What the He‑Bessent Call Reveals About US‑China Tensions Ahead of Xi’s Visit

Top American and Chinese economic officials used a Thursday phone call to confront each other over rising tensions, even as they continued to prepare for a summit between President Donald Trump and Chinese leader Xi Jinping in September. Vice Premier He Lifeng, Beijing’s point person on economic ties with Washington, raised “serious concern” over recent US trade restrictions, according to Xinhua. On the other side, Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer pressed China to meet its commitments on rare earths and US farm goods.

The exchange underscores how the truce struck last year—which suspended some tariffs and export curbs—is now under severe strain. New frictions include fresh US import duties that build out Trump’s tariff wall, access to rare earth minerals, the possible shipment of Chinese weapons to Iran, and the rapid spread of open‑weight Chinese AI models that Washington fears are built on misappropriated technology.

In a social media post after the call, Bessent said he had underlined Washington’s expectation that “Beijing fully meet its commitments on rare earths and US agricultural products.” Simultaneously, the US announced restrictions on foreign‑made robots and inverters, citing supply‑chain vulnerabilities—a move that, while not naming China, effectively bans products overwhelmingly sourced from Chinese factories. Wu Xinbo, director of Fudan University’s Center for American Studies, said the Chinese expressions of unhappiness were genuine, but noted that the call itself points to continued preparation for the next leaders’ meeting, with possible in‑person consultations on trade and investment boards expected before any Trump‑Xi sit‑down.

Behind the Fragile Trade Truce: Rifts, Demands, and the Road to September

Why the truce is cracking

The May 2024 trade truce was always a holding operation rather than a durable settlement. It froze some tariffs in exchange for Chinese purchases and promises on rare earths, but never resolved the structural rot in the relationship. Now a cascade of new irritants is testing its limits. Washington’s fresh round of import duties, the robot and inverter ban, and Bessent’s hints at a crackdown on Chinese AI firms for alleged intellectual‑property theft are each pulling the two sides further apart. Rare earths are a particular flashpoint—the US relies heavily on Chinese supplies and suspects delivery quotas are not being met in full.

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What Washington wants and what Beijing is offering

Bessent’s social media message made the US asks explicit: full compliance on rare earths and agricultural purchases. The administration, however, appears reluctant to escalate enforcement formally, wary of triggering a full‑blown trade war that could damage the US economy and overshadow the diplomatic choreography for the leaders’ summit. Bloomberg reported that Trump’s trade team believes China is not living up to its side of the deal, yet they are holding back from taking Beijing to task publicly. For China, the calculus is equally delicate. He Lifeng’s “serious concern” about restrictions is a calibrated signal—strong enough to show domestic audiences that Beijing will not be pushed around, but not so severe that it derails the summit that Xi needs to stabilise the relationship and attract foreign investment.

What the September summit could deliver—and what it cannot

The two sides have already agreed to create boards on trade and investment. Progress on the trade board is seen as more realistic in the short term; the investment board would take longer. But neither mechanism is likely to resolve the core disputes over technology access, AI governance and rare‑earth security. At best, the summit may yield a reaffirmation of the truce, some marginal Chinese purchases, and a framework for continuing talks. The bigger risk is that the current friction causes a breakdown before the presidents even meet, making the summit an exercise in damage limitation rather than a reset.

Navigating Renewed US‑China Friction: What Business Should Do Now

  • Monitor rare‑earth supply chains closely. If China curtails exports in response to US criticism, downstream manufacturers of electronics, electric vehicles and defence equipment will face immediate bottlenecks. Map out alternative sources, even if they are costlier.
  • Prepare for a widening of US import restrictions on Chinese hardware. The robot and inverter ban, though framed as a supply‑chain security measure, may be a template for further product‑specific curbs. Companies importing from China should stress‑test their logistics and consider inventory builds.
  • Watch for AI‑related measures. Bessent’s warning about intellectual‑property theft in Chinese AI models could translate into export controls on semiconductor design tools or restrictions on US cloud services used by Chinese developers. AI‑exposed firms should track developments at the Commerce Department.
  • Position for short‑term calm around the summit, not a breakthrough. History suggests that a pre‑summit detente can temporarily lift market sentiment. However, the core disputes are unresolved, so any relief is likely to be fragile. Avoid making long‑term investment decisions based solely on summit optics.

Risk & Opportunity Assessment

Commercial RiskHighFresh US tariffs, the robot/inverter ban, and potential rare‑earth export controls could disrupt supply chains and raise costs for firms reliant on Chinese inputs.
Competitive RiskMediumStricter US technology restrictions on Chinese AI firms risk locking US rivals out of the Chinese market, while also possibly entrenching a two‑track global AI ecosystem.
Regulatory RiskHighThe US is signalling further product‑specific import curbs under the guise of supply‑chain security, creating a fluid regulatory environment for importers and manufacturers.
Reputation RiskMediumCompanies caught in the crossfire—especially those that rely on rare earths or manufacture in China—face scrutiny from both governments and consumers over allegiance and supply‑chain ethics.
Technology DisruptionHighOpen‑weight Chinese AI models are already shaking up the market; a US‑led crackdown on IP could disrupt collaboration, chip designs, and the pace at which these models proliferate globally.
Commercial OpportunityMediumFirms that can offer rare‑earth alternatives, localised robotics manufacturing outside China, or compliant AI infrastructure services may capture demand from companies seeking to de‑risk their supply chains.