As Trump courts a more assertive Beijing, China hawks are losing out

Boston Globe

2 days ago

The move was a dramatic reversal from three months ago, when President Trump banned China from accessing the H20, while also imposing triple-digit tariffs on Beijing. That set off an economically perilous trade clash, as China retaliated by clamping down on exports of minerals and magnets that are critical to American factories, including automakers and defense manufacturers.
China's decision to cut off access to those materials upended the dynamic between the world's largest economies. The Trump administration, which came into office determined to bully China into changing its trade behavior with punishing tariffs, appeared to realize the perils of that approach. Now, the administration has resorted to trying to woo China instead.
Officials throughout the government say the Trump administration is putting more aggressive actions against China on hold, while pushing forward with moves that the Chinese will perceive positively. That includes the reversal on the H20 chip.
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The H20 decision was primarily motivated by top Trump officials who agreed with Nvidia's arguments that selling the chip would be better for American technology leadership than withholding it, people familiar with the move say.
But Trump officials have also claimed that it was part of the trade talks. After telling Congress in June that there was 'no quid pro quo in terms of chips for rare earths,' Scott Bessent, the treasury secretary, reversed those comments Tuesday, saying that the H20 move was 'all part of a mosaic' of talks with China. 'They had things we wanted, we had things they wanted, and we're in a very good place,' he said.
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A Chinese Ministry of Commerce official seemed to reject that Friday, saying that the United States had 'taken the initiative' to approve the H20 sales. China believes the United States should continue to remove its trade and economic restrictions, the official said.
A person familiar with the talks, who spoke on the condition of anonymity because he was not authorized to speak publicly, said that the H20 chip was not specifically discussed in meetings between Chinese and US officials in Geneva and London this spring. But the reversal was part of a more recent cadence of warmer actions the United States and China have taken toward each other. For instance, Beijing agreed in recent weeks to block the export of several chemicals used to make fentanyl, an issue Trump has been concerned about.
Recent events have underscored the influence that China has over the US economy. When Trump raised tariffs on Chinese exports in April, some top Trump officials thought Beijing would quickly fold, given its recent economic weakness. Instead, Beijing called Trump's bluff by restricting rare earths needed by American makers of cars, military equipment, medical devices, and electronics.
As the flow of those materials stopped, Trump and other officials began receiving calls from CEOs saying their factories would soon shut down. Ford, Suzuki, and other companies shuttered factories because of the lack of supply.
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Trump and his top advisers were surprised by the threat that Beijing's countermove posed, people familiar with the matter say. That brought the United States back to the negotiating table this spring to strike a fragile trade truce, which Trump officials are now wary of upsetting. That agreement dropped tariffs from a minimum 145 percent to 30 percent, with the Chinese agreeing to allow rare earths to flow as freely as before.
The administration's caution when it comes to China has been amplified by Trump's desire for an invitation to Beijing later this year. The president, who has been feted on other foreign trips, wants to engage in face-to-face trade negotiations with Chinese leader Xi Jinping. Howard Lutnick, the commerce secretary, has begun recruiting chief executives for a potential delegation, setting off a competition over who will get to ride in Air Force One, according to people familiar with the plans.
The Commerce Department declined to comment. The White House, the Treasury Department, and the Office of the United States Trade Representative did not respond to a request for comment.
'The government understands that forcing the world to use foreign competition would only hurt America's economic and national security,' said John Rizzo, a spokesperson for Nvidia.
Opposition to China has fueled bipartisan action for the past decade. Now, Trump's more hawkish supporters are quietly watching as the president remakes the party's China strategy.
Though few are willing to speak out publicly, officials in the Trump administration and in Congress have privately expressed concern that the trade war has given China an opening to finally bring US technology controls onto the negotiating table.
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Christopher Padilla, a former export control official in the George W. Bush administration, said the fact that the United States was now negotiating over what were supposed to be security restrictions was 'a significant accomplishment for the Chinese.'
'They've been after this for decades, and now they've succeeded,' he said. 'I assume the Chinese are going to demand more concessions on export controls in return for whatever we want next.'
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