When Trump Plays Chicken With China - 5/12/25

There is one news story that matters more than any other in the world right now—the burgeoning fight between Trump and Chinese President Xi Jinping. We have spent a good amount of time in this space over the last several weeks talking about Trump’s threatened trade war, but it has become increasingly clear that the standoff between the US and China over tariffs and other rules governing international commerce will shape the global economy for years to come. Unlike dozens of other countries around the world, who rushed to negotiate with Trump’s trade specialists after he announced his plans to impose onerous tariffs, Chinese leaders were ostentatiously indifferent, letting it be known that the US had much more to lose from a prolonged standoff.

For several weeks, both Trump and Xi refused to blink, neither wanting to admit that they needed a deal more than the other. But the reality is that both men and both countries would suffer greatly from a continued deadlock. So the result has been an absurd but necessary dance in which Chinese and U.S. officials pretend that they are only meeting reluctantly at the other’s behest. 

That’s why last weekend’s meeting between the two countries’ top trade negotiators took place in Switzerland, so both sides could unconvincingly assert that they simply happened to be in that country for other reasons. It was also clear that little of substantive permanence would be accomplished in these preliminary sessions and that it would require a Trump-Xi summit later this year to finalize any meaningful agreement. Monday’s announcement of a temporary conciliatory measure merely postpones the inevitable confrontation that will be required to resolve the impasse.

Trump may have showed his hand prematurely last week when he suggested that his representatives might propose tariff levels much lower than what he had previously announced (although still far above the current rates). His proclamation that American girls did not need as many dolls as they currently possess seemed to reflect some presidential nervousness too. And Trump’s overly enthusiastic response to the meeting in Switzerland (referring to it as “a total reset” on social media) suggests an anxiety on his part to announce even a preliminary agreement to pacify consumers and markets.

For good reason—it's been reported that the US is especially concerned about the lack of access to Chinese rare earth minerals necessary for various types of consumer, military, and manufacturing technology. Trump should also be worried about how Americans will respond to higher prices and empty shelves when they go shopping. Meanwhile, China’s leaders have been working overtime to reach out to other potential trading partners, most notably Brazil, whose agricultural products could compensate for the lack of access to American farmers, and other Pacific Rim countries, who do not trust China but are increasingly wary about relying on the US in such a dangerous part of the world.

It may ultimately be the decisions that other countries—in Asia and elsewhere—make as to which of these two imperfect trading partners would be a less risky bet for their own alliances. Now the focus turns to Europe, where Trump’s protectionist agenda has caused immense resentment with our traditional allies. But China’s behavior makes it difficult for the European Union and its members to comfortably place their trust in Xi either.

We saw a stark example of this dynamic last week when Xi joined Russian President Vladimir Putin for a celebration commemorating the Soviet victory over Nazi Germany in WWII. China had just agreed to lift sanctions on European parliamentarians, removing one obstacle to negotiations toward a mutual investment agreement. But at a time when Europe’s leaders are attempting to raise the pressure on Putin to sign off on a ceasefire with Ukraine, Xi’s presence in Moscow sent a much less reassuring message. 

China needs to maintain access to, or even expand, markets like Europe for its exports that had previously been destined for American buyers. But such belligerent posturing almost certainly undermines those efforts. Meanwhile, the EU is preparing for exceedingly hostile trade negotiations with the US. 

Both superpowers want Europe on their side, even if neither is acting like it at the moment. But if either the US or China is able to secure support from other countries in the months ahead, their bargaining position will be much stronger when Trump and Xi finally do meet face-to-face.