China’s New Strategy for Trump: Punch Hard, Concede Little

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https://www.wsj.com/world/china/china-t ... y-06841606

In recent trade negotiations, the Chinese have demanded a full capitulation: the removal of all U.S. tariffs and export-control measures

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“During Trump’s first term, China was constantly put off balance by his pressure tactics,” said Kurt Campbell, former deputy secretary of state under President Joe Biden and now chairman of the Asia Group, an advisory firm in Washington. “This time, Xi wanted to be prepared. He knows Trump wants a good relationship with him and respects strength, not concessions.”

The most powerful example of the new strategy came early this month when Washington and Beijing were trying to finalize the South Korea summit. Just when relations seemed on the mend, Xi dropped a bombshell: He directed his government to hit back at a recent U.S. export-control action—and do so with unprecedented force, according to the people close to Beijing.

On Oct. 9, China’s Ministry of Commerce unveiled broad restrictions on exports of rare-earth materials that threaten to upend global production of everything from phones, laptops and cars to missiles. China produces around 90% of the world’s refined rare earths.

Publicly, Chinese officials said the move was simply a tit-for-tat response to a new U.S. rule extending restrictions on tech sales to any companies at least half-owned by an already blacklisted Chinese entity. In reality, the people close to Beijing said, it was also Xi’s attempt to gain leverage before meeting Trump, who has shown a desire to strike a broad economic deal with China.

A rare-earth mine in China’s Inner Mongolian Autonomous Region.
A rare-earth mine in China’s Inner Mongolian Autonomous Region. Wu Changqing/VCG/Getty Images
Xi’s new doctrine is that the U.S. must adapt to a reality of Chinese power, these people said. In rare earths, they said, Xi is convinced that China holds an undisputed trump card that allows it to demand substantial U.S. concessions.

“Beijing believes it has maximum leverage and is not afraid of using it,” said Jimmy Goodrich, a China and technology expert at the University of California Institute of Global Conflict and Cooperation in San Diego.

Still, Xi risks a strategic backfire. His tactics provide ammunition to hawks in Washington pushing to break America’s economic dependency on China. U.S. allies in Europe and Asia, who rely on these minerals for their own industries, were also unsettled by Beijing’s heavy-handed display, reinforcing worries that China is becoming an increasingly unpredictable actor on the world stage. The U.S. and Australia this week announced plans to invest $3 billion in critical minerals aimed at eroding China’s hegemony.

A first sign of Xi’s playbook appeared in April, when Trump unleashed his global “Liberation Day” tariffs. China, already weathering Biden-era restrictions, was hit hard, with U.S. tariffs on Chinese goods eventually skyrocketing to 145%. And Beijing’s retaliation was swift: It cut off rare-earth magnets to American companies, temporarily forcing some U.S. automobile factories to shut down.

President Trump’s announcement of high ‘Liberation Day’ tariffs in April drew a strong response from China.
President Trump’s announcement of high ‘Liberation Day’ tariffs in April drew a strong response from China. brendan smialowski/AFP/Getty Images
The blowback on Wall Street was immediate. The U.S. bond market went into a tailspin, and Beijing’s counterpunch caused stocks to plummet. Beijing gradually eased exports later, after striking agreements with Washington, but continued to tightly control supply.

For Xi, the market chaos was a signal. According to the people close to Chinese policymakers, he was emboldened to press his advantage, convinced the U.S. lacked the stomach for more economic pain. In recent trade negotiations, the Chinese have demanded a full capitulation: the removal of all U.S. tariffs and export-control measures, though their American counterparts haven’t given any ground.

The art of concession
The strategy behind this new assertiveness was born from crisis. After Trump’s presidential victory last year, anxiety rippled through Beijing. According to the people close to policymakers, Xi told his top aides—including chief of staff Cai Qi, economic czar He Lifeng and the Communist Party’s leading ideologue, Wang Huning—to urgently design a new playbook for Trump 2.0, one that would break the constant reactive posture that had defined Beijing’s past approach.

In a statement, China’s Foreign Ministry said both countries “should address mutual concerns through dialogue and consultation on the basis of equality and mutual benefit.”

