US-China Trade War Deepens Beneath Diplomatic Charm

Trade experts are warning that the upcoming summit between US President Donald Trump and Chinese President Xi Jinping will mask a deepening trade conflict between the world's two largest economies, despite expected displays of cooperation and friendship. Over the past decade, the United States has built an entity list restricting more than 1,000 Chinese companies from purchasing advanced chips and semiconductor manufacturing equipment, while Beijing has quietly developed powerful retaliatory tools, including dominant control over rare earth minerals and critical supply chains. Marcus Noland, executive vice president at the Peterson Institute for International Economics, described the situation as a "very dangerous game of chicken" where pressure is building beneath apparent calm. China ended 2025 with a record trade surplus of $1.2 trillion, demonstrating remarkable economic resilience despite Washington's tariffs. While US exports to China fell 20 percent, Chinese exports diversified significantly, growing 25.8 percent to Africa, 13.4 percent to Southeast Asia, 7.4 percent to Latin America, and 8.4 percent to the European Union. Beijing leveraged global dependence on Chinese supply chains by imposing export controls on rare earths, materials critical to semiconductor and defense industries that are produced almost exclusively by China, positioning itself with what supply chain consultant Cameron Johnson called the "ultimate trump card." Chinese manufacturers have adopted strategies of partial cost pass-through to US consumers while expanding into new global markets, with companies reporting that their US client bases remained largely intact despite tariff turbulence. Businesses on both sides appear to have become "numb" to tariff threats, with executives like Eric Zheng of the American Chamber of Commerce in Shanghai noting that firms need certainty extending several years into the future, not temporary 90-day truces. While the Iran conflict currently gives Washington some leverage through energy exports, analysts say China's industrial breadth provides a longer-term advantage, explaining Beijing's current willingness to engage in dialogue rather than escalate further.