According to CNBC’s The China Connection newsletter, Chinese President Xi Jinping and U.S. President Donald Trump are scheduled to meet Thursday in South Korea amid escalating bilateral tensions, with Beijing seeking stability in economic relations and a rollback of tariffs that more than doubled in April before both sides agreed to 90-day pauses set to expire in mid-November. Analysts identified China’s key demands including preventing further tit-for-tat escalations, addressing U.S. restrictions on Nvidia AI chips and advanced technology, and ensuring Chinese firms abroad aren’t cut off from global supply chains following recent U.S. actions affecting approximately 20,000 Chinese entities. The meeting occurs against the backdrop of China’s expanded rare earth licensing regime covering products with just 0.1% China-sourced materials and Trump’s recent indication he might lower fentanyl-linked tariffs ahead of the summit. This high-stakes diplomatic encounter reveals the complex interplay of economic and strategic interests shaping U.S.-China relations.
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Table of Contents
The Stability Imperative Versus Transactional Diplomacy
Beijing’s emphasis on relationship stability contrasts sharply with Washington’s transactional approach, reflecting fundamentally different strategic outlooks. While the Trump administration has focused on discrete “wins” like the potential TikTok divestment or tariff adjustments, China’s leadership is playing a longer game centered on predictable economic conditions for its export-oriented manufacturing sector. The tariff uncertainty creates planning nightmares for Chinese manufacturers who operate on thin margins and multi-year supply contracts. This stability-seeking behavior isn’t merely preference—it’s structural necessity for an economy where manufacturing comprises nearly 30% of GDP compared to America’s 11%. The Chinese system’s reliance on five-year plans and centralized industrial policy makes abrupt policy changes particularly disruptive, explaining why Beijing prioritizes predictable frameworks over individual concessions.
The Technology Asymmetry and China’s Hedging Strategy
China’s technology demands reveal a nation caught between immediate dependency and long-term ambition. The reference to Nvidia’s evaporated market share underscores Beijing’s acute awareness that while domestic alternatives exist for many technologies, the performance gap in cutting-edge AI chips remains substantial. However, China’s simultaneous emphasis on five-year tech self-sufficiency plans indicates this dependency is viewed as temporary. The real concern isn’t current restrictions but whether the U.S. will continue escalating export controls, creating moving targets for Chinese R&D efforts. This explains why Beijing might accept limited technology access today if accompanied by predictable rules tomorrow. Meanwhile, China’s rare earth countermeasures demonstrate sophisticated understanding of asymmetric dependencies—while America leads in chip design, China dominates rare earth processing essential for everything from electric vehicles to defense systems.
The Expanding Battlefield: Third-Country Implications
Recent U.S. actions extending technology restrictions to allies represent a strategic escalation Beijing didn’t anticipate. The Malaysia trade agreement clauses and the Dutch government’s intervention at Nexperia signal Washington’s success in multilateralizing what Beijing hoped would remain a bilateral dispute. This development fundamentally alters China’s strategic calculus—no longer can Chinese companies simply reroute technology acquisition through friendly nations. The implications extend beyond semiconductors to emerging technologies like quantum computing and advanced materials where China has made significant investments. Beijing’s response through rare earth regulations shows it understands this new battlefield and possesses leverage points of its own, but the multilateral nature of recent restrictions suggests China may need to reconsider its entire international technology cooperation strategy.
The Structural Limits of High-Level Diplomacy
Despite the summit’s high profile, structural factors severely constrain what either leader can deliver. Trump faces domestic political pressures that make significant tariff rollbacks challenging, while Xi confronts nationalist sentiment and military priorities that limit flexibility on core issues like Taiwan and South China Sea claims. The mutual respect framework Beijing emphasizes often translates into incompatible minimum conditions for both sides. More fundamentally, both nations appear to be operating from the premise that strategic competition is the new normal rather than a temporary deviation. This underlying reality suggests that while the meeting might produce photo opportunities and limited confidence-building measures, substantive policy changes remain unlikely. The real value may lie in establishing guardrails and communication channels to manage competition rather than resolving fundamental disagreements.
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Economic Decoupling: Rhetoric Versus Reality
The persistent talk of decoupling obscures a more complex reality of selective disengagement and strategic interdependence. While certain high-tech sectors face genuine separation, overall trade figures and supply chain analysis suggest integration continues in many areas. China’s export diversification toward Southeast Asia doesn’t represent decoupling so much as supply chain reorganization, often with U.S. companies maintaining significant involvement through regional subsidiaries. The contradiction between Trump’s optimistic rhetoric and the administration’s escalating restrictions reflects this ambiguous reality—policymakers want the benefits of economic engagement without the strategic vulnerabilities. This creates a unstable equilibrium where businesses face conflicting signals, explaining why Chinese leaders prioritize predictability even over specific concessions. The summit’s most lasting impact may be clarifying whether both nations can establish rules for managed competition or whether economic relations will remain perpetually unstable.
