The National Interest In the Donald Trump-Xi Jinping Summit, China Holds the Cards May 13, 2026 By: Desmond Lachman

 The National Interest 

In the Donald Trump-Xi Jinping Summit, China Holds the Cards

May 13, 2026

By: Desmond Lachman

At best, President Trump may be able to keep the status quo of US-China trade. But he doesn’t have the leverage for concessions from Beijing.

President Donald Trump likes to think of negotiations in terms of who holds the cards. On his trip to China this week, it would seem that China holds all the cards on economic issues. This makes it likely that President Trump will achieve little in securing meaningful economic concessions from China. However, China might be prepared to offer Trump an economic fig leaf in terms of larger aircraft and agricultural import orders. 

Start with trade threats. In February 2026, the Supreme Court ruled that President Trump violated federal law by unilaterally imposing sweeping tariffs under the International Emergency Economic Powers Act (IEEPA). This meant that Trump could no longer arbitrarily decide on Friday to impose a punitive import tariff on all Chinese goods and then implement that decision on Monday. 

Instead, Trump can now impose tariffs on China only under Section 232 (national security grounds), Section 301 (unfair trade practices), and other existing trade laws. However, each requires completing formal investigation processes and faces potential legal challenges. This means high tariffs on China are still possible, but will take longer and be harder to impose unilaterally.

By contrast, China has a rare-earth trump card it can play at will. Not only does China mine between 60 and 70 percent of the world’s rare earth output, but it also controls between 85 and 90 percent of the world’s rare earth refining capacity. China knows that its rare earths are critical to the US economy because they are essential for manufacturing advanced technologies like electric vehicles, electronics, renewable energy systems, and military equipment. Last year, China’s threat to restrict its rare earth exports to the United States was an important factor in the Trump administration walking back from its peak 145 percent import tariff escalation on China.

In any trade negotiation, President Xi Jinping knows that his country’s repressive political system allows him to withstand more economic pain and for longer than President Trump can, who has to answer to the American electorate. This is especially the case when Trump is going into November’s midterm elections with an acute affordability problem and with growing public opposition to the Iran War. Trump can ill afford to exacerbate the affordability problem by imposing high import tariffs on China, even if the Supreme Court had sanctioned his trade restriction policy.

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Yet another disparity in the relative strength of the United States and China at the forthcoming summit meeting is their respective trade positions. Despite raising tariffs to their highest level in the past 100 years and a meaningful improvement in the US-China bilateral trade balance, the overall US goods and services trade deficit in 2025 was practically unchanged from the previous year. 

Largely responsible for this disappointing performance is the continued large US budget deficit, which weighed on the country’s savings. Meanwhile, despite a large drop in its exports to the United States, China recorded a record trade surplus of around $1.2 trillion in 2025. It did so by shifting its exports to Europe and its Asian trade partners. It also did so by continuing to pursue policies that suppress domestic consumption and that keep its currency undervalued.

On top of all of this, Trump will be going to Beijing as a supplicant to enlist China’s support in helping him end his unpopular war with Iran. This heightens the chances that Trump will be in no position to exercise economic pressure on China to reduce its record overall trade surplus and to help the US reduce its trade deficit. The most we should expect from Trump’s China visit on the economic front is the maintenance of the truce that was struck last year between the two countries in their trade war.

In short, Trump will get little help from China to reduce the US trade deficit, and he will have to learn to live with China’s record trade surplus.

About the Author: Desmond Lachman

Desmond Lachman is a senior fellow at the American Enterprise Institute. He was a deputy director in the International Monetary Fund’s Policy Development and Review Department and the chief emerging market economic strategist at Salomon Smith Barney. Mr. Lachman has written extensively on the global economic crisis, the US housing market bust, the US dollar, and the strains in the euro area. At AEI, Mr. Lachman focuses on the global macroeconomy, global currency issues, and multilateral lending agencies.