Trump Lost to China

After the United States-China summit planned for Thursday, President Trump may crow about his deal-making skill. Aides may suggest that he deserves a Nobel Prize for negotiation — but I invite you to roll your eyes.

The most important bilateral relationship in the world today is between the United States and China, and Trump has bungled it. He started a trade war that Washington has been losing, and if a truce is formalized this week, it will likely be one with China holding power over America and leaving our influence diminished.

When Trump rashly announced his “Liberation Day” tariffs in April, he badly miscalculated. He seemed to think that China was vulnerable because it exported far more to the United States than it purchased. He apparently didn’t appreciate that much of what China purchased, like soybeans, it could get elsewhere — while Beijing is now the OPEC of rare earth minerals, leaving us without alternative sources. China controls about 90 percent of rare earths and is the sole supplier of six heavy rare earth minerals; it also dominates rare earth magnets.

Rare earths and rare earth magnets are essential ingredients of modern industry. They are necessary for the manufacturing of drones, automobiles, airplanes, wind turbines, many electronics and much military equipment; without them, some American factories would close and military suppliers would be severely affected. A single submarine can require four tons of rare earths.

It was quite predictable that China would respond to an international dispute by weaponizing its control over rare earths, for that is what it did with Japan in 2010. Sure enough, two days after Trump announced his Liberation Day tariffs, China announced export controls for some rare earths. It then greatly expanded the export controls this month.

It soon became obvious that President Xi Jinping of China had us over a barrel, for the United States economy depends on Chinese rare earths far more than China depends on American soybeans.

Treasury Secretary Scott Bessent says that negotiators have now “reached a substantial framework” for a trade deal between Trump and Xi. If the framework holds, it appears that the United States will cut and cancel tariffs and China will suspend its latest restrictions on rare earth mineral exports and resume soybean purchases. On the surface, that might look like a return to the status quo before the trade war, but it’s more like our surrendering and ending up in a weaker position after a conflict we started.

That’s because the dispute led China to weaponize its control of rare earths and hold this over us indefinitely as a cudgel. Indeed, a one-year suspension of export controls on rare earths would be a brilliant move by Xi, allowing Beijing to retain its leverage over the United States without causing such disruption that America and other countries would make all-out efforts to break China’s near-monopoly on the minerals.

At a conference over the weekend, I asked a large room full of international relations experts for a show of hands: Who thought the United States was winning the trade war, who believed China was winning and who thought it was too soon to tell? Overwhelmingly, people said China was winning and now holds the advantage.

Now that Trump has induced China to weaponize rare earths, we don’t have any rapid way of finding alternative sources. (Republican and Democratic presidents over the years should have worked much harder to develop rare earth mines and refineries.) Terry Lynch, the chief executive of Power Metallic Mines, a major mining company based in Canada, told me that the West needs a Manhattan Project-scale effort to develop rare earth capabilities, but that even such an all-out initiative would probably take five to seven years to get results.

“In that interim time, we’re going to have to make a deal with China,” he said.

In effect, Trump started a trade war and soon found that he was carrying a tariff to a knife fight. The trade bully unexpectedly found himself bullied, so he began to court China and make concessions.

Trump dialed back tariffs (before threatening new ones). He eased rules on exporting chips to China. He allowed TikTok to continue to operate in the United States, despite serious national security concerns. He blocked a visit to the United States by Taiwan’s president and reportedly delayed an arms sale to Taiwan. As the Center for American Progress put it, “the Trump administration’s approach to China is in a strategic free fall.”

That’s what I worry about in the coming years. Xi sees our weakness. He has established that he has the upper hand in the bilateral relationship and that Trump is the weak one who will buckle under pressure, including on security matters. And because Trump has betrayed and antagonized allies, they are less likely to work with us in resisting Beijing.

Xi may suspend his rare earths restrictions for a year, but I doubt he’ll let us build stockpiles. I suspect it will be more difficult for American companies to acquire rare earths to make fighter aircraft and submarines — and in fairness, Xi in some respects is simply doing to the United States what we have done to China.

In any case, a one-year suspension of rare earth licensing may simply be a way of reminding American leaders — and others around the world, for the restrictions were global — of their vulnerability. The aim presumably would be to induce more compliant behavior on issues Beijing cares about, from Taiwan to human rights complaints about Xinjiang and Tibet.

Sun Tzu, the great military strategist, wrote in “The Art of War” 2,500 years ago, “To win 100 victories in 100 battles is not the acme of skill. To subdue the enemy without fighting is the acme of skill.” And that may be what Xi has in mind, allowing China by its newfound trade leverage to project more military power in the western Pacific without firing a single missile.

Xi may explicitly or implicitly use the threat of limiting rare earth exports to encourage Trump to dial down support for Taiwan or reduce patrols in the South China Sea. If Trump goes along with that, it would be an enormous setback for America in Asia and a big gain for Chinese influence. Our allies would shudder at the thought of diminished American power in the Pacific, and there would be a growing risk of Chinese aggression in the Taiwan Strait.

So don’t rush to applaud whatever triumphant announcements you may hear from Trump and his aides about a landmark deal with China. We Americans may have lost not just a trade war but a chunk of our global credibility and influence for years to come, in ways that would be seen globally as a harbinger of American decline.