Trump-Xi Summit Tests Superpower Balance as Tariff Pressures Ease
Upcoming talks arrive as Supreme Court ruling weakens US leverage while China's strategic chokepoints force Washington to recalibrate tech export controls.
US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng will meet in Paris mid-March to negotiate trade deals ahead of a planned Trump-Xi summit scheduled for early April, with tariffs now averaