Who has the upper hand in China-US relations? | The Bottom Line

Key Concepts

• US-China Trade War: The ongoing economic and political conflict between the United States and China, characterized by tariffs and export controls.
• Rare Earth Minerals: A group of 17 elements crucial for modern technology, including electric vehicles, electronics, and military hardware. China holds a dominant position in their mining and processing.
• Fentanyl Precursors: Chemical compounds used in the production of fentanyl, a highly potent opioid responsible for a significant number of deaths in the US.
• Geopolitical Significance: The strategic importance of certain resources or relationships in international affairs.
• De-escalation: The process of reducing tensions and the likelihood of conflict.
• Bilateral Deals: Agreements made between two countries, as opposed to multilateral agreements involving multiple nations.
• Trans-Pacific Partnership (TPP): A proposed trade agreement among Pacific Rim countries, which the US withdrew from.
• ASEAN Countries: Member states of the Association of Southeast Asian Nations, a regional organization promoting intergovernmental cooperation and economic, political, security, military, educational, and socio-cultural integration among its members.
• Taiwan Strait: The body of water separating mainland China from Taiwan, a key geopolitical flashpoint.
• Unipolar World: A global system where one superpower holds dominant influence.
• Multipolar World: A global system where power is distributed among multiple major poles or centers of influence.
• G2 World: A hypothetical scenario where only two major powers (in this context, the US and China) significantly shape global affairs.
• Global West, Global East, Global South: A framework for understanding global order based on groupings of countries with shared values, interests, and outlooks.

Summary

This discussion delves into the complex and often contentious relationship between the United States and China, focusing on the implications of a recent meeting between Presidents Trump and Xi Jinping. The core argument is that despite superficial agreements, the fundamental structural challenges in the US-China relationship remain unaddressed, leading to an ongoing, hybrid struggle.

The US-China Summit: A Ceasefire, Not a Resolution

The meeting between Presidents Trump and Xi Jinping is characterized as a "ceasefire and truce" in the US-China trade war, rather than a definitive resolution. The agreed-upon measures were limited and narrow:

• Pause on Export Controls: Both sides agreed to a one-year pause on major export control actions, including US Commerce Department actions and Chinese actions related to rare earth minerals.
• Tariff Reduction: The US agreed to reduce some of its tariffs on China by 10%.
• Increased Chinese Purchases: China agreed to purchase more soybeans and, according to the US side, more oil and gas.
• Future State Visits: A significant outcome was the agreement for President Trump to visit China in April of the following year, with President Xi Jinping reciprocating by attending the G20 summit hosted by the US.

However, the expert, Evan Maderos, emphasizes that "none of the big structural challenges, contradictions, problems in the US-China relationship were addressed." This suggests a return to the status quo ante, with the underlying issues unresolved. A key point to watch going forward is whether the US will agree to sell high-capacity Nvidia chips to China, a topic discussed but not resolved during the meeting.

Geopolitical Dimensions: Russia and China's Support

The discussion highlights a geopolitical issue raised during the summit: China's support for Russia. President Trump reportedly pressed Xi Jinping to reduce Chinese support for Russia, particularly its substantial purchases of Russian oil, which are seen as vital to the Russian economy and military.

• China's Stance: Despite discussions, no agreements were reached. China's position, as articulated by its top diplomat Wang Yi, is a firm commitment to ensuring "Russia doesn't lose," viewing this as geopolitically beneficial for China. Maderos expresses "very low expectations" of any movement on this front.

The Strategic Significance of Rare Earth Minerals

A significant portion of the discussion focuses on the strategic importance of rare earth minerals, explaining why China's control over this sector is so critical:

• What are Rare Earths? Contrary to their name, rare earths are not particularly rare but exist in small quantities and require environmentally damaging processing to extract.
• China's Monopoly: China controls 70-90% of the global market for mining and processing rare earths, effectively holding a monopoly. This was not always the case, as the US controlled most of the market in the 1990s.
• Technological Dependence: Rare earths are essential for producing motors for electric vehicles (EVs), consumer electronics, and sophisticated military weapons.
• Weaponization: China "weaponized" its rare earth exports in response to US tariffs, cutting off sales of heavy rare earth magnets to the US. This demonstrated the US industry's extreme dependence and caused significant disruption.
• Limited Solution: The one-year reprieve on rare earth export controls is seen as a de-escalation mechanism, not a solution. The US aims to reduce its dependence through agreements with countries like Australia and Japan, but this is a "5 to 10 year enterprise."

