President Donald Trump has positioned an enormous guess that the United States can take an traditionally aggressive stance towards China, the world’s second-largest economic system, and emerge stronger due to it.
Although it stays unclear if the gamble can pay off over the long run, Trump has been driving an unimaginable successful streak in latest months. The inventory market is close to file highs, the US economic system rebounded within the second quarter and inflation has defied predictions of a surge after Trump put his tariffs in motion.
But Chinese chief Xi Jinping is on a successful streak of his personal. On Monday, Trump opened the door to sending China sooner AI chips after releasing beforehand blockaded mid-tier chips. And regardless of America’s tariffs, China has efficiently discovered different markets to promote to, flooding the world with its items.
That’s as a result of Xi holds plenty of trump cards: China stays the world’s greatest exporter of products, wielding vital energy the world over. It additionally maintains management of practically the complete provide of the world’s crucial rare-earth minerals, vital for manufacturing electronics and protection gear essential to America’s nationwide safety and whose export Beijing has been slow-rolling their launch, a lot to US consternation.
And Xi has slow-walked a prize that Trump has lengthy sought: a one-on-one assembly.
Trump has performed the function of the China bully this 12 months, escalating the tariffs he positioned on China in his first time period – and continued by former President Joe Biden – to unprecedented ranges. He set tariffs on Chinese items at a minimal of 20% early in his second time period, sending them to 145% in the course of the spring and successfully blockading commerce with America’s second-largest buying and selling accomplice.
In May, negotiators between the 2 nations introduced America’s tariffs on Chinese items imposed this 12 months method down – to 30%. That felt higher to US corporations that depend on Chinese items, even when it stays considerably increased than something the United States has positioned on a major buying and selling accomplice in practically a century.
Over the course of the previous few months, Trump’s negotiators have secured a number of concessions from China, together with purchases of US soybeans and a halt to antitrust investigations into some massive American corporations that threatened their means to do enterprise there.
Those will not be major concessions, however as negotiations have continued, Trump has celebrated the tens of billions of {dollars} in tariff income which have flowed into the US Treasury every month, largely due to the large tariffs positioned on China.
Meanwhile, inflation has risen solely barely from four-year lows reached earlier this 12 months. Last quarter’s gross home product, the broadest measure of the US economic system, confirmed a pointy rebound in progress, despite the fact that it was full of warning indicators. Jobs progress has slowed dramatically in latest months, however uncertainty about tariffs has largely eased, and a few economists anticipate companies to start hiring once more consequently within the coming months.
And Trump’s favourite indicator of success, the US stock market, has been booming, largely ignoring tariffs in favor of comparatively sturdy earnings and a possible fee minimize from the Federal Reserve within the subsequent few months.
So Trump has been capable of come throughout as a robust foil to China, which he has labeled a nationwide safety menace and key financial competitor, whereas conserving the US economic system from plunging right into a recession – at the very least within the close to time period. That’s no small feat.
Despite Trump’s bluster about China, America’s president has handled Xi with relative leniency in comparison with the aggression he’s proven towards US allies, together with the European Union and Brazil, in latest months. That’s as a result of Xi is enjoying a really sturdy hand, too.
China maintains an iron grip on rare-earth minerals utilized in ultra-strong magnets which are important elements in every little thing from vehicles to fighter jets. The United States deems them crucial to the protection and industrial sectors, however China controls 90% of the worldwide processing of uncommon earths. In varied rounds of commerce negotiations, the United States mentioned it has received concessions that might give any US enterprise that desires uncommon earths preferential remedy and entry, however American corporations proceed to complain that China isn’t issuing permits rapidly sufficient to fulfill their wants.
In alternate for doling out extra uncommon earths, China has demanded a discount in US export controls on crucial items – with a selected eye on superior AI microchips. The Trump administration had drawn a line within the sand on AI chips, barring their supply to China. But Monday, Trump reversed course, saying Nvidia’s H20 chips that powered China’s earth-shattering Deepseek AI mannequin might stream considerably freely into China. And he even mentioned he would think about permitting Nvidia to ship a pared down model of its highest-end Blackwell chips, a concession that the White House had beforehand mentioned was a nonstarter.
Xi has additionally curried favor with Trump by agreeing to buy US items, together with soybeans. Meanwhile, China’s economic system has saved tempo by promoting into new markets, together with nations in South America and Africa, limiting disruption to its companies. China’s exports grew at 5.9% within the first half of 2025, the identical tempo as the primary six months of 2024, based on ING. And China’s commerce surplus reached $586 billion within the first half, setting a brand new file for any six-month interval.
And Xi has energy over one thing else that Trump actually covets: a gathering. Although Trump has claimed Xi promised to fulfill a date has not but been set, and China has but to substantiate.
So Xi is biding his time, leveraging his nation’s assets and export dominance. It’s a robust hand to play towards a president who has used tariffs to steamroll virtually each different international chief in his path.