In August, when US Treasury Secretary Scott Bessent said that the American and Chinese trade teams would meet in two to three months, a huge gap between talks, the prognosis for US-China relations was not positive. Now, as China moves on multiple fronts at once, the prognosis appears to be terminal.
With US President Donald Trump threatening an additional 100 per cent tariff in November, the writing is on the wall: US-China talks have failed. The rapprochement is over. From Beijing’s perspective, its moves might be a defensive response to mounting US pressure, not a first strike.
The breakdown has been building for some time, in particular as the US and China were unable to reach a soybean deal and as Washington pressured allies from Europe to Asia to limit their trade with China. Even then, there were still some bright spots: a TikTok framework deal and the United States restarting the export of jet engines, AI chips and critical software.
All of this was short-lived. The US and China are quickly returning to their positions in April. As Beijing raises the heat, the question is not what happened, but what China is doing? Anyone thinking about what happens next should read China’s moves very carefully. They signal where China is at and the possibilities for which it is preparing.
First, China is making it clear it is ready to fight with the US with no clear off-ramp. There are three parts to this calculation: China’s ability to meet the US “on the field” (i.e., the US raises tariffs, China cuts American chips), the Chinese belief that when America swings at China, it will end up hurting itself (i.e., farmers in the US angry at Trump over the China fight) and the unique levers China can pull to retaliate directly (i.e., expanded rare earth export controls). Beijing believes it can weather a storm that is increasingly guaranteed to strike.
Second, China is signalling that its reliance on the US is no longer what it once was. As the US continues to restrict Chinese vehicles, the largest market for BYD outside China is the UK, where sales are up 880 per cent year on year. In the first half of 2025, Chinese clothing exports to Europe surged 20 per cent as the de minimis exemption disappeared in the US. The latest crackdown on Nvidia chips at Chinese ports further reflects China’s new belief that dependency does not mean defeat.
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