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President Donald Trump has placed a massive bet that the United States can take an historically aggressive stance against China, the world’s second-largest economy, and emerge stronger because of it.

Although it remains unclear if the gamble will pay off over the long term, Trump has been riding an incredible winning streak in recent months. The stock market is near record highs, the US economy rebounded in the second quarter and inflation has defied predictions of a surge after Trump put his tariffs in action.

But Chinese leader Xi Jinping is on a winning streak of his own. On Monday, Trump opened the door to sending China faster AI chips after releasing previously blockaded mid-tier chips. And despite America’s tariffs, China has successfully found other markets to sell to, flooding the world with its goods.

That’s because Xi holds a number of trump cards: China remains the world’s biggest exporter of goods, wielding significant power across the world. 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 wins

Trump has played the role of the China bully this year, escalating the tariffs he placed on China in his first term – and continued by former President Joe Biden – to unprecedented levels. 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%. That felt better to US companies that rely on Chinese goods, even if it remains significantly higher than anything the United States has placed on a major trading partner in nearly a century.

Over the course of the past few months, Trump’s negotiators have secured several concessions from China, including purchases of US soybeans and a halt to antitrust investigations into some large American companies that threatened their ability to do business there.

Those may not be major concessions, but as negotiations have continued, Trump has celebrated the tens of billions of dollars in tariff revenue that have flowed into the US Treasury each month, in large part because of the massive tariffs placed on China.

Meanwhile, inflation has risen only slightly from four-year lows reached earlier this year. Last quarter’s gross domestic product, the broadest measure of the US economy, showed a sharp rebound in growth, even though it was filled with warning signs. 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.

And Trump’s favorite indicator of success, the US stock market, has been booming, largely ignoring tariffs in favor of relatively strong earnings and a potential rate cut from the Federal Reserve in the next few months.

So Trump has been able to come across as a strong foil to China, which he has labeled a national security threat and key economic competitor, while keeping the US economy from plunging into a recession – at least in the near term. That’s no small feat.

Xi’s counter

Despite Trump’s bluster about China, America’s president has treated Xi with relative leniency compared to the aggression he’s shown toward US allies, including the European Union and Brazil, in recent months. That’s because Xi is playing a very strong hand, too.

China maintains an iron grip on rare-earth minerals used in ultra-strong magnets that are essential components in everything from cars to fighter jets. The United States deems them critical to the defense and industrial sectors, but China controls 90% of the global processing of rare earths. 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.

In exchange for doling out more rare earths, China has demanded a reduction in US export controls on critical goods – with a particular eye on advanced AI microchips. The Trump administration had drawn a line in the sand on AI chips, barring their delivery 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.

And Xi has power over something else that Trump truly covets: a meeting. Although Trump has claimed Xi promised to meet a date has not yet been set, and China has yet to confirm.

So Xi is biding his time, leveraging his country’s resources and export dominance. It’s a strong hand to play against a president who has used tariffs to steamroll practically every other foreign leader in his path.