<p><em>By Karishma Vaswani</em></p><p>Even before Donald Trump and Xi Jinping meet in South Korea on Thursday, the winner in this round of trade talks is clear. China has conceded just enough to appear conciliatory. That has bought Beijing time to focus on what matters most: Taiwan, high-tech advancement, and long-term dominance of the Indo-Pacific.</p><p>The US president might think that he has the upper hand, but in actual fact he is handing his Chinese counterpart a victory. All the signals point to mutual de-escalation, as my colleagues at Bloomberg Economics have noted. A “framework” deal, reached in Malaysia at the weekend, is likely to shape their agenda. </p><p>The White House is selling the outcome of these talks as a win for the US. The reality? China hasn’t given up anything meaningful. I’ve been writing for months about how Beijing’s “protracted war” strategy — a Mao-era philosophy of endurance — has shaped Xi’s response to American tariff pressure. That discipline is paying off.</p><p>When the two sit down for their first talks since 2019, Xi will be negotiating from a position of strength. Washington is expected to take Trump’s threat of 100% tariffs on Chinese goods off the table while Beijing is expected to delay export controls on critical minerals for a year, and revive large purchases of US soybeans. It’s a small price to pay for the relief China is buying while keeping the world’s second-largest economy firmly in control of vital supply chains. </p>.<p>In return, China will expect the US to loosen curbs on cutting-edge chips, so it can get access to high-end technology and reduce reliance on foreign suppliers, future-proofing its economy. It also wants some Chinese firms removed from the US entity list, which was designed to weed out foreign elements believed to be acting against US interests. Trump, who will be keen to show his base at home that he can make deals with America’s competitors, may well capitulate.</p><p>Such an outcome would reinforce Xi’s narrative that the West is in decline, and the East is rising amid “great changes unseen in a century.” The economy — weighed down by property woes and weak consumption — remains fragile, but a tariff shock would make things worse. China also learned from the first trade war. It offered few real compromises, never fulfilled promises from previous agreements, but still weathered that storm. Trump’s need for a political victory ahead of next year’s midterm elections also strengthens Xi’s hand.</p><p>Washington hasn’t pinned Beijing down on structural reforms, curbs on subsidies, or limits on state-backed tech programs, long-standing grievances over how China has manipulated the global economic system to its benefit. That is partly a recognition of how deeply embedded Beijing’s industrial policy is. Instead, the Trump administration has “sabotaged the sources of American strength and competitiveness at home and dismantled American power and influence abroad,” notes the Center for American Progress, a left-leaning Washington-based think tank. </p><p>There is something Xi does want from Trump. He’s expected to raise Taiwan's status, perhaps even asking for language that would show Washington doesn’t support formal independence, breaking with decades of strategic ambiguity. The island is home to 90% of the world’s most advanced chips, and is central to the dominance of future industries like artificial intelligence. </p><p>Secretary of State Marco Rubio insists Washington won’t abandon long-standing support of Taiwan, but Xi will test that resolve. Trump’s inconsistent approach has already rattled Taipei. He has yet to approve a more than $400 million military aid package, accused the island of stealing America’s advanced semiconductor business, and cancelled President Lai Ching-te’s transit through the US in August. </p><p>Taiwan should be treated as a cornerstone, not a bargaining chip. It sits on the First Island Chain, which is of strategic importance not only to Washington and Beijing, but also to American allies such as Japan, the Philippines and South Korea. Taipei will be looking for reassurances from the White House that it can count on, a move that may also build confidence among other partners. </p><p>Dismantling Beijing’s leverage on rare earths is also imperative, as Bloomberg’s Editorial Board notes. China is home to half of the world’s reserves and much of its refining capacity. Trump’s deals with Asian nations to secure new supplies could help to break Beijing’s dominance. </p><p>But any deal between the superpowers will be a truce, not a breakthrough. By fighting less, and thinking more, Xi has won this round — hands down. </p>
