US and China Clash Over Tariffs, AI, and Rare Earths as Summit Ends With No EV Deal
Washington and Beijing remain locked in a high-stakes economic standoff over tariffs, artificial intelligence, and critical minerals, even as both sides signal they want to keep talking.
President Donald Trump and Chinese President Xi Jinping met for a high-stakes summit, but no agreement was reached on opening the U.S. market to Chinese electric vehicles [250867][250863]. The two leaders are expected to meet again in the coming months, with focus potentially shifting from extending the latest tariff truce to building a longer-lasting framework for managing economic and technological competition [250896].
Tariffs remain the biggest issue between the two countries. The United States has imposed tariffs on Chinese goods, and China has responded with its own tariffs [250867]. The U.S. currently imposes a 100% tariff on Chinese-made electric vehicles, making them too expensive to compete in the American market [250863]. However, analysts say Chinese automakers like BYD and Nio can work around these barriers by building factories in Mexico or partnering with established automakers. Chinese EVs typically cost 20% to 30% less than comparable American models and lead in battery technology [250863].
Artificial intelligence has emerged as a new battleground. Both countries want to lead in this technology. The U.S. has restricted some AI technology exports to China, while China is investing heavily in its own AI industry [250867]. Xi called for humans to keep control of artificial intelligence and warned that rivalry between the United States and China must not be allowed to run out of control. He said AI development should not be left to market forces alone and that the technology should serve people rather than replace them [249638].
China has also tightened its grip on rare earths, the minerals used in electric cars, missiles, and smartphones. Rare earths are a group of 17 metals that are hard to mine and hard to replace. China controls most of the world's supply and almost all of its processing [250882]. In recent weeks, Beijing has slowed exports and tightened permits, threatening American factories, defense contractors, and tech companies. Trump, who once promised a hard line on China, has now delayed new tariffs and signaled he wants a deal [250882].
The European Union is also pressing China to make progress by next month on its widening trade imbalance. China's merchandise trade surplus approached US$1.2 trillion last year [249710]. The EU is raising the possibility of new protectionist trade measures. Pascal Lamy, former Director-General of the World Trade Organization, warned that Europe faces a critical decision on China: rebalance trade relations or slide into protectionism [246057].
In Asia, Japanese chemical makers are sounding the alarm over a sharp rise in imports from China. The influx is putting pressure on domestic producers, who say they are losing market share and facing falling prices [250879]. Chinese producers have expanded capacity in recent years, allowing them to offer lower prices, while Japanese firms with older plants and higher energy costs struggle to match those prices. Industry groups have asked the government to monitor the situation and determine whether the imports are being sold below fair market value [250879].
Meanwhile, a group of top Chinese business leaders traveled to Washington this week, even as it remained unclear whether they would meet with U.S. officials at the planned summit. The trip signals that Chinese companies still want to keep talking to Washington despite rising trade tensions. Many Chinese firms are eager to protect their access to the American market [249639].
Spain has proposed a more flexible version of Europe's "made in Europe" rules, aiming to keep Chinese investment flowing without cutting China off from EU subsidies and public contracts. The proposal was presented Thursday in Brussels, where EU industry ministers met to decide how much of a product must be made in Europe to qualify for public procurement and EU aid programs [249347]. Spain's Minister of Industry and Tourism, Jordi Hereu, said: "This is a battle over the future of EU industry. We support strengthening European industrial production. But we also need a pragmatic view: many value chains depend on other regions of the world" [249347].
Britain is under pressure to raise tariffs on Chinese electric cars. The European Union wants the UK to match its own import taxes. Without this, EU officials warn, British-made cars could face new barriers inside Europe [249567].
In the Philippines, young people remain open to China despite political tensions over the South China Sea. In a car wash lounge in Davao, 29-year-old cashier Shenilane Formento scrolls through messages on her Oppo phone—a Chinese brand—while following news of confrontations between Philippine and Chinese forces in disputed waters. She calls these incidents "disappointing," yet she remains open to China, a sentiment shared by many young Filipinos who separate political tensions from economic opportunity [248378].
A new security agreement between the United States, Denmark, and Greenland could limit China's ability to operate in the Arctic, especially in resource-rich Greenland. The agreement was signed on Tuesday. Observers note it could speed up the militarization of the Arctic and make Western Arctic nations more cautious about working with China [250898].
As artificial intelligence becomes central to China's economic transformation, economists and industry leaders are warning of two major risks: inflated valuations for humanoid robotics companies and the technology widening the wealth gap between rich and poor. Daniel Zhang, managing partner of FirstLight Capital and former chairman and CEO of Alibaba Group Holding, pointed to the sharp fall in some Chinese humanoid robotics stocks, saying the decline reflected expectations that had become unrealistic [250912].