The new approach is rooted in a core belief in Beijing: that Trump is fundamentally transactional, not ideological. Policymakers believe they can use Trump’s zest for a deal to neutralize the China hawks in his administration. The goal, as Campbell put it, is to create a “soft and hard” approach. Beijing would cater to Trump’s desire for deals while simultaneously applying painful economic pressure.

“Holding Trump close has been central to the Chinese playbook,” said Evan Medeiros, a former senior national-security official in the Obama administration and now a professor at Georgetown University. “They know he is neither a hawk nor ideological and want to play to his instincts to do deals.”

Nvidia’s Jensen Huang helped persuade President Trump to reverse a ban on selling the company’s H20 chips to China.
Nvidia’s Jensen Huang helped persuade President Trump to reverse a ban on selling the company’s H20 chips to China. Chip Somodevilla/Getty Images
White House spokesman Kush Desai disputed the characterization of the president’s dealmaking instincts, saying Trump’s promise is to revitalize American industries and communities. “The only deals that President Trump is willing to strike are deals that deliver on this pledge by putting Americans and America First,” Desai said.

Beijing is also trying to go around formal diplomatic and security establishments to get messages straight to Trump through relationships with influential U.S. business titans such as Nvidia’s chief executive, Jensen Huang.

That quiet calculation—balancing pressure with appeasement—now forms the bedrock of China’s strategy. In the tense lead-up to trade talks in Madrid this September, Xi knew he needed to offer a concession to get what he truly wanted: summits with Trump to hash out issues one-on-one.

The concession was TikTok.

For Trump, forcing the sale of the high-profile app was a populist victory framed around national security. For Xi, however, the app was a low-cost bargaining chip. He had privately dismissed it as “spiritual opium,” according to the people close to Beijing, and viewed it as an easy sacrifice to secure the continued dialogue China needed.

As a result, Xi set the stage for a series of summits with Trump. After the meeting next week in South Korea, Beijing hopes to arrange a Trump visit to China early next year, and finally a Xi trip to the U.S. in late 2026.

At the top of Xi’s agenda is the critical issue of Taiwan. With Trump signaling interest in a new economic accord, the Chinese leader plans to use these meetings to press Trump to move beyond the longstanding policy of strategic ambiguity and formally state that the U.S. “opposes” Taiwan’s independence. In another sign of this transactional approach, ahead of the expected leaders’ summit, Beijing is considering a significant purchase of American soybeans, a request put forward by Trump.

The thinking among the Chinese leadership, the people close to Beijing said, is that since the two leaders are going to meet, what’s the problem with buying some soybeans?

Hawks grounded
White House Senior Counselor for Trade and Manufacturing Peter Navarro and other ‘China hawks’ have been partially sidelined.
White House Senior Counselor for Trade and Manufacturing Peter Navarro and other ‘China hawks’ have been partially sidelined. will oliver/epa/shutterstock
Xi’s new playbook is gaining some ground in an administration where cabinet secretaries now carefully curate their advice to Trump, selectively choosing what to present and what to hold back, said people familiar with the White House’s internal dynamics.

Below the cabinet level, these people said, many traditional China hawks have been marginalized, including Peter Navarro, a longtime trade adviser to Trump.

A senior administration official said even though Navarro’s television appearances have declined, he’s still involved in formulating China policies.

In a statement, Navarro said, “Just as in the first Trump term, my job today is to help create jobs, improve wages, and fix supply chain vulnerabilities. The difference this time is that I don’t have to fight the secretaries of Commerce, Treasury, and War to move the Trump agenda. One band, one sound.”

Landon Heid’s nomination to be an assistant secretary of Commerce was pulled earlier this year.
Landon Heid’s nomination to be an assistant secretary of Commerce was pulled earlier this year. kevin mohatt/Reuters
One example of how hawkish voices were checked was the case of Landon Heid, said the people familiar with the White House’s dynamics. His nomination to a crucial post at the Commerce Department—overseeing the very export controls meant to protect American technology—was pulled in September without explanation.

A former diplomat in Beijing and an ex-tech policy expert for the hard-line House Select Committee on China, Heid issued a stark warning during his confirmation hearing in April, calling China’s pursuit of emerging technologies a “profound threat to U.S. economic and national security.”

But his hawkishness was seen as a liability to some officials at the White House, according to the people familiar with the dynamics.

“Landon Heid is a valued voice within the administration and will continue executing the President’s America First Asia policy at the National Security Council,” White House spokeswoman Anna Kelly said. Heid didn’t return a request for comment.

