What’s happening now actually feels a bit like the U.S.–Soviet dynamic back in the day — both sides making sure they could destroy each other, and that balance of deterrence ironically brought a kind of stability. Back then, the weapon of choice was nuclear arms. Today, between China and the U.S., the “weapons” are economic — each side’s dependence on the other.
For the U.S., that leverage mainly comes from its position as the dominant buyer of Chinese goods, and its strength at the high end of global supply chains, things like aircraft engine parts, critical software, and advanced components.
China, on the other hand, is overall at a disadvantage compared to the U.S., but it does have asymmetric strengths in a few key areas. One is its purchasing power for specific American goods, with soybeans being the clearest example. Another is its dominance over critical minerals, especially rare earths. Beijing has been playing that card to the fullest. It’s like this: you’re holding a machete, and I’m holding a needle. Maybe I can’t kill you with the needle, but if I jab it into your fingertip, it’ll still hurt like hell.
Right now, time seems to be a bit on China’s side. The lawsuit over the “reciprocal tariff” order goes to court on November 5. According to Robert Lighthizer, Trump’s former trade czar, there’s a good chance the Supreme Court will strike it down. And with the U.S. midterms approaching, if Trump can’t offset the pain caused by China’s countermeasures, he’ll face growing pressure from Congress, business, and the public.
So yes, Beijing’s recent retaliation, the 50% tariff rule and the port fees, is a direct response. But objectively speaking, it also buys China more time: time to strengthen domestic tech capabilities and time to expand trade with the Global South to cushion against U.S. tariffs.
Of course, the U.S. isn’t sitting idle. Washington’s been busy stockpiling new leverage of its own.
First, it’s been scrambling to find other countries to help reduce its reliance on Chinese rare earths — signing critical minerals cooperation deals with Australia, Malaysia, Thailand, and Japan, and now reaching out to Brazil. The urgency is real. But the Australian deal mainly involves building a 100-ton-per-year gallium refinery in Western Australia, which might help with gallium, but it doesn’t touch the rare earth problem.
Malaysia and Thailand do have small deposits of heavy rare earths, but limited reserves and output. Their real potential is to serve as Southeast Asian refining hubs, not as mining sources. Lynas already operates a refining plant in Kuantan, Malaysia, and reportedly has some heavy rare earth refining capacity there.
The real choke point for the U.S. is heavy rare earths, which come from ionic clay deposits. Australia’s ores (monazite and bastnäsite) are different; they’re not the ion-adsorption type you find in Jiangxi, so Lynas doesn’t have the tech for that. Mining monazite is messy and radioactive, creating big environmental headaches. Lynas actually got in trouble in Malaysia for producing radioactive waste — at one point, the government even threatened to shut it down. The eventual compromise was to process the ore in Australia first to remove the radioactive elements and ship it to Malaysia as rare-earth carbonate. That workaround has significantly hurt output.
Even if the U.S. and Australia double down now, with more funding and policy support, the best they can probably do in the near term is keep Lynas and MP Materials stable and push some R&D. But the real bottlenecks remain twofold: China’s decades-honed, tightly guarded refining and separation know-how, and its ionic clay extraction technology. Without those, the heavy rare earth problem won’t be solved in one or two years. Three years is the most optimistic timeline; five to ten years is probably more realistic, and that’s what most analyses suggest.
Over the past few days, Trump’s been touring Malaysia for the ASEAN summit, then Japan and South Korea. There have been some tangible outcomes. On October 26, the White House released a joint statement announcing new “reciprocal trade” deals with Malaysia, Thailand, Cambodia, and Vietnam.
And there’s some real substance here. For example, in the U.S.–Malaysia deal, there’s a clause that says:
“If Malaysia enters into a new bilateral free trade agreement or preferential economic agreement with a country that jeopardizes essential U.S. interests, the United States may, if consultations with Malaysia fail to resolve its concerns, terminate this Agreement and reimpose the applicable reciprocal tariff rate set forth in Executive Order 14257 of April 2, 2025.”
Sound familiar? It should. It’s basically the “poison pill” clause from the USMCA’s Article 32.10 transplanted into Southeast Asia. Back then, the idea was that if Canada or Mexico signed a free trade deal with a “non-market economy” (i.e., China), the U.S. could withdraw from USMCA and pursue a separate bilateral deal instead. In trade terms, it’s a way of locking your partner in, making it painful for them to cooperate with others later.
Similarly, the U.S.–Cambodia deal includes a lighter version of that idea:
Article 3.3: Digital Trade Agreement: Cambodia shall consult with the United States before entering into a new digital trade agreement with another country that jeopardizes essential U.S. interests.
The full texts for Thailand and Vietnam haven’t been released yet, but it’s safe to assume similar clauses are in there.
Beyond that, both the Malaysia and Cambodia agreements include commitments to cooperate with the U.S. on export controls, investment screening, and broader economic security measures. Essentially:
Help the U.S. close loopholes in export controls so sensitive tech doesn’t get re-exported to China; and
Align with U.S. investment security policies, especially in critical minerals, infrastructure, and high-tech sectors.
