Last update: Thursday 5/14/26 9:49am
U.S. President Trump met with China's President Xi in Beijing on May 15-16. This TL;Dr summary of our lengthy report, China vs. The World, should make it easier for readers to understand what really happened and what did not happen, no matter how loudly President Trump proclaims the details of his success in persuading President Xi to accommodate America's economic and political objectives. The good news is that the meeting could not fail to achieve substantial mutually beneficial strategic objectives ... because President Xi could not risk letting it fail.
Introduction | 1. Long-term | 2. Short-term | 3. Detente
Introduction
This section is by far the longest part of this summary because it provides the context for the economic trade war that was flaring up in the final months of 2025.
In 1992, Deng Xiaoping, the 'father of modern China', inspired his country to greatly enhance its economic power by leveraging its abundant rare earth resources. High levels of leverage would be required because the total global sales of processed rare earth elements (REEs) is still less than $10 billion annually. But Deng realized that high leverage could be achieved by exploiting the signature properties of REEs.
- When materials are “seasoned” with tiny amounts of REEs, they become lighter, smaller, and more powerful. With the benefit of 20-20 hindsight, we can now see that Deng's strategy was stunningly simple, but it embodied a fatal flaw that was accidentally exposed exposed during the Obama administration.
We are not talking about the Pyrrhic legal victory in the case that the Obama administration and its Japanese and EU allies won before a tribunal of the World Trade Organization (WTO) in 2015. China was the true victor when it complied with the court's order to remove its "illegal" export tariffs, thereby greatly lowering the prices of its refined REEs to levels which foreign refineries could not match. Most of China's foreign competitors quickly folded their operations, thereby providing China with a near-monopoly on REE processing. See the "Unintended Consequences" segment of our previous installment for details, "China vs Obama". This was the first in a series of "REE ironies."
But China paid a high price for its monopoly because current REE refining processes were highly toxic, a price that other nations were not willing to bear. See: "China Has Paid a High Price for Its Dominance in Rare Earths", Keith Bradsher, NY Times, 7/5/25
The second "REE irony" was the accidental disclosure of the fatal flaw in Deng's strategy by career professionals in the Bureau of Industry and Security (BIS) of the U.S. department of Commerce during the Obama administration. During their investigations of ZTE, a large Chinese telecommunications company:
Between 2010 and 2016, ZTE violated U.S. sanctions by illegally exporting U.S. telecom equipment to Iran and North Korea. After BIS placed ZTE on the Entity List in March 2016, U.S. suppliers could not sell tech equipment to the company without a license. ZTE reached a settlement with the U.S. government, paid $1.19 billion, and was removed from Entity List in March 2017. After a new agreement, requiring a change in leadership and an additional $1 billion penalty, ZTE was removed from the Denied Persons List in April 2018, but remained on probation. ZTE was near bankruptcy.
c) Bottom Line -- America's shutdown of ZTE's operations demonstrated a fatal flaw in Deng Xiaoping's strategy for achieving his vision. China could not produce better versions of foreign products by "seasoning" them with its processed REEs if the products used American technology and software because America could deny China's access to its technology and software anytime it chose to do so. China would have to develop its own technology and software.
China's initial reaction to the demolition of ZTE was muted because this wake-up call was depressing. Developing its own technology and software would take at least a decade.
President Obama went after ZTE because of national security concerns. President Trump also went after Huawei, another large Chinese telecommunications company, because of concerns about national security. He also placed Huawei on the Entity List to prevent from Huawei from providing infrastructure for the new 5G telecommunications protocol. Then he introduced a new notion: extraterritoriality.
- Extraterritoriality
"Commerce Department Further Restricts Huawei Access to U.S. Technology and Adds Another 38 Affiliates to the Entity List", Department of Commerce, August 11, 2020
-- "This amendment further restricts Huawei from obtaining foreign made chips developed or produced from U.S. software or technology to the same degree as comparable U.S. chips"
China quickly responded with a hostile 'warning' in the People's Daily, a quasi-official English language publication, that it could stop selling rare earths to the U.S and thereby deprive the U.S. of all rare earths. ... "United States, don't underestimate China's ability to strike back", People's Daily Online (English Edition), 5/31/19. Here are a couple of excerpts.
e) President Biden's comprehensive worldwide extraterritorial export controls
- "China does not want a trade-war, but it is not afraid of one and will fight one if necessary.”
- "Many foreign media outlets have turned their eyes to rare earths. Some analysts believe that China's dominant position in the rare earth market has given Beijing a way to strike back."
- "We advise the U.S. side not to underestimate the Chinese side’s ability to safeguard its development rights and interests. Don’t say we didn’t warn you!"
By the end of his first term, President Trump understood the warning. That's why he began to openly muse about buying Greenland because of its extensive rare earth resources.