As other officials who pushed for a tougher line on China have left the administration, security and tech experts began to worry that a vacuum had been created—one that could be filled by those more interested in business ties with Beijing than in challenging its ambitions.

That vacuum, these experts said, provided an opening for influential business leaders, most notably Nvidia’s Huang. In an appeal to Trump in the summer, Huang argued that the ban on selling the company’s H20 artificial-intelligence chip to China would only accelerate Beijing’s push for technological self-sufficiency. Trump then decided to reverse the ban.

An Nvidia spokesperson said the company “works with governments across the world. We do not engage in geopolitical or diplomatic discussions between governments.”

Nvidia had developed the H20 to comply with past export restrictions as a less powerful chip specially designed for China. “America wins by promoting U.S. industries worldwide,” the Nvidia spokesperson said.

White House spokesman Desai said, “The era of Washington, D.C. politicians selling out our country and compromising America’s national security at the behest of special interest groups ended the day President Trump took office.” To deliver on his pledge to put America first, Desai said, “President Trump has assembled the best and most experienced economic and national security team in modern history.”

The consequences of the diminished influence of the hawks became clear just weeks before Trump’s Alaska summit with Russian leader Vladimir Putin in August.

Treasury Secretary Scott Bessent meets with Chinese Vice Premier He Lifeng in Geneva earlier this year.
Treasury Secretary Scott Bessent meets with Chinese Vice Premier He Lifeng in Geneva earlier this year. martial trezzini/KEYSTONE/Reuters
According to people with knowledge of the events, the administration had prepared a “decision memo” outlining a package of secondary sanctions against China for its purchases of Russian oil—a move intended to give the U.S. leverage over both China and Russia. The memo was sent to Trump for a final decision.

However, before his meeting with Putin, Trump decided against the sanctions package, the people said, partly to avoid direct retaliation from Beijing. Specifically, the president worried that China would once again restrict U.S. access to its rare-earth magnets—a critical component in both defense and commercial technology.

It was Beijing’s playbook in action: Trump’s transactional, personal decision-making overruled a proposed hawkish move, driven by China’s leverage over economic chokepoints.

A high-stakes gamble
That success, however, may have bred the overconfidence behind Beijing’s latest sweeping controls on rare earths. The move enraged the White House, and Trump himself threatened to retaliate with 100% tariffs on Chinese goods and cancel the summit with Xi. The backlash triggered a hasty softening of the tone from Beijing. By Oct. 12, China’s Ministry of Commerce had issued a statement promising to implement the controls in a “prudential and moderate manner.”

Beijing’s quick backtrack underscores that the U.S. continues to hold significant leverage in the relationship. Senior administration officials including Treasury Secretary Scott Bessent have said China remains critically dependent on American products such as jet engines for its burgeoning aviation industry. A loss of access to such high-end products could thwart China’s own technological and strategic ambitions.

Bessent, for his part, has also maneuvered to keep the door open for a resolution between Trump and Xi, even while applying pressure. He recently rebuked a specific Chinese negotiator, a break from diplomatic protocol, in a bid to blame lower-level figures for China’s recent actions and allow the two leaders to eventually work things out without losing face.

Still, the ground beneath the expected summit had shifted. Even as Trump later softened his tone on the tariff threat, Beijing’s new rare-earths move spurred the administration to devise a series of counterattacks should China fail to walk back the rule.

According to the people close to the White House’s dynamics, officials are now using the incident as a clear-cut example of China’s coercive tactics. The proposed secondary sanctions on China for its imports of Russian oil, which Trump initially vetoed, may be back on the table.

Trump said Wednesday he plans to speak to Xi about China’s purchases of Russian oil during their meeting in South Korea next week.

This has created a new, high-stakes test, pitting the president’s “master dealmaker” instincts against the stark warnings of his national-security establishment. For China, the question is whether its playbook has instead provoked the very hard-liners it was meant to circumvent.

The ultimate outcome may hinge on a fundamental mismatch in perspective, one that defines the entire U.S.-China relationship.

“Trump’s focus is short-term and political,” said Campbell, the former deputy secretary of state, “while Xi is focused on sustaining long-term competition with the U.S.”

Write to Lingling Wei at Lingling.Wei@wsj.com

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