Tariffs still matter, but export controls, rare earths and strategic supply chains now define the rivalry.
President Donald Trump’s visit to Beijing this week reflects a deeper shift in U.S.-China relations. Economic competition is no longer primarily about tariffs, trade deficits or market access. It is increasingly regarding control over strategic pillars of future power like AI, semiconductors, rare earths, advanced manufacturing and supply chains.
Thus, President Trump met Chinese President Xi Jinping in Beijing on May 14 after arriving the previous day for talks expected to cover trade, Taiwan, Iran, artificial intelligence and broader relations, not just to lower trade tensions. Reuters reported that Xi warned Washington that mishandling Taiwan could push the relationship into a dangerous place, while both sides also explored economic cooperation. After the summit, U.S. officials said Washington’s policy on Taiwan remained unchanged, suggesting that the meeting reduced diplomatic tension but did not alter the deeper strategic dispute.
A separate Reuters report said Xi described a “new positioning” in the relationship, signaling Beijing’s desire to frame competition in more stable terms. Specifically, Xi stated that the two powers should overcome the “Thucydides Trap,” a concept popularized by Harvard scholar Graham Allison to describe the risk of conflict when a rising power challenges an established one. Allison drew from the ancient Greek historian Thucydides, who wrote that the rise of Athens and the fear it created in Sparta helped make war more likely. However, the concept does not mean that war is inevitable and its real value is that it shows how fear, perception and miscalculation can turn competition into confrontation when great powers fail to manage their rivalry. In today’s U.S.-China context, the phrase refers to the danger that China’s rise and America’s effort to preserve its global position could push both countries toward confrontation, even if neither side openly seeks war.
That diplomatic language matters, however, it does not erase the structural direction of the relationship. Washington and Beijing are now trying to reshape the rules, dependencies and vulnerabilities of the next era of global economy. Especially, the perspective of Beijing is that the two powers are equal in managing global affairs.
The first layer is tariffs: The U.S. has used tariffs against China since Trump’s first term, and many of those measures continued under former President Joe Biden. In 2024, the Office of the U.S. Trade Representative finalized Section 301 tariff increases on Chinese imports in strategic sectors, including electric vehicles, batteries, semiconductors, solar cells, steel and aluminum, critical minerals and medical products. Under the Federal Register notice, tariffs on Chinese electric vehicles rose to 100%, while solar cells and semiconductors were set to rise to 50%.
This indicates that tariffs are no longer only punitive tools or bargaining chips, but instruments of industrial policy. Washington is using them to slow China’s penetration of strategic sectors while giving U.S. and allied industries time to build capacity. However, tariffs alone cannot define the competition. China has adapted by redirecting trade, deepening ties with other markets and relying on the scale of its industrial base. That is why export controls have become more important. Tariffs make trade more expensive and export controls try to prevent specific technologies from reaching strategic competitors.
In the U.S.-China context, the most important controls concern advanced semiconductors, semiconductor manufacturing equipment, high-bandwidth memory and technologies linked to artificial intelligence and military modernization. In December 2024, the Bureau of Industry and Security announced controls on 24 types of semiconductor manufacturing equipment, three types of software tools and high-bandwidth memory, along with 140 additions to the Entity List. The stated purpose was to limit China’s ability to produce advanced chips for military applications, AI and advanced computing.
The controls did not stop there. In January 2025, BIS issued a rule to regulate the diffusion of the most advanced AI models and advanced computing chips, although the Trump administration later rescinded the Biden-era AI diffusion rule and replaced it with a different approach to advanced AI chip controls. In August 2025, the Commerce Department closed a loophole that had allowed some foreign-owned semiconductor fabs in China to receive certain U.S.-origin goods, software and technology without individual licenses under the Validated End-User program.
These measures reveal the central logic of the new competition: Washington is not trying to cut off all trade with Beijing but instead, it is trying to draw a line around technologies that could strengthen Chinese military power, surveillance capacity or AI development. This is selective decoupling, not full economic separation. Beijing has its own tools. China’s leverage is not only its market size, but its position inside critical supply chains. Rare earths are the clearest example.