- President Biden declared a national emergency. The BIS then established new Foreign Direct Product (FDP) rules, claiming U.S. jurisdiction over any advanced chip made in any country with American tools or software.
- Now comes the supreme REE irony. President Biden's worldwide extraterritorial export controls were designed to be China's ultimate damnation; instead they inspired China's timely resurrection.
What China needed asap was a substantial modification to Deng's strategy that would enable it to bargain with the U.S., a strategy that would enable China to say, "If you strike us over here, we will strike you over there." - President Biden’s worldwide extraterritorial export controls inspired China to develop its own worldwide extraterritorial export controls for its processed REEs.
f) China announces worldwide extraterritorial export controls
China probably developed these controls before President Biden left the Oval Office in January, 2025. But given the uncertainty of the outcome of the Y.S. election, China waited for the most impactful opportunity to announce them.
As will be described in the next section, that opportunity came in October 2025 in response to President Trump’s signal that he was considering a 500 percent tariff on all Chinese imports. Here's the lengthy headline from Global Times on October 9, 2025, an Enlgish language quasi-official publication.
- "China imposes new export control measures on rare-earth items to foreign entities"
- "China's Ministry of Commerce (MOFCOM) announced on Thursday that it will impose control measures on the export of rare-earth items to foreign entities. The move aims to safeguard national security and interests ... "
- "Under the new measures, foreign organizations and individuals need to gain licenses from the MOFCOM before exporting certain items, including rare earth permanent magnet and rare earth target materials manufactured overseas that contain, integrate, or are mixed with rare earth metals or oxides originating from China, where the value of these Chinese-origin materials constitutes at least 0.1 percent of the total value.
- "Meanwhile, rare earth metals and oxide manufactured outside China yet involving Chinese relevant technologies in the process of rare earth mining, smelting and separation, metal smelting, magnetic material manufacturing, or rare earth secondary resource recycling should also apply for the license, the statement noted. The two new regulations will take effect on December 1."
- "And all exports involving rare earth metals and oxide originating from China need to apply before exporting immediately."
- "Chinese regulators will not approve export applications for foreign military users, as well as export applications for importers and end-users listed on export control or watch lists."
Readers should take special notice of the last prohibition of sales to foreign military users, e.g., the U.S.
-- We identified a few of military uses or REEs in the Context section of our first installment in this series.
-- We noted in a previous installment how the dependency of U.S. DoD/DoW on Chinese RREs had been badly mismanaged -- U.S. unreliable RRE supply chain
-- We identified a few of military uses or REEs in the Context section of our first installment in this series.
-- We noted in a previous installment how the dependency of U.S. DoD/DoW on Chinese RREs had been badly mismanaged -- U.S. unreliable RRE supply chain
-- And we posted a wide range of REE uses in Big Tech data centers in the full version of this report
Don’t say we didn’t warn you!"
1) China's Long-term Objectives
This section identifies some long-term objectives the editor of this blog has identified that are related to Rare Earth Elements (REEs) and tech.
- Effective administration of its extraterritorial export controls on its processed REEs
-- Maintain sufficient staff to monitor and enforce worldwide compliance with its controls.
-- Update its controls from time to time to eliminate loopholes that emerge, which means engaging in continuous rounds of "Whack-a-Mole" to restrain violators of its controls.
-- Work out political/diplomatic processes for handling important situations wherein its extraterritorial controls overlap/conflict with U.S. extraterritorial controls., e.g., ASML (Netherlands), and TSMC (Taiwan) - Deriving maximum leverage from its processed rare earth elements (REEs)
China's long-term objectives are to leverage its processed REEs. As per Deng Xiaoping's original strategy, China does not really want to sell any of its processed REEs to any other country. The total global annual sales of REEs is less than $10 billion dollars. Even if China sold its processed REEs for ten times their current value, that would generate less than $100 billion per year. Deng envisioned earning hundreds of billions each year.
China really wants wealthy foreign investors to invest tens of billions into China's own manufacturing infrastructure each year and to provide these investors with substantial returns on their investments within three to five years. It does so by producing superior components, subassemblies, assemblies, and sometimes final products that because China's thousands of REE patents embody far greater knowledge of the best ways to "season" products than foreign competitors.
China's superior versions of the components, subassemblies, assemblies, and final products quickly dominate the markets in affluent consumer countries that generate the desired hundreds of billions of dollar annual revenues for China.
China uses its license requirements to "nudge" foreign manufacturers to shift their production of components, subassemblies, assemblies, and final products to China. The process for obtaining licenses for buying processed rare earths contains so much friction that foreign manufacturers eventually perceive the "wisdom" of relocating their productions to China.
Bottom line: China does not want to engage in economic trade wars even if it could "win" because the wealthy investors in the losing countries whose economies had been damaged would have fewer dollars to invest in China's infrastructure and the affluent customers would have fewer dollars to purchase China's superior products. So China's economy would also be damaged. - Independent advanced chips and software.
