Guangyi P

Good to meet informally with President Xi at the APEC Summit in South Korea today. 🇦🇺🇨🇳

The latest round of trade escalation between the US and China is the result of serious miscalculation by the US—Beijing takes BIS’s 29 September rule expansion as a unilateral provocation. 1. The Geneva, London, and Stockholm talks were primarily about testing boundaries and guardrails between the US and China. By July, a fragile equilibrium had formed: China continued supplying REEs on the existing level; the US froze tariffs at the current level. 2. That equilibrium was solidified during the Madrid talks in September, when negotiators quickly agreed on a framework for the potential sale of TikTok US. While TikTok US was never central to the trade negotiations, approving its sale under agreed conditions was a major concession from Beijing to deliver a high-visibility win that Trump desires, signaling willingness to move on secondary issues in exchange for stability ahead of a leadership-level summit. 3. By the end of Madrid, both sides appeared aligned in avoiding new unilateral measures ahead of the proposed late October Xi-Trump meeting. The assumption was that only a leader-to-leader session could unlock a broader settlement, given especially Trump’s preference for personalistic diplomacy over technocratic negotiation tracks. This implicit understanding was made explicit in China’s readout of the 19 September Xi-Trump phone call, where Xi warned against unilateral moves that could undermine “the results of multiple rounds of talks.” From Beijing’s perspective, BIS’s 29 September rule expansion was a direct violation of that warning—a unilateral escalation just 10 days after Xi framed stability as a condition for a summit. 4. Beyond BIS’s September rule, Beijing is also likely treating the USTR decision imposing port-entry charges on Chinese-built or Chinese-operated vessels—scheduled to take effect on 14 October—as another pending unilateral measure that should have been suspended after the 19 September Xi-Trump call. The fact that Washington is pressing ahead this Tuesday will reinforce Beijing’s perception that the US is acting in bad faith. 5. From Beijing’s perspective, these actions are not only substantive escalations but further confirmation of low credibility of the Trump administration. Beijing is effectively reactivating its April playbook—escalating first to force a negotiation reset, rather than waiting passively for the next talks. 6. Beijing’s underlying logic is straightforward: The US is more vulnerable to a rare earth supply shock than China is to incremental export controls on semiconductors. In recent weeks, Chinese policymakers have sent increasingly clear signals that they are prepared to accelerate domestic semiconductor supply chain development at all cost, even if it means absorbing short-term inefficiencies. This gives Beijing confidence that rare earth leverage is more decisive than chip export pressure. In a negotiation setting, it will likely seek a deep tariff cut in exchange for stable REE flows.