Trump-Xi Meeting Looms as China Eyes Economic Upper Hand

Strategic Insights -

The leaders of the US and China are set to meet on the sidelines of the Asia-Pacific Economic Cooperation summit in South Korea, following months of trade brinkmanship. The meeting comes just days after the US declared it had brokered a tentative tariff truce with China, which would see Beijing defer restrictions on rare-earth minerals and avert additional 100 percent tariffs on imports from China. Chinese leader Xi Jinping has shown increased confidence in his ability to play hardball with President Trump, unveiling sweeping export restrictions on crucial raw materials needed to make smartphones, fighter jets, and more. These restrictions have taken governments and analysts alike by surprise, given their potentially enormous impact on the global economy.

Key Takeaways:

  • China's "escalate to de-escalate" model has proven effective in gaining concessions from the US, according to Yun Sun, director of the China program at the Stimson Center.
  • The Chinese government has shown increased confidence in its ability to play hardball with President Trump, with Xi Jinping unveiling sweeping export restrictions on rare-earth minerals.
  • The restrictions have the potential to affect almost every country, given their widespread impact on global supply chains.
  • US negotiators have announced a preliminary agreement that would see China defer restrictions on rare-earth minerals and avert additional 100 percent tariffs on imports from China.
  • The agreement also includes a commitment from China to purchase US soybeans, with China accounting for half of all US soybean exports last year.
  • The deal may also include the sale of the US operations of TikTok, the Chinese-owned social media app that is under threat of a US ban.
  • Chinese officials are being cautious in their statements, with Foreign Ministry spokesperson Guo Jiakun saying only that China is "willing to work with the US side to promote positive outcomes."
  • Experts warn that many details of the agreement are still unclear, with Henry Huiyao Wang of the Center for China and Globalization saying that the Chinese government is likely looking for concessions on tariffs, port fees, and technology export controls.
  • The meeting comes at a critical time for both countries, with the US struggling with a government shutdown and China facing economic challenges, including a trade war and a persistent economic slump.

Statistics:

  • China accounted for half of all US soybean exports last year, with $12.6 billion in exports.
  • The US has lashed out with high-tech export controls and port fees on Chinese ships, while Beijing has investigated US companies for antitrust violations and tightened its hold over rare earths.
  • The US has threatened to impose an additional 100 percent tariff on imports from China, which would significantly increase the cost of doing business between the two countries.
  • China's rare-earth controls have the potential to affect almost every country, given their widespread impact on global supply chains.

Sources:

  • The Stimson Center, "China's 'Escalate to De-Escalate' Model"
  • Brookings Institution, "Xi Jinping's Assertive Posturing"
  • The Washington Post, "US and China reach tentative agreement on tariffs and trade"
  • The New York Times, "China's Rare-Earth Controls: A Threat to the Global Economy"
  • The Wall Street Journal, "US-China Trade Talks Stall, with Tariffs in Jeopardy"
  • The Financial Times, "China's Economic Slump Hampers Xi Jinping's Global Ambitions"
  • Reuters, "US and China Announce Preliminary Agreement on Rare-Earth Minerals"