With Donald Trump and Xi Jinping set to meet on Thursday, this promises to be an important moment in U.S.-China relations. The meeting follows a long stretch of contentious trade hostilities marked by tit-for-tat tariffs and excessive unpredictability. Both leaders are determined to meet pressing challenges to secure access to critical minerals and semiconductors. These concerns underpin much of their countries’ economic policy direction.
The backdrop of this very important upcoming meeting is shrouded in controversy. For the past ten months, America and China have been locked in a tariff-by-tariff trade war. This constant clash has deepened a years-long tension between U.S.-China trade relations. U.S. tariffs on Chinese exports have peaked as high as 145%, with Chinese retaliatory tariffs reaching a high of 125%. Even as negotiations have continued, Beijing has proved unyielding on perhaps the most contentious point in the ongoing trade talks.
Underlying this meeting is the growing competition over critical minerals and semiconductor technology as well. China has spent big bucks to jumpstart its homegrown manufacturing base, especially in the semiconductor or chip-making sector. For one, observers say that Beijing has had a decades-long ambition to become less dependent on these fields. Stefanie Kam, a China policy analyst, underlined this strategic goal, stating that “Beijing has long intended to become more self-reliant.”
In this rapidly changing environment, a few major players have acknowledged the value of being able to tap into the Chinese market. Such an outcome would leave one firm paying a voluntary tax of 15% on its China sales, directly to the U.S. government. In exchange, it will be granted export licenses. This recent advancement is a strong testament to that market potential, even amid the current trade tensions.
In particular, the U.S. administration sought to curtail American companies’ connections with Chinese manufacturing. They hit a wall, as most of the initial restrictions were blunted by exemptions. Yet as much as the advocacy effort to limit sophisticated semiconductor tech gained momentum, China’s imports represented shipments of less-advanced semiconductors. The efforts to limit access were downright brutal.
The road to this meeting has not been easy. In June, the two countries were able to come to a tenuous peace, committing to ongoing discussions while seeking an overall comprehensive deal. This tentative agreement went a long way toward calming posturing and opening up lines of communication between the two countries.
Scott Bessent, chief investment officer at the U.S. Treasury, doubted Trump’s ability to raise a 100% tariff on Chinese products. This threat had been looming over their continuing negotiations. State officials on both sides have gone to great lengths to accommodate their concerns. The debate is making way for these advocates’ well-thought out conversations.
China’s recent actions have drawn attention. The country recently launched an anti-monopoly probe into Nvidia, indicating the country’s willingness to enforce more rules on foreign companies operating within its borders. These maneuvers serve to remind us of China’s determination to defend its mercantilist impulses even as it walks a tightrope to maintain healthy trade ties with the U.S.
Each of these leaders is preparing for their important conversations. Expectations are high, as they hope to wrap up a deal soon on the company’s divestiture of TikTok’s American operations. This point of contention has led to heated discourse between the two nations. It has significant data privacy and national security implications.
Prof Tim Harcourt remarked on the significance of the upcoming meeting, stating, “This is the meeting that resets globalisation in a post-Covid era.” His remarks summarize the big picture impact of U.S.-China relations on the future direction of trade dynamics writ large.