<p><em>By Karishma Vaswani</em></p><p>Even before Donald Trump and Xi Jinping meet in South Korea on Thursday, the winner in this round of trade talks is clear. China has conceded just enough to appear conciliatory. That has bought Beijing time to focus on what matters most: Taiwan, high-tech advancement, and long-term dominance of the Indo-Pacific.</p><p>The US president might think that he has the upper hand, but in actual fact he is handing his Chinese counterpart a victory. All the signals point to mutual de-escalation, as my colleagues at Bloomberg Economics have noted. A “framework” deal, reached in Malaysia at the weekend, is likely to shape their agenda. </p><p>The White House is selling the outcome of these talks as a win for the US. The reality? China hasn’t given up anything meaningful. I’ve been writing for months about how Beijing’s “protracted war” strategy — a Mao-era philosophy of endurance — has shaped Xi’s response to American tariff pressure. That discipline is paying off.</p><p>When the two sit down for their first talks since 2019, Xi will be negotiating from a position of strength. Washington is expected to take Trump’s threat of 100% tariffs on Chinese goods off the table while Beijing is expected to delay export controls on critical minerals for a year, and revive large purchases of US soybeans. It’s a small price to pay for the relief China is buying while keeping the world’s second-largest economy firmly in control of vital supply chains. </p>.<p>In return, China will expect the US to loosen curbs on cutting-edge chips, so it can get access to high-end technology and reduce reliance on foreign suppliers, future-proofing its economy. It also wants some Chinese firms removed from the US entity list, which was designed to weed out foreign elements believed to be acting against US interests. Trump, who will be keen to show his base at home that he can make deals with America’s competitors, may well capitulate.</p><p>Such an outcome would reinforce Xi’s narrative that the West is in decline, and the East is rising amid “great changes unseen in a century.” The economy — weighed down by property woes and weak consumption — remains fragile, but a tariff shock would make things worse. China also learned from the first trade war. It offered few real compromises, never fulfilled promises from previous agreements, but still weathered that storm. Trump’s need for a political victory ahead of next year’s midterm elections also strengthens Xi’s hand.</p><p>Washington hasn’t pinned Beijing down on structural reforms, curbs on subsidies, or limits on state-backed tech programs, long-standing grievances over how China has manipulated the global economic system to its benefit. That is partly a recognition of how deeply embedded Beijing’s industrial policy is. Instead, the Trump administration has “sabotaged the sources of American strength and competitiveness at home and dismantled American power and influence abroad,” notes the Center for American Progress, a left-leaning Washington-based think tank. </p><p>There is something Xi does want from Trump. He’s expected to raise Taiwan's status, perhaps even asking for language that would show Washington doesn’t support formal independence, breaking with decades of strategic ambiguity. The island is home to 90% of the world’s most advanced chips, and is central to the dominance of future industries like artificial intelligence. </p><p>Secretary of State Marco Rubio insists Washington won’t abandon long-standing support of Taiwan, but Xi will test that resolve. Trump’s inconsistent approach has already rattled Taipei. He has yet to approve a more than $400 million military aid package, accused the island of stealing America’s advanced semiconductor business, and cancelled President Lai Ching-te’s transit through the US in August. </p><p>Taiwan should be treated as a cornerstone, not a bargaining chip. It sits on the First Island Chain, which is of strategic importance not only to Washington and Beijing, but also to American allies such as Japan, the Philippines and South Korea. Taipei will be looking for reassurances from the White House that it can count on, a move that may also build confidence among other partners. </p><p>Dismantling Beijing’s leverage on rare earths is also imperative, as Bloomberg’s Editorial Board notes. China is home to half of the world’s reserves and much of its refining capacity. Trump’s deals with Asian nations to secure new supplies could help to break Beijing’s dominance. </p><p>But any deal between the superpowers will be a truce, not a breakthrough. By fighting less, and thinking more, Xi has won this round — hands down. </p>
