So far, Trump’s big bet on China has paid off. However, Xi still has the trump cards

President Donald Trump has made a huge wager that the US can attack China, the second-biggest economy in the world, in a way that has never been seen before and come out stronger as a result.

Trump has been on an amazing winning streak in recent months, but it’s still uncertain if the gamble will pay out in the long run. The US economy recovered in the second quarter, the stock market is close to record highs, and inflation has not increased as expected since Trump implemented his tariffs.

However, Xi Jinping, the leader of China, is also enjoying success. After releasing previously blockaded mid-tier chips on Monday, Trump cleared the path for China to receive faster AI processors. And despite America’s tariffs, China has successfully found other markets to sell to, flooding the world with its goods.

This is due to the fact that Xi has several advantages: China continues to be the world’s largest exporter of products and has considerable global influence. It also maintains control of nearly the entire supply of the world’s critical rare-earth minerals, necessary for manufacturing electronics and defense equipment crucial to America’s national security and whose export Beijing has been slow-rolling their release, much to US consternation.

And Xi has slow-walked a prize that Trump has long sought: a one-on-one meeting.

Trump’s victories

This year, Trump has taken on the role of the China bully, raising the tariffs he imposed on China during his first term to previously unheard-of levels, which were carried out by former President Joe Biden. He set tariffs on Chinese goods at a minimum of 20% early in his second term, sending them to 145% in the middle of the spring and effectively blockading trade with America’s second-largest trading partner.

In May, negotiators between the two countries brought America’s tariffs on Chinese goods imposed this year way down – to 30%. Even while it is still much greater than anything the US has imposed on a large trading partner in over a century, it felt better for US businesses that depend on Chinese exports.

Trump’s negotiators have won a number of concessions from China in recent months, including the purchase of US soybeans and the suspension of antitrust investigations against a few major American corporations that endangered their ability to conduct business in China.

Trump has praised the tens of billions of dollars in tariff income that have poured into the US Treasury each month as a result of the hefty tariffs imposed on China, even if those may not be significant concessions.

In the meantime, inflation has only marginally increased from earlier this year’s four-year lows. Despite numerous warning indicators, the US economy’s biggest indicator, the gross domestic product, showed a significant recovery in growth last quarter. Jobs growth has slowed dramatically in recent months, but uncertainty about tariffs has largely eased, and some economists expect businesses to begin hiring again as a result in the coming months.

Additionally, the US stock market, Trump’s preferred measure of success, has been rising, mostly disregarding tariffs in favor of comparatively high earnings and the possibility of a rate drop by the Fed in the coming months.

Trump has thus been able to prevent the US economy from going into a recession, at least in the short term, while projecting an image of being a formidable opponent to China, whom he has described as a major economic rival and a threat to national security. It’s no little accomplishment.

Xi’s rebuttal

The US President has been more forgiving of Xi than he has been with US allies like the European Union and Brazil in recent months, despite his bellicosity against China. This is due to the fact that Xi is also playing a very powerful hand.

Rare-earth materials used to make ultra-strong magnets, which are crucial parts of everything from cars to fighter jets, are still tightly controlled by China. Although 90% of the world’s rare earth processing is done in China, the US considers them essential for the industrial and defense sectors. In various rounds of trade negotiations, the United States said it has won concessions that would give any US business that wants rare earths preferential treatment and access, but American companies continue to complain that China isn’t issuing permits quickly enough to satisfy their needs.

China has asked a decrease in US export regulations on key items, specifically advanced AI microchips, in exchange for more rare earths. Regarding AI chips, the Trump administration had set a boundary by prohibiting their shipment to China. But Monday, Trump reversed course, saying Nvidia’s H20 chips that powered China’s earth-shattering Deepseek AI model could flow somewhat freely into China. And he even said he would consider allowing Nvidia to ship a pared down version of its highest-end Blackwell chips, a concession that the White House had previously said was a nonstarter.

Xi has also curried favor with Trump by agreeing to purchase US goods, including soybeans. Meanwhile, China’s economy has kept pace by selling into new markets, including countries in South America and Africa, limiting disruption to its businesses. China’s exports grew at 5.9% in the first half of 2025, the same pace as the first six months of 2024, according to ING. And China’s trade surplus reached $586 billion in the first half, setting a new record for any six-month period.

Additionally, Xi controls a meeting, which is something else that Trump genuinely desires. Although China has not yet confirmed, Trump has stated that Xi committed to meet, but no date has been established.

Xi is therefore using his nation’s wealth and export leadership to buy time. A president who has used tariffs to crush almost every other foreign leader in his path is a formidable opponent.