Both Malaysia and Cambodia pledged to enforce restrictions against entities on the U.S. Entity List and SDN List. Malaysia even committed to fully comply with U.S. unilateral export controls, while Cambodia agreed to cooperate “case by case.” Both countries promised to prevent their firms from helping others bypass these restrictions and to coordinate with Washington on sanction enforcement.
Malaysia is also planning a new foreign investment security review mechanism — to assess risks in critical minerals, energy, and infrastructure projects — aligned with “international best practices” and closely coordinated with the U.S. Cambodia, meanwhile, agreed to share information on third-country investment activity and deepen cooperation on economic and security matters after signing an information-sharing agreement.
In short, both deals tie these countries more closely to U.S. export control and investment regimes.
Now, back to the big picture — both sides are laying out their chips before the leaders’ meeting.
Fentanyl: There are encouraging signs. It looks like both sides are close to a solution. On October 26–27, China’s Public Security Minister Wang Xiaohong toured Guangdong, visited the Opium War Museum in Humen, and called for carrying forward Lin Zexu’s anti-drug spirit — a very pointed gesture.
In addition, Wang visited the Opium War Museum in Humen Town, Dongguan, to learn about local anti-drug efforts.
调研期间，王小洪……参观东莞市虎门镇鸦片战争博物馆，了解禁毒工作情况。
“We must carry forward and promote the spirit of Lin Zexu, adhere to and rigorously implement anti-drug policies, improve the drug governance system, and successfully wage a people’s war against drugs in the new era.”
要传承弘扬林则徐精神，坚持厉行禁毒方针，完善毒品治理体系，打好新时代禁毒人民战争。
Meanwhile, U.S. media reported that FBI Director Kash Patel is set to visit China next month. Beijing clearly wants the fentanyl tariffs gone, but according to the Wall Street Journal, the likely compromise is for the U.S. to first cut the fentanyl tariff in half to 10%, in exchange for tougher Chinese action on precursor chemicals — and then revisit whether to remove it entirely later.
Rare earths: Washington wants China to scrap its new restrictions, especially those under Notice No. 61 and its FDPR-style extraterritorial rules. But China has only agreed, in talks with Malaysia, to delay implementation by 12 months. The U.S. isn’t thrilled, but has little choice — it buys time for domestic industries dependent on rare earths and for efforts to reduce reliance on China.
Soybeans: All signs point to Beijing being ready to resume large purchases of U.S. soybeans. China’s open to it — after all, soybeans are soybeans; it’s just a question of price and leverage. The key issue is what Beijing gets in return. For now, it seems that commitments on soybeans and the rare-earth delay are being traded for extensions of reciprocal tariff suspensions and pauses on Section 301 investigations and high-tech export restrictions.
Port fees: This one’s trickier. Given Trump’s obsession with reviving U.S. shipbuilding, Washington’s unlikely to roll this back completely. Likewise, Beijing’s retaliatory port fees on American ships probably won’t disappear either. The WSJ suggests a compromise: both sides partially cut port fees to ease pressure on their companies and set a positive tone for further talks.
As for broader tech issues — like semiconductors — there hasn’t been much movement. If Treasury Secretary Scott Bessent is to be believed, the U.S. made no concessions on export controls during the Malaysia talks.
This morning, Trump suddenly congratulated Jensen Huang — but stopped mid-sentence, without saying why. People are speculating that maybe the U.S. has approved NVIDIA to sell its B30A chips to China. We’ll probably find out soon — Huang is attending the APEC CEO Summit and meeting Trump. At NVIDIA’s GTC event today, Huang didn’t mention it; he did say NVIDIA expects to ship 20 million Blackwell Rubin GPUs and stressed again that the company currently has zero AI chip market share in China, nor has it applied for export licenses for Blackwell chips. He added that reopening the China market would be “a huge win,” but he doesn’t expect that to happen yet.
So, heading into Thursday’s meeting, that’s roughly where things stand. Personally, I think the outcome will be positive. Even if there aren’t big concrete breakthroughs, both sides have every reason to project optimism. Their domestic politics and markets badly need it.
And indeed, this kind of top-level meeting is often the only way to truly break deadlocks. On October 27, Foreign Minister Wang Yi spoke by phone with U.S. Secretary of State Marco Rubio and said something I don’t think I’ve ever heard a Chinese diplomat say about the two leaders:
“President Xi and President Trump are both world-class leaders. Their long-term engagement and mutual respect have become the most valuable strategic asset in U.S.–China relations.”
“World-class leaders.” “Strategic asset.” Those are new phrases — and clearly deliberate. Trump has said many times that he has a great relationship with Xi; this is Beijing’s way of saying the feeling is mutual.
All in all, the atmosphere is just right. I’m confident the meeting will help steady the relationship — and maybe even start to move it forward.