Rare earth elements and rare earth magnets are used in electric vehicles, electronics, aircraft engines, defense systems, semiconductors and advanced manufacturing. China remains dominant in processing: Reuters reported in 2025 that China produces more than 90% of the world’s processed rare earths and related technology. In October 2025, Beijing tightened export controls targeting defense and semiconductor users, expanding an earlier set of restrictions. Rare earths are again central to the Trump-Xi talks. Ahead of the summit, Reuters reported that the two sides were weighing an extension of a rare earth truce, but that Chinese heavy rare earth exports remained sharply constrained, with the U.S., Germany and Japan among the most affected.
This is the other side of the economic rivalry. Washington controls important parts of the high-end technology chain while Beijing controls key parts of the materials and manufacturing chain. Each side has vulnerabilities, but each side also has leverage. That makes supply chains the third and most important layer of the competition. For decades, globalization was built on efficiency and companies looked for lower costs, faster production and larger markets. China became the center of global manufacturing because it offered scale, infrastructure, labor capacity and deep supplier networks. But the new era is about resilience, security and political risk, not just resilience.
Today, the main question for companies and governments is whether a supply chain can survive tariffs, sanctions, export controls, war, political pressure or a sudden regulatory move. That is why semiconductors, batteries, rare earths, pharmaceuticals, drones, telecommunications equipment, shipbuilding, energy technology and AI infrastructure are now treated as instruments of national power. Whoever controls production, inputs, standards and chokepoints gains influence over the wider international system.
The Beijing summit did produce limited economic openings, but not a strategic reset. U.S. Trade Representative Jamieson Greer said Washington expects China to commit to “double-digit billions” in U.S. agricultural purchases per year over the next three years, with soybeans still central to the package. Trump also said China had agreed to buy 200 Boeing aircraft, with the possibility of a larger order later. These are important commercial signals, but they do not resolve the deeper disputes over tariffs, export controls, rare earths, AI chips and Taiwan. Those steps would matter, especially for markets and companies exposed to the bilateral relationship. However, they would not remove the deeper struggle over technology, industrial capacity and strategic dependence. In Washington, suspicion of China is now bipartisan, even when Democrats and Republicans disagree on tactics. In Beijing, Xi’s leadership has spent years emphasizing self-reliance, technological upgrading and resistance to foreign pressure. Neither side can easily return to the old model of deep economic integration without strategic limits.
The result is not a clean break, but it is a more managed, contested and weaponized form of interdependence. The U.S. and China will continue to trade: American companies will continue to seek access to Chinese consumers and Chinese firms will continue to depend on global markets. But the most sensitive sectors will be filtered through national security reviews, licensing rules, investment restrictions, industrial subsidies and political bargaining.
For the rest of the world, this creates difficult choices. U.S. allies such as Japan, South Korea, the Netherlands and Germany are directly affected because they sit inside semiconductor, machinery, automotive and rare earth supply chains. Emerging economies may benefit from supply-chain diversification, but they may also face pressure to align with one side’s rules. Companies will need to manage compliance risk across overlapping U.S., Chinese and allied regulations.
The strategic takeaway is that the U.S.-China economic competition has entered a more complex phase. Tariffs still matter, but they are no longer the main story. Export controls, rare earths, AI chips and supply-chain resilience now define the center of the rivalry. Trump’s Beijing visit may stabilize the relationship temporarily, and it produced limited economic agreements, but the larger direction is unlikely to change. The U.S. and China are not moving back toward simple globalization. They are moving toward a world where trade continues, trust is lower, supply chains remain global and economic policy has become one of the main instruments of geopolitical power.
[Photo by The White House, Public domain, via Wikimedia Commons]
The views and opinions expressed in this article are those of the author.
Themistoklis (Themis) Zanidis is founder of GeoSec Insights and a geopolitical analyst focused on global security, great-power competition and strategic risk. He is a former Hellenic Navy officer and has academic training in international relations, political science and cultural studies.
