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With a crucial Trump–Xi summit just days away, Washington and Beijing scramble to mend ties amid a new flare-up in their $660 billion trade relationship.

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A Fragile Calm Unravels

Barely a month after President Donald Trump hailed “progress” in U.S.–China talks, the world’s two largest economies are racing to rescue a planned leaders’ summit now just a week away. What was once cautious optimism has turned into a diplomatic scramble, as both nations trade blame for a sudden surge in economic tensions.

The stakes are enormous: a $660 billion trade relationship, fragile ceasefire talks, and the geopolitical balance between two rival powers teetering once again.

From Hope to Hostility

Optimism from Trump’s September call with President Xi Jinping and talks in Madrid has vanished. The relationship took a sharp downturn in early October, when Beijing expanded export restrictions on rare earth minerals a critical move targeting industries reliant on U.S. technology.

The retaliation came after Washington broadened its blacklist of Chinese companies barred from purchasing American tech components. China’s escalation effectively weaponized its dominance in rare earth processing, an area where it produces more than 90% of the global supply.

“This marks a major expansion of Beijing’s extraterritorial power,” explained Cory Combs, an analyst at consultancy Trivium China. “The new controls specifically reference semiconductor-related exports and send a clear signal of intent.”

A Trade War Reignited

For months, Washington and Beijing had been engaged in uneasy negotiations part diplomacy, part economic chess. But with China’s latest move, the trade dispute has burst back into full view.

According to experts, Beijing’s tougher posture reflects a broader shift. “China now believes that negotiation alone is not enough,” said Wu Xinbo, director of the American Studies Center at Fudan University. “Countermeasures are necessary to prevent the U.S. from exerting excessive pressure.”

Within Washington, officials were reportedly caught off guard by China’s timing. Two administration sources confirmed that U.S. agencies are now assessing how the rare earth restrictions could impact domestic industries, particularly in semiconductors and defense manufacturing.

‘Economic War’ Fears Mount

Inside the White House, Trump’s team views China’s strategy as “full-blown economic warfare,” according to a source familiar with internal deliberations. The president has warned that if talks collapse, he could impose tariffs of up to 100% on Chinese goods.

Despite the threats, Trump insists the summit will proceed at the end of October in South Korea, on the sidelines of the Asia-Pacific Economic Cooperation (APEC) meeting. Still, aides admit the path to a deal is narrowing fast.

In a last-ditch diplomatic push, U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng are scheduled to meet in Malaysia in the coming days a high-stakes attempt to prevent the summit from derailing completely.

Each Side Claims the Upper Hand

The deadlock is deepened by mutual confidence and miscalculation.
“Chinese officials believe their economy is stable and that the U.S. system is in disarray,” said Michael Hart, president of the American Chamber of Commerce in China. “They feel that gives them a stronger bargaining position.”

But Hart noted that American negotiators feel equally secure. “U.S. officials think the opposite that the U.S. economy remains strong while China’s is under stress. This belief makes compromise difficult on both sides.”

Washington’s Mixed Signals

The United States’ fragmented China strategy isn’t helping matters. While the administration pushes aggressive trade measures, it has simultaneously relaxed restrictions on some chip exports and approved a tentative deal over TikTok.

“Policymakers in Washington remain broadly hawkish,” Hart said. “But Trump himself has shown that he can be flexible and pragmatic when the situation demands it.”

That pragmatism was evident earlier this week when Trump signed a new critical minerals pact with Australia an effort to reduce reliance on Chinese supply chains. Meanwhile, U.S. officials are reportedly exploring new restrictions on software-powered exports and additional sector-specific tariffs targeting semiconductors, pharmaceuticals, and advanced manufacturing.

China’s Counterplay

Beijing, too, is preparing its next moves. Analysts warn China could intensify enforcement of its rare earth restrictions, launch fresh antitrust probes into U.S. corporations, or expand tariffs on American goods a tactic it revived earlier this year.

While Chinese ministries have yet to issue formal statements, insiders say the current policy framework is designed to last. “Even if Beijing downplays the impact, these controls are here to stay,” said one expert familiar with China’s trade strategy.

What Comes Next

For now, the best-case scenario may be a modest agreement perhaps a follow-up to the Phase One trade deal of 2020. Some insiders suggest smaller confidence-building measures, like renewed agricultural purchases, could pave the way for broader negotiations in early 2026.

“The most realistic outcome is incremental,” said Peter Harrell, a former White House economic official. “Confidence-building steps could help both sides agree on a path toward a more comprehensive deal next year.”

But optimism remains fragile. As both governments brace for a tense summit, global markets watch nervously, knowing the world’s most vital trade relationship could tilt toward confrontation or fragile cooperation once again.

A Summit on the Brink

The Trump–Xi meeting now represents far more than a diplomatic formality. It is a test of whether two rival powers can manage competition without escalation. With trade barriers hardening and political rhetoric heating up, both sides seem convinced they hold the upper hand-leaving the global economy caught in the crossfire.

(Disclaimer:  This article is based on verified reports and expert analysis. It presents a factual, independent overview of recent U.S.–China trade and diplomatic developments.)

 

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