Trump and Xi meet this week

U.S. President Donald Trump and Chinese President Xi Jinping are expected to meet this week for their second in-person summit of the year. U.S. concerns about artificial intelligence have gained prominence ahead of the meeting.

Trade deficit remains stubbornly high

While an escalation in trade tensions last April briefly sent the U.S. trade deficit with China to its lowest level since two thousand seventeen, surging demand for AI-related parts have helped send it higher again so far this year.

Tariffs have not reduced U.S. demand

Tariffs have done little to dent America's appetite for Chinese goods. Businesses are hoping for an extension of a trade truce reached last fall, but expect little change in trade patterns.

“Tariffs have done little to dent America's appetite for Chinese goods.”

World depends on China more than ever

Asia still accounts for more than sixty percent of U.S. imports, the same as before Liberation Day. Jens Eskelund, president of the European Chamber of Commerce in China, estimated between half and three-quarters of container traffic from China to Southeast Asia subsequently heads on to other destinations.

China reached export milestone early

Eskelund previously expected China to account for forty percent of global container exports in the year two thousand thirty, but the milestone was reached this summer. That pace has sped up the world's reliance on China-made goods.

Real estate downturn drove export surge

China's real estate market began its downturn in two thousand twenty-two, dragging down domestic demand. Chinese companies ramped up global expansion and exports. Eskelund said China was the only game in town and could allow its exchange rate to rise.

“China was the only game in town.”

AI chip demand may be weakening

U.S. tech companies' buildout of data centers to power AI has supported demand for Chinese goods. But think tank CF forty estimated that for the first time this year, AI-related exports fell significantly in August from a year ago.

Chinese firms intensify global competition

The economic slowdown has pushed Chinese companies to compete even more fiercely with each other and foreign rivals. The American Chamber of Commerce in Shanghai said three-quarters of members saw Chinese rivals as more advanced, with the perceived gap in product quality narrowing by six percentage points from last year.

China's strategy shows no dependence

Chinese companies have come to dominate global supply chains for critical minerals, supporting Beijing's self-sufficiency goals. Chad Bown, senior fellow at the Peterson Institute for International Economics, said China's strategy is not dependent on actions the rest of the world might take.

“There's no sense in which China's strategy seems to be at all dependent on actions that the rest of the world might take.”

China weaponizes world dependence

Bown said China's strategy is one of one-way dependence of the rest of the world on China that it will weaponize. The European Union has the largest trade deficit with China of any economy, and EU officials are starting to follow the U.S. in scrutiny of China-origin exports.

“This strategy of a one-way dependence of the rest of the world on China that it's going to weaponize.”