How Trump and Xi’s trade war threats softened into a quieter rivalry

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The last time Donald Trump met Xi Jinping, in October 2025, the general atmosphere was that of a winner-takes-all championship wrestling match, with the Beijing Bruiser with its powerful grip on rare earths taking on the Tariff Man’s signature forearm of tariffs. It was not difficult for the jury to award the title to great Xi. The threat of bringing American factories to a standstill by cutting off crucial raw materials caused the American competitor to throw in the towel before the battle had even begun, although it still claimed victory.

Since that fight, the battle between the US and China has been intense but more subdued, with both sides trying to gauge each other’s supply chain weaknesses while building strength to fix their own. With the vulnerability created by the war in Iran increasing the risk of economic disruption, there is little enthusiasm for a repeat of the public battle. If the Xi-Trump summit in China goes ahead next month, it will (perhaps mercifully) yield little, except perhaps some goodwill pledges about future Chinese investment in the US.

Since the start of Trump’s second term, Washington and Beijing have tested their control over the other’s chokepoints. Some conclusions are clear. The tariffs are not the final blow that Trump thought they were. As during his first term, Chinese companies avoided this by channeling exports through third countries. Complaints from American companies and consumers about shortages of inputs, smartphones and computers forced Trump to punch holes in the tariff wall.

Last summer and fall, the US moved from relying solely on tariffs to a more advanced strategy somewhat typical of Joe Biden’s administration: controls and licensing requirements for technology and especially for semiconductors, especially the H20 chip produced by Nvidia. China’s enormously powerful threat, in turn, was to impose far-reaching restrictions on rare earth elements.

In the weeks leading up to the October summit, both sides recognized the potential damage that implementing the threats could cause. Trump backed away from his confrontational rhetoric, leaving China with a clear diplomatic victory. Since then, Trump has been more concerned about replacing the so-called emergency tariffs declared by the Supreme Court than about ramping up the tariff campaign.

After seeing the power of controlling each other’s supply chain bottlenecks, the US and China have since sought to address their weaknesses. But where this requires international cooperation, the US’s ability to do so is severely hampered by the destruction of trust that Trump has wrought around the world.

Back in July last year, the US took the highly unusual step of taking a state stake in MP Materials, a rare earths mining company, followed by other forays into state capitalism. But not only do rare earth mining and processing operations take years to reach production, the U.S. currently faces a shortage of economically viable supplies of many critical minerals.

The Trump administration has launched a series of bilateral and plurilateral international initiatives to build a secure supply chain for critical minerals. But it is not credible that a government goes from literally threatening to take an area like Greenland by force, citing its mineral reserves as one reason, to a few months later asking its so-called foreign policy allies to trust that it will form a reliable coalition sharing control of the mineral resources.

As far as China is concerned, its pursuit of self-sufficiency in high-end semiconductors is largely a domestic matter, with the government investing vast amounts of money in an effort to close the technology gap with the US. It has also recently given itself greater security powers over supply chains, particularly by retaliating against trading partners who try to reduce their dependence on China.

The current context for relative diplomatic peace in US-China trade relations is the war with Iran, another Trump-initiated conflict in which it is not clear that he has the “escalation dominance” to win a protracted test of strength. The energy shock is likely to give the US a relative economic advantage as a net fuel exporter in the short term, although China has insulated itself fairly well with large oil reserves in the medium term. But in the longer term, the US has weakened its geoeconomic credibility while strengthening that of China, the global source of most renewable technology.

The rivalry for dominance between the US and China is a long-term struggle for technological and productive supremacy. It won’t be decided in a few high-profile confrontations. It is the strategies that Washington and Beijing pursue between government shutdowns, rather than the tactics they employ, that will determine their future.

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