US-China Relations: A Fragile Truce and the Competition for Power

After a period of heightened tensions, the relationship between the United States and China has entered a phase of relative calm. This shift began in October 2025, when President Donald Trump and Chinese leader Xi Jinping reached an agreement in Busan, South Korea, to pause their ongoing trade war. The truce included a halt to new U.S. Tariffs and a rollback of Chinese restrictions on American access to rare earths and magnets. However, this reprieve remains fragile, driven more by domestic considerations than a resolution of underlying issues.

A Shift in Tactics

The truce represents a change in approach from the Trump administration, which had previously escalated trade tensions with tariffs reaching as high as 145 percent in April 2025. China retaliated with its own tariffs and threats to restrict rare-earth exports, prompting a shift towards a more conciliatory posture from the U.S. This included praising Xi, lowering tariffs, and downplaying sensitive issues like human rights and cyberattacks in favor of securing deals.

Several factors motivated this recalibration. These include the growing number of international challenges facing the U.S. – including conflicts in Gaza, Iran, Ukraine, and Venezuela – and increasing domestic pressures related to affordability and immigration. The administration also appeared surprised by China’s willingness to weaponize its control over critical minerals like rare earths, essential components in modern electronics. American public opinion has become less hawkish towards China, with a growing sentiment that avoiding conflict is a top priority Chicago Council on Global Affairs.

A Gentleman’s Handshake

Despite the truce, fundamental tensions remain unresolved. The agreement between Trump and Xi is best described as a “gentleman’s handshake,” built on economic interdependence and a shared interest in stability. Many policymakers in the U.S. Government view this period as a temporary stalemate and are eager to resume strategic competition with China. A single incident – in the Taiwan Strait, a spy balloon incident, or accusations of election interference – could quickly unravel the current calm.

China’s Strategic Focus

While the U.S. Navigates internal challenges, China is focused on strengthening its economic and technological power. China’s new Five-Year Plan prioritizes reducing reliance on foreign technology, accelerating domestic industrial modernization, and fostering innovation. Beijing is pursuing dominance in emerging technologies, including robotics, 6G mobile communication, and artificial intelligence. This strategy aims to solidify China’s position in the global economy and reduce its vulnerability to U.S. Export controls and sanctions.

The U.S. Response: Rebuilding National Power

To effectively compete with China, the United States needs to prioritize rebuilding its economic and technological strength. This requires reducing dependencies on China, particularly in critical supply chains like critical minerals, rare earths, and magnets. Strategies include expanding long-term contracts, accelerating environmental reviews for domestic mining, and funding the development of a complete domestic supply chain. Strengthening U.S. Defense capabilities through streamlined procurement processes and investment in workforce development is also crucial.

However, reducing reliance on China will be a long and complex process. Japan’s experience demonstrates that it takes significant time and effort to diversify supply chains. Despite over a decade of effort, Japan still sources 60 percent of its rare earths from China, compared to the U.S. Which imports approximately 70 percent.

The Importance of the Relationship

The dynamic between Trump and Xi is central to the current state of U.S.-China relations. Trump views his personal relationship with Xi as a key factor in maintaining stability and securing favorable deals. This approach, while unconventional, has been tolerated by Beijing, which prioritizes a stable economic relationship with the U.S.

Looking ahead, the actions taken by both leaders during this period of calm will be more important than any summit meeting. China is actively working to strengthen its position, and the United States must respond with urgency by securing supply chains, accelerating industrial production, and fostering innovation. Only then can the U.S. Hope to secure more favorable terms in the next chapter of its relationship with China.