Trump-Xi summit: Face-off over Iran and Taiwan?

We begin the day with plans for a Chinese visitor. It is now official Chinese President Xi Jinping will travel to the United States on Wednesday, a two-day visit that will include a face-to-face meeting on Thursday with President Trump. Trade is set to top the agenda, but tariffs, critical minerals, Iran, Taiwan and increasingly artificial intelligence mean that the summit is about considerably more than just commerce. China confirmed the visit on Monday, saying that Xi Jinping and Donald Trump would discuss the relationship between the world's two largest economies as well as wider international issues. Beijing is presenting the visit as an opportunity to put relations on a more stable footing. China is ready to work with the United States to enrich the substance of a constructive and strategically stable China-U.S. relationship, strengthen dialogue and cooperation, properly manage differences, continuously enhance the well-being of the people of both countries and promote world peace, stability and prosperity. When negotiators for both countries are already trying to establish potential common ground between the two presidents, U.S. Treasury Secretary Scott Besson met Chinese Vice Premier He Lifeng and his delegation in New York on Sunday. Besson described the talks as very successful. The two sides discussed trade and investment and began setting up a new dialogue on artificial intelligence. A very successful engagement with the Chinese on trade and AI, completing where we left off in Beijing. But the immediate economic disputes have not gone away. Washington and Beijing have maintained a tariff truce but have yet to turn it into a lasting trade settlement. China also retains considerable leverage through its dominance of rare earth supply chains and controls on critical minerals, while Washington has its own pressure points through tariffs, technology restrictions and access to the U.S. market. And the talks now reach far beyond bilateral trade. Washington wants Beijing to distance itself economically from Iran. Taiwan remains a fundamental source of tension and the two governments are beginning to explore whether they can establish mechanisms to manage some of the risks created by artificial intelligence. And joining me now is Scott Kennedy, he's senior advisor and trustee chair in Chinese business and economics at the Center for Strategic and International Studies. Mr. Kennedy, it's good to have you with us. Let me just ask you, when presidents Trump and Xi, when they sit down on Thursday, will this be about settling another round of trade disputes? I think actually that's quite right. Trade will be at the top of the agenda. As you know, both sides reached a cease fire on trade last October and they're coming to the end of that period. And that covered commitments to not raise tariffs higher than they were then, as well as limits on export controls, export controls related to semiconductors on the American side and rare earths on the Chinese side. Both sides recently met to prepare for Thursday's meeting and they did not say that they had reached an agreement to extend the cease fire. So the big question is how long will they extend it or will they just continue to let it play out and have further negotiations next month up until the deadline, November 10th? That's the biggest issue that they're going to tackle on Thursday. I know that you recently described this meeting, this summit as being too big and too small to fail. What did you mean with that? Too big to fail because the U.S. and China are the world's economic and military superpowers. If the summit fails and we have a re-escalation, that is going to hurt their economies, the world economy, at a time when no one really can afford that. There's also a number of important security issues that hang in the balance in the Middle East, around China and elsewhere. It's too small because their ambition is not high enough. These are the world's two most powerful leaders and what they're planning to talk about is relatively small potatoes. Yes, tariffs and rare earths matter, but so do global imbalances and China's trade surpluses through the roof, affecting Europe and everybody else. We have a global security architecture which is coming undone, which they need to discuss, climate change, public health, AI. We need a bigger ambition on both sides. In that regard, they're going to meet the low expectations that they're setting up for themselves. I want to ask you about these rare earths for a moment. China demonstrated last year how much leverage it has through rare earths and critical minerals. Has that fundamentally changed the balance at all in these negotiations? Yes, I think actually fundamentally it's had a huge effect. If you're just talking about rare earths, the Chinese have said, these are now products which they are not going to sell on an ongoing basis to whichever buyer lines up. It's going to be based on their judgments around national security and as part of negotiating leverage. Since the world is dependent on Chinese rare earths, they have about a 70% monopoly. They are using