Denis Staunton: Xi is in a strong position and feels confident in taking a tough approach to negotiations
By the time Xi Jinping’s meeting with Donald Trump in South Korea takes place on Thursday, the details of any deal between the world’s two biggest economies will already have been worked out by their officials. On Sunday, US treasury secretary Scott Bessent said a “very substantial framework” had been reached.
The Chinese president will want no surprises and there will be no equivalent of the extended, impromptu press conferences in the Oval Office Trump has used to embarrass other leaders over the past nine months.
Xi faces into this week’s meeting in a stronger position than when he last met Trump on the margins of a G20 summit in Osaka in 2019. Since then, he has had more time to study Trump’s playbook and to prepare for a trade war that Chinese officials have long regarded as inevitable.
During Trump’s first term he caught China off guard with his capricious moves on trade, and Xi’s response was usually reactive and restrained. Although Beijing had cards to play, including access to its huge market for American farmers, the importance of its trade relationship with the US meant Xi was always going to make a deal.
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This time, China has been more ruthless and targeted, using export controls and other non-tariff measures as well as matching Trump’s tariffs with levies on US goods. Each time Trump has tried to escalate, a Chinese countermeasure has alarmed the markets and forced him into retreat.
When the US president hit China harder with tariffs than any other country on “Liberation Day” last April, Beijing responded by restricting the export of rare earths. China controls 90 per cent of the refining of these minerals, which are used to make magnets that are essential for manufacturing everything from laptops to cars.
The move caused a number of car factories in the US to halt production and forced Trump into negotiations with China, which saw a temporary reduction in tariffs and an agreement not to introduce new coercive measures while talks were going on. But at the end of September, the US increased the number of Chinese companies on its list of sanctioned entities which are effectively banned from trading with American firms.
The new list included Chinese-owned subsidiaries of Chinese companies outside China, a dramatic expansion with far-reaching consequences. In response, China expanded its export controls on rare earths to include products containing small quantities of the minerals, a move the US treasury secretary described as pointing a bazooka at the world’s supply chains.
Meanwhile, China has not imported soybeans from the US this year, a serious blow to farmers in the Midwest who are an important part of Trump’s base. And Beijing has responded to the US increasing port fees for Chinese ships by raising fees for ships whose ownership includes US investors.
China wants to send third countries a warning that allowing themselves to be recruited into any US-led campaign against China will carry a cost
One reason Xi feels confident in taking a tougher approach in this trade war is that the US accounts for a shrinking proportion of China’s exports. The latest figures showed China’s exports growing in September despite a 27 per cent fall in goods shipped to the US.
Those figures showed the US share of Chinese exports at just above 10 per cent, down from the high teens a few years ago. Much of the expansion in Chinese exports has been to the Asean countries of southeast Asia, but Latin America and Africa are increasingly important.
Five years ago, Chinese exports to the US were worth five times as much as its exports to Africa. Today, they are worth just two-and-a-half times as much and exports to Africa have grown more dramatically this year than exports to any other region.
Some of China’s actions in its trade war with the US affect other trading partners too, including the European Union. This is especially true of the export controls on rare earths, which have left European manufacturers waiting for permission to import them.
Upsetting partners such as the Europeans appears counterintuitive at a time when Beijing wants to capitalise on Trump’s trampling over alliances to forge closer friendships. But China also wants to send third countries a warning that allowing themselves to be recruited into any US-led campaign against China will carry a cost.
Xi’s ambitions for his meeting with Trump may go beyond the immediate trade issues to the broader context of US-China relations. This includes Washington’s decade-long effort to restrict China’s access to advanced technology, particularly semiconductors.
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On Taiwan, Xi wants Trump to declare that the US opposes independence for Taiwan and to discourage Taipei from a military build-up Beijing views as provocative. Trump has shown little commitment to Taiwan or any enthusiasm for using the US military to defend the island’s self-governing status.
There are some signs of a softening in the hardline consensus on China that has prevailed in Washington as the Trump administration turns its focus to the western hemisphere. It is in China’s interest to de-escalate the current tensions, while at the same time strengthening its industrial, economic and military resilience.
Thursday’s meeting is unlikely to produce a comprehensive agreement but could stabilise relations to allow for further negotiations. A more substantial deal may have to wait until Trump visits China in the early months of next year.
Keith Duggan: Trump leans on bravado, business instincts and chest-thumping theatrics to tackle trade, technology and global influence
Donald Trump is an avowed fan of the Ultimate Fighting Championship world, with plans to stage an exhibition in the White House next year. And since his return to office, there has been something of the pre-octagon braggadocio and chest puffery in his words and actions towards China, and president Xi Jinping.
On Thursday, the White House confirmed that the two leaders will meet this Thursday at the Apec summit in South Korea, marking their first in-person encounter since 2019.
October was dominated by will-they-won’t-they nervousness following Trump’s aggressive announcement, on October 12th, of forthcoming additional 100 per cent tariffs on Chinese exported products. That imposition was in response to Beijing’s decision to limit its export of rare earth minerals crucial to US manufacturing of semiconductors and weaponry vital to its national security system.
