry. Within weeks, America's $1.5trn carmaking industry, among others, panicked and Mr. Trump sought peace. In July the European Union squealed in the lead-up to an EU-Chinese summit after flows of rare-earth minerals and battery technology to Europe slowed without explanation. Speeding them up then became a subject of negotiation.