The Obama administration's demolition of ZTE was the wakeup call. President Biden's extraterritorial export controls on U.S. advanced chips and software make this objective more difficult to achieve, but all the more necessary to achieve asap.
-- China must design its own advanced chips and software. Indeed, China ordered its tech companies to stop buying Nvidia’s AI chips, as reported in Financial Times, 9/17/25 and Ars Technia, 9/17/25.
-- China must develop its own high resolution lithography machines that produce advanced chips, comparable to the fab machines that, at this time, are only produced by ASML (Netherlands), machines that are restricted by U.S. controls.
-- China must develop the expensive energy-intensive infrastructure of hyper-scale clouds/data centers that would make Chinese large language models accessible to everyone in China. China must develop all levels of the full stack. It's not enough to have world class LLM's, like Deep Seek's models, at the top of the stack.
2) China's Short-term Objectives
Presidents Obama and Trump-1 repressed ZTE and Huawei for reasons of national security; but President Biden's extraterritorial restrictions on China's access to advanced chips and software was a comprehensive effort to suppress the continued success of China's efforts to dominate one global tech product market after another by employing Deng's original strategy.
President Trump-2's signal of his intention to impose a 500 percent tariff on all Chinese exports transformed the conflict into a full scale trade war. China's quick announcement of exterritorial controls on its refined RREs was powerful enough to cause President Trump to request an immediate truce, a pause of controls by both sides that China immediately accepted.
But nobody should be fool enough to believe that a truce is the end of the war. A truce is a brittle thing that's easily broken, all the more so in this case because President Trump himself is brittle, given to making abrupt policy shifts from one moment to the next.
So this truce could break down at any time and the conflict could escalate to a level the world has not witnessed since the ultra dangerous years after the Soviets installed nukes in Cuba because the U.S. and China (with a little help from Russia) have enough nukes to transform the other's "victory" into a catastrophic global loss.
The good news for the world is that President Xi seems to have embraced a new strategy, the same strategy that Secretary of State Henry Kissinger used to bring the escalating nuclear arms race between the U.S, and the Soviet Union to a stable conclusion -- Détente
This pictured shows Zhou Enlai, the first Premier of the People's Republic of China (PRC), enjoying a tasty Chinese take-out with Henry Kissinger, U.S Secretary of State, who was on his first secret trip to the PRC in 1971 to prepare for President Nixon's historic meeting with Chairman Mao Zedong in 1972, wherein the U.S. and China would begin the process of normalizing their relationship.
Although Secretary Kissinger participated in the process that normalized the relationship of the U.S. with the PRC, détente was his term for the extensive talks, accords, treaties, and agreements between 1969 and 1979 that ended the hitherto apocalyptic nuclear arms race between the U.S. and the Soviet Union. The world became a much safer place for a long time thereafter. Wikipedia provides a concise overview of the context and achievements of Kissinger's Détente.
President Xi has arranged a few more meetings with President Trump this year after their meeting in Beijing. Instead of "accords" and "treaties", these meetings will announce lots of "deals" because that's how President Trump measures the value of these kinds of meetings. For example, President Xi will probably agree to buy enough soybeans from American farmers to keep their MAGA hats firmly in place for next 10 elections; but he will also keep China's commitment to large purchases of soybeans from Brazil because he also wants to enhance China's image as the world's rational/dependable super power.
Our upcoming federal elections will be held on November 3, 2026. Therefore no one should be surprised that China set the deadline for responses to its new export controls on November 10, 2026 -- one full week after our elections. By that time enough returns will be finalized to assess the GOP’s gains and losses.
- If the GOP does well in the elections, then President Trump will have maximum power, and President Xi will have minimum leverage; but if the GOP does poorly, then their relative positions will be reversed.
- President Trump met President Xi in China this week. Of course, this was another short-term bargaining session with President Xi offering minimum commitments, and President Trump proclaiming maximum victory, no matter what really happened behind closed doors
Meanwhile, the U.S. Supreme Court's denial of President Trump's authority to impose tariffs has already afforded China's leverage a substantial boost.
President Xi might eventually agree to carve out "exceptions" to the November 10, 2026 deadline for U.S. defense contractors that would enable them to continue to have access to whatever processed REEs they needed until President Trump's second term expires in 2028. These potential exceptions might be carrots that ensure President Trump's continued attendance at subsequent meetings.
If the deals and exceptions that President Xi negotiated with President Trump on this visit are one-off concessions, then the current truce will be only be a welcone, but easily fractured pause in a mutually disastrous trade war. So President Xi's only rational choce is Détente -- regular meetings with America's current leaders wherein the deals and exceptions are calibrated to our elections.
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