With his trademark social post, “The G2 will be convening shortly”, Trump drew global attention to the anticipated trade talks between the US and China at Busan in South Korea. Beijing long sought parity with Washington. By calling the meeting ‘G2’, Trump has fulfilled the CCP’s long-cherished Chinese Dream. By placing China in the same league, Trump lent legitimacy to China’s superpower ambitions. The acknowledgement of duopoly by Trump is an emphatic victory for Xi, struggling with economic slowdown, high unemployment crises, deflationary pressures and oversupply.
The recently concluded fourth plenum of the CCP, held
ahead of the Trump-Xi meeting, silently set the strategic tone. Though the
focus remained on domestic affairs, with many simply dismissing the plenum
communiques as political propaganda, they often chart China’s long-term plans.
For instance, prior to the 13th five-year plan in 2015,
the CCP plenum released a decade-long industrial blueprint for development that
culminated in the launch of ‘Make in China 2025’ in response to Obama’s ‘Pivot
to Asia’ policy. A decade hence, the Make in China has been extremely effective
in thwarting Washington’s containment as Beijing achieved technological
dominance in emerging technologies.
Evolving the framework for the 15th five-year
plan, the October plenum doubled down on achieving ‘self-sufficiency’ in
‘advanced manufacturing’. Taking note of the “complex and severe” international
environment, the plenum has preferred a dialogue with the US rather than
“decoupling and confrontation” with the underlying motive being “within crises
lie opportunities, and crises can be transformed into opportunities”.
Days after the plenum, the fifth round of trade talks
between the US and China in Kuala Lumpur agreed to an extension of the trade
truce beyond November 10th. Interestingly, the readout of the
Xi-Trump meeting issued by the Chinese side noted, “Xi stressed that dialogue
is better than confrontation”. China’s calibrated and measured response is at
odds with the unmissable Trump’s exuberance, who boasted of a massive success
in trade talks.
But beneath the veneer of Trump’s proclaimed success of
the US-China trade deal lies an inexorable truth of the temporary suspension of
implementation of the rare earth export control measures announced on October 9
for one year. This implies that the earlier announcement on rare-earth curbs in
April by China would still be in vogue. Trump reduced Fentanyl tariffs to 10%
and suspended the implementation of the 50% penetration rule, 301 investigative
measures for one year. In turn, China has also agreed to suspend the
implementation of non-tariff countermeasures against the US for one year.
Countries reached a consensus on anti-drug cooperation on fentanyl, and leaders
agreed to work together for global economic stability. In all, Trump has
trimmed the trade tariffs to 47% from 57%, lower than India's.
China pledged to purchase 12 million metric tonnes (MMT)
of soybeans this year and an additional 25 MMT for the next three years to
stabilise ties. Beijing has also agreed to terminate investigations targeting
US companies and resume trade from Nexperia facilities in China. Beijing’s
blockade of Nexperia chip shipments sent shock waves across the European
automotive sector. China released its press note on October 30, hours after the
summit, White House’s Fact Sheet was out on November 1st. This gave
upbeat Trump to revel in self-promotion as he effusively rated his meeting with
Xi as “12 on the scale of 10”.
By averting immediate escalation, both leaders secured a
temporary reprieve from the retaliatory countermeasures. Yet, Trump’s climbdown
reflected America’s waning economic leverage. He unleashed the tariff trade war
to target China. But, given America’s reliance on China for critical minerals,
he was compelled to take a restrained approach.
By deferring the rare earth controls by one year, Xi
avoided a serious trade escalation and demonstrated to the World who holds the
cards. A tight leash on rare-earth exports can potentially choke the US
economy. Back in 1992, on his tour to Baotou rare earth facilities, in Inner
Mongolia, Deng Xiaoping stated, “The Middle East has its oil; China has rare
earths”. Planning ahead of time, understanding the importance of rare earths,
China’s industrial policy strategically prioritised them. While Beijing invested
all its forces to dominate crucial mineral mining, refining and processing,
General Motors of the US began divesting from rare earths.
Countries should have paid heed to the said and unsaid
words of Chinese leaders who were preparing to weaponise these crucial
minerals. But the US, smitten by an industrial strategy paralysis, allowed the
sale of GM’s Magnequench in Indiana to a consortium which had two sons-in-law
of Deng on the board. The unit closed by the mid-2000s. Around the same time,
the rare-earth reserve in Mountain Pass Mine, located in the Mojave Desert,
which catered to 60 to 70% of global supplies, was ordered to shut down by the
Environmental Protection Agency due to wastewater leakages. It was the world’s
second-largest mine.