This is an era in which strategic advantage will once again accrue to those who can operate at scale. China possesses scale, and the United States does not – at least not by itself
— Kurt Campbell and Rush Doshi
While much of the world swooned before Trump’s volatile tariff weaponry, the Chinese have remained sanguine and unblinking in the face of the most ferocious threats. They have repeatedly forced Trump to back down. After the US accomplishment of a peace deal, however tentative, in the Middle East and a renewed sense that he has grown weary of Russian president Vladimir Putin’s manipulations, Trump last week voiced optimism that the US and China would strike an agreement that will see the two superpowers avoid an era of throwing economic haymakers.
“I expect to make a good deal with him,” Trump said last week, before airing old grievances.
“For years they were making billions – $700 billion and we’d be making nothing. Honestly? We built China’s military with the money that we lost for so many years, getting ripped off. So, I think we are going to have a fair deal and I think we are going to have a very successful meeting. Maybe it won’t happen. Maybe someone will say, ‘I don’t want to meet. It’s too nasty.’ But it’s really not nasty, it’s just business.”
It is business, and several sectors across the United States are already feeling the pinch. Last week, Reuters reported on a letter from the National Foreign Trade Council (NFTC), a lobby group including behemoths such as Amazon and Exxon Mobil, calling for the suspension of the Affiliates Rule, issued three weeks ago by the US Bureau of Industry and Security.
The rule radically expands the blacklist of sanctioned firms from which American companies are prohibited from shipping goods. The policy applies across the board, but specifically hits China as it applies to two specific blacklists: the entity list and national security interest list.
“President Trump is putting America first and preventing China Communist Party-tied entities from accessing US technology through hiding their ownership in foreign front companies,” Michigan congressman John Moolenaar told Politico.
[ Trump signs number of trade deals with southeast Asian countriesOpens in new window ]
“As the chairman of the Select Committee on China, I’ll continue working to ensure Chinese firms cannot manipulate our export controls and undermine our national security interests.”
The NFTC argues that the expansion has halted billions of dollars’ worth of exports and leaves US businesses vulnerable to being dropped from supply chains entirely.
Meanwhile, farmers across the Midwest are staring glumly at soybean harvests which had been destined for China. Last year China bought $12.6 billion worth of US soybeans. This year’s crop was planted with that market in mind, but China has swiftly switched from US to Argentinian supplies in response to the brewing trade war. It’s an indicator that China can cause the same damage to sectors of the US economy that those excavator diggers did to the East Wing of the White House last week.
“China is not buying any soybeans at all, so we got to open new markets like the president has done in Japan and Taiwan,” said Arkansas senator Tom Cotton last week.
“I suspect the president is going to provide them [US farmers] some aid because we are not going to allow China to drive a wedge.”
On Thursday, Trump reminded the public that China is paying 20 per cent punitive tariffs on fentanyl flow to the US, which will, as things stand, shoot up to 157 per cent on November 1st. “We don’t want that because it is not sustainable to them,” Trump said last week.
“We have some big issues with the farmers and other things but the first thing I am going to be asking him [Xi] about is fentanyl.”
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More broadly speaking, a plethora of US businesses’ policy analysts will be looking to see signs that the Trump administration can develop a strategy to deal with the reality of China as an economic rival while nurturing the trade interdependence.
The US is reaping the cost of failing to develop its domestic processing capabilities of rare earth minerals over the past two decades. And despite Trump’s vision of restoring America’s manufacturing prowess, the cold fact is that China has almost double the manufacturing output.
There are few tangible signs that the tariff policy is bringing the US manufacturing giants back from its cost-efficient hot houses in the East.
China has the world’s largest navy and has demonstrated a nimble appetite for swift development of domestic supplies and a willingness to establish new trading partners.
[ Trump team views trade through the looking glassOpens in new window ]
A series of Chinese artificial intelligence (AI) breakthroughs – the August debut of The Darwin Monkey supercomputer, the rapid advance of DeepSeek and robots completing the Beijing half-marathon – has spooked fears that the US may ultimately lose the battle for supremacy in the coming age of AI.
All of this underlines US concerns that the tariff chaos and the Trumpian ethos of self-reliance has coincided with a period when the US most needs co-operation and partnerships with others.
“This is an era in which strategic advantage will once again accrue to those who can operate at scale. China possesses scale, and the United States does not – at least not by itself,” wrote Kurt Campbell and Rush Doshi in a May edition of Foreign Affairs.
“Because its only viable path lies in coalition with others, Washington would be particularly unwise to go it alone in a complex global competition. By retreating to a sphere of influence in the Western Hemisphere, the United States would cede the rest of the world to a globally engaged China.”
Trump is optimistic that rather than strategy, he can smooth over relations with Xi through the magnetic force of his personality – and the art of the deal. It’s either that or the octagon.
