Trump and Xi start two days of engagements Wednesday that blend pageantry with tough policy choices, after years of U.S. pressure on Beijing through tariffs, tech limits and nudging allies to curb reliance on China. Since returning to office, Trump has leaned into a more transactional tone with Xi.
The backdrop is a frayed alliance network. Arguments about tariffs, military budgets, and individual quarrels have frayed ties that Washington once took for granted. He has sparred with NATO over burden sharing, floated cuts to U.S. deployments across large parts of Europe, and on Tuesday unveiled plans to bolster forces in Greenland, even after earlier threats to seize the island, while also levying tariffs on Canada. Following his May meeting with Xi in Beijing, Trump said he would keep a $14 billion Taiwan arms package on hold and labeled it a "very good negotiating chip."
China has widened its commercial reach and built new pressure points. Its worldwide trade surplus is set to exceed $1 trillion for the second year in a row, with a record $1.2 trillion projected for 2025, even as exports to the U.S. declined. The pitch to other countries is not always to choose Beijing over Washington, but to make alignment with the U.S. less automatic.
America still has the more potent defense network. The Lowy Institute scored the U.S. at 81.4 out of 100 in 2025, versus 18.9 for China. But political appetite abroad is changing. "China is presenting itself to the world as the stable counterweight to an erratic and violent United States," said Ryan Hass, who directs the John L. Thornton China Center at the Brookings Institution. "America retains unmatched power on the world stage, but leverage requires a united front and there are a shrinking number of countries willing to follow America's lead right now." Hass told CNBC, "When democratic countries don't have public support for a counterpart, it raises the cost for leaders to align with the United States," and "It lowers the cost for leaders to defy the United States."
Allies have noticed the U.S. approach.
Confidence metrics reflect the drift. In Germany, the share saying Washington factors in other countries' interests fell to 23% from 60% in 2023. Canada was invited this month to be the European Union's first "associate member," with Prime Minister Mark Carney's government aiming for tighter defense integration with Europe and reduced dependence on the U.S.
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Washington hit China where it was exposed: U.S. buyers and the advanced chips and tools needed to compete at the frontier. Those levers still matter. Key segments of the semiconductor supply chain remain in the hands of U.S. and partner companies, and restrictions continue to limit China's access to top tier chips and equipment.
Beijing built leverage of its own. Last year, Beijing placed seven rare earths under export curbs that demand government sign-off before any overseas shipments. The impact came fast: Ford paused Explorer production in Chicago for one week due to a lack of magnets, and Japanese and European auto suppliers idled lines while they awaited materials. "One of China's primary objectives ahead of these meetings is to box the U.S. in diplomatically, to limit the Trump administration's range of action," Hart said, highlighting critical minerals as one of the levers.
Those minerals were part of weekend talks in New York between Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng, who is also a member of the Communist Party's Political Bureau. With the current trade truce set to expire Nov. 10, after another meeting with He on Wednesday Bessent said the U.S. was "fine with either continuing" the truce or "examining [a] bigger deal."
India shows how countries are carving out room between the giants. The country is still a U.S. security partner as well as a strategic rival to China, and troops from both sides remain stationed along their disputed Himalayan border. "Uncertainty over Trump's approach to Beijing and strains in India's own relationship with the U.S. have given India another reason to keep relations with China on steadier ground," Madan told CNBC. "Even a tactical détente between the U.S. India and China can have downstream impacts on India's strategic environment."
The most immediate flashpoint is Taiwan. After the May meeting in Beijing, Trump said he was keeping the package on hold and described it as a "very good negotiating chip." For Beijing, the stakes are high.
For your wallet, keep an eye on three things: whether the Nov. 10 truce gets extended or rewritten, any signals on rare earths access, and movement on the Taiwan package. Those threads run straight into autos, chips and the broader supply chain, which is where prices and timelines can shift under your feet.
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