that. In the year since China started to impose these restrictions, although they have continued to export rare earths to the United States, they've dropped about 25% to the US. That's really important for the US to address, but it's that key leverage that changes the entire relationship, not just around these minerals. What is that leverage? What leverage does Trump bring to the table in return? Sure. The US is the world's leading producer of semiconductors. Even when the semiconductors don't come from the US, like the equipment that is made by the Dutch, those have American components. The US can use extraterritorial leverage to try and slow that to China. Everyone uses our banking system. We're a large market. Of course, we're a large military power. But the Chinese have finally found one area of a choke point that they have control over and are flexing their muscles. That has changed things significantly. The US and others are now trying to address that weakness and dependency, but it's going to take a while to do so. During that time, the Chinese are not being shy about using the leverage that they have built. Before I ask you about other issues, tell me what do you think would be a meaningful economic agreement to come from Thursday? What would that look like? Sure. Well, aside from extending this truce to provide some predictability for the global economy and maybe identifying $30 billion of goods on each side to lower tariffs, a real important outcome, if they decided to put their attention toward it, would be discussing global imbalances. China's $1.2 trillion trade surplus from last year, they're likely going to surpass that this year. The world is awash in Chinese goods because of Chinese industrial policy. The US has its own domestic imbalances, overconsumption, etc. If both sides could agree that they put that issue on the agenda and then bring it to APEC and the G20, as it was raised earlier this summer, I think that would be touching upon a genuinely structural issue in the global economy, not just specific goods and products that are important for the bilateral economic relationship. And there's also been an attempt, as you said, to broaden this relationship beyond trade. I know that the Treasury Secretary, Bessett, he and he, Lefebvre, his Chinese counterpart, they've been discussing the possibility of creating a US-China dialogue on artificial intelligence. For our viewers, why is that important? You've had to be living under a rock the last few years to not know that artificial intelligence is the great new technology that's being developed that could fundamentally transform the global economy. It has enormous potential for not just search and looking up information, of course, but manufacturing, innovation, there's so many different ways. And the Chinese and the Americans are both leaders in AI. At the same time, it can do tremendous harm. If you lose control over it, it could have enormous effects with regard to cyber hacking, the use of military weaponry, deep fakes. The Chinese are particularly worried about its potential effects for destabilized control of the government by the Communist Party. The US is worried about a whole host of risks. And obviously, this requires the two governments that are leaders of these industries to sit down, but it also requires those industries to meet and discuss this as well. There are a number of track two and track 1.5 dialogues involving experts, the labs, some government officials, but the two sides have not discussed this the way they need to. In 2024, the Biden administration and the Chinese reached a tentative agreement to commit to make sure that there was human intervention in control of nuclear weapons. But I think everyone now knows after the hugging face incident and many others, a lot more needs to be done. Yeah, I want to ask you too, before we run out of time about Taiwan, we know that it's a dangerous issue. It can be. Trump has openly described US arms sales to Taiwan as a negotiating chip. So from Beijing's perspective, is there a danger that this summit encourages the idea that fundamental security questions can become part of a broader bargain? I think actually on the issue of Taiwan, the Chinese feel like things have moved in their direction quite considerably as a product of the summit that Trump and Xi had in Beijing a few months ago. Then it was President Trump who began to mirror the logic of the cross-strait issue from Beijing's perspective, emphasized how far away Taiwan is from the United States, indicating that perhaps it wasn't a key critical US interest to protect Taiwan. Of course, since then, the US has not sold any more weapons to Taiwan. I think the Chinese feel that they've gotten a lot. If the president of the United States makes further commitments that aligns with them, I think they'd be happy, even happier, but I think already. No, I think Taiwan is not going to be as significant an issue this time as it was in May. Okay. Scott Kennedy of the Center for Strategic and International Studies. Mr. Kennedy, good having you on the program. We appreciate your insights tonight. Thank you. Thanks so much, Brent.