While the US lagged, through export subsidies and
asymmetric VAT systems, China favoured its domestic manufacturers. By the late
2000s, when the US stopped producing rare earths, China took the lead. Though
Molycorp tried to revive the Mountain Pass in 2008, Chinese export quotas
turned the market tide. By lifting curbs on exports after the diplomatic row
with Japan in 2010, China exported rare earths at low profit margins. Backed by
government subsidies, Chinese companies flooded the global markets, making the
business unsustainable for others.
After decades of policy paralysis, the US is making
efforts to secure the rare earth supply chain through “Operation Warp Speed”.
Treasury Secretary confidently remarked that European and Asian countries would
join the US in developing reliable supply chains. Trump has alienated friends
and allies with tariffs, fostering reluctance among countries to join
Washington’s initiative. Even if the US aggressively pushes for self-reliance
now, its efforts might at least take 5-7 years to yield tangible results. Having
squandered decades of strategic opportunity, Washington finds itself playing
catch-up to match an ascendant China.
Endowed with substantial reserves of critical minerals,
China has astutely mastered the technology to mine and process rare earths for
decades. Controlling more than 69% of rare earth reserves and 90% of processing
capacity, Beijing has also systematically acquired rare-earth mining rights
from various countries to strengthen its dominance. Risking significant
environmental dangers over many years, China has monopolised rare earth
processing. Imposing tight controls on rare-earth exports, China not only signalled
its willingness to wield economic coercion but also unintentionally exposed the
United States’ strategic vulnerabilities and unpreparedness.
US dependence on rare-earth far exceeds China’s
requirement of US soybeans. With zero US soybean imports this harvest season,
Beijing showed who held the cards in these trade negotiations. China trumped
the US at its own game of economic warfare. By blocking rare earth exports and
rerouting agricultural imports from Latin America, Xi has shown the world who
is the boss. With few cards against Beijing, Trump wasn’t into hard bargaining
with Xi. Instead, he was courting Xi to defer the tight regulations on critical
mineral exports. For all the brouhaha, countries, at best, reached a status
quo. A comprehensive trade deal remains elusive as of now, with no major
breakthrough on the horizon.
Trump is on a weak wicket, and the Republican containment
policy of China hardly resonates with the American public. The 2025 Chicago
Council Survey shows that 53% Americans favour friendly cooperation and
engagement with China and only 50% perceive China as a threat to the US, down
from 58% in 2023. Negative perceptions about China have rebounded, with
Democrats holding the most favourable view of Beijing.
As per the survey, Americans see the US and China as the
top two global powers. 53% believe that America is strong militarily, while the
verdict is narrowly split about the economic power- 34% see the US as a major
economic power, and 33% perceive China as economically stronger. Given
the rising inflation, Americans are rejecting high tariffs against China.
However, a whopping 82% of Americans refuse the idea of
granting China the sphere of influence of Asia. The survey may not be a true
reflection of American society, riven by partisan affiliations playing a role
in shifting attitudes. However, by and large, the underlying message of
diminishing dominance of the US is clear. The age of American unipolarity is
nearing an end. Trump started the trade war to bully China, got bullied
in turn. Forced to dial down, pandering to Beijing, he hasn’t raised the issue of
Taiwan or Chinese purchases of Russian oil during his meeting with Xi. Though
the US still leads in innovation, design and advanced technologies, a
retreating Washington is now focused on bolstering its hemispheric dominance.
For the first time since the Cold War, America has
grudgingly ceded ground to China, accepting its global rise. Bargaining from a
position of weakness, Trump preferred to woo Xi to avert a plausible collapse
of strategic industries due to the lack of rare-earth minerals. Trump’s
unpredictability and transactionalism have eroded mutual trust even in alliance
partnerships.
Paradoxically, just as many Americans remain reluctant to
decouple with China, Southeast Asian and European nations—despite territorial
disputes and concerns over Beijing’s mercantilist practices—are choosing to
manage their relationships with China rather than confront it. At the same
time, they continue to maintain strong ties with the United States.
While President Trump hastily framed the meeting as a
“G2,” hinting at a global duopoly, the geopolitical reality today defies such
binary divisions. The world can no longer be neatly delineated into spheres of
influence or rigid blocs. Recognising their deep interdependencies, countries
are increasingly prioritising strategic interests—engaging with major powers
while retaining their strategic autonomy. The logic of G2 is misplaced in the
contemporary geopolitical arena with multiple players and many poles. The rise
of Middle Powers like India, Russia, Germany, Turkey and GCC nations and their
growing relevance in the new global order hints at a new reset.
However, as the great power competition between the US
and China intensifies, the world will witness a restructuring of supply chains
and a strategic realignment of countries to safeguard their national interests.
Clearly, the archaic framework of G2 capable of imposing its decisions on the
rest of the World is a relic of the Cold War era. Though Trump’s G2
offhand reference of G2 is the strategic reality of their mutual
interdependencies, an impulsive compartmentalisation of spheres of influence undermines
global stability.
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