US Diplomacy and the Erosion of Trust in Asia

The conversation then shifts to US diplomatic strategies in Asia and their impact on regional perceptions:

• Bilateral Deals vs. TPP: President Trump's approach of negotiating a series of bilateral deals, focused on tariff reduction for market access and investment commitments (e.g., South Korea's $350 billion pledge), is contrasted with the TPP. TPP aimed to establish common rules for trade, investment, and digital commerce, creating peer pressure on outliers like China. Trump's withdrawal from TPP is seen as a missed opportunity.
• Perceptions in ASEAN: For countries in Southeast Asia (e.g., Malaysia, Vietnam), the US is increasingly perceived as "more uncertain, more unreliable, and to some economies actually a source of active disruption of the global trading system." This perception, coupled with US tariffs, creates an opportunity for China to expand its economic and political ties. The US is struggling to be seen as a "stable, reliable security partner and economic partner," making it difficult for these countries to "lean toward the United States."

The Taiwan Question: A Growing Concern

The discussion addresses the sensitive issue of Taiwan and the potential for Chinese action:

• Managing, Not Seizing: Currently, Xi Jinping views the Taiwan question as a "problem to be managed, not as an opportunity to be seized." China's strategy involves deterring independence moves and creating incentives for Taiwan to tie its future to the mainland.
• Undermining Confidence: A key part of China's strategy is to undermine the confidence of the Taiwanese people in American commitments. Trump's perceived ambivalence about Taiwan, suggesting China is more important than Taiwan, provides China with opportunities to exploit this.
• US Policy Shifts: The Trump administration has made decisions that signal a de-prioritization of Taiwan, including suspending an arms sale, restricting the transit of the Taiwanese president, and downgrading a high-level defense dialogue.
• Strategic Significance of Language: A subtle shift in US policy language, from "do not support Taiwan independence" to "oppose Taiwan independence," could have "outsized strategic significance" for Taiwan, signaling a diminished US commitment and potentially altering the dynamic in a way Beijing desires.
• Summit's Impact: Despite claims that Taiwan was not discussed at the summit, the expert worries that the upcoming reciprocal visits will be used by China to elicit shifts in US policy toward Taiwan.

The "Pivot to Asia" and Global Order

The conversation concludes by examining the US's ability to maintain its focus on Asia amidst global distractions and the evolving international order:

• Deep Involvement, Not a Pivot: The US is already "very, very deeply involved in the Asia Pacific" with treaty allies, significant military deployments, and a strong presence. The "pivot" was intended to increase this involvement incrementally.
• Evolving Global Order: The world is transitioning from a unipolar system dominated by the US to a multipolar system with more diffuse power. This transition is not abrupt but gradual.
• Trump's Acceleration of Transition: Concerns are raised that Trump's policies might be accelerating this transition, potentially weakening the US's position as a strategic reference point.
• Structural Weaknesses in China: Despite China's growing influence, it faces long-term structural weaknesses, including its non-freely convertible currency and closed capital account. China also lacks a global military capability, which can alarm its neighbors, pushing them towards the US.
• The Tripartite Structure: A useful framework for understanding the current global order is a tripartite structure: the "global West" (US and its allies), the "global East" (China, Russia, North Korea, Iran), and the "global South." These groupings are defined by shared values, interests, and outlooks, leading to jockeying for position.

Conclusion: An Ongoing Hybrid Struggle

The bottom line is that China is too significant for the US to disengage from. The two nations are deeply intertwined through trade and are rivals for global power. While both leaders recognize the inability to divide the world into competing camps, tensions are unlikely to disappear. The most probable outcome is an "ongoing hybrid kind of struggle, testing each other constantly." The US's perceived flirtation with abandoning the global stage leaves China with opportunities to exploit US mistakes, echoing Napoleon's advice: "Never interrupt your enemy when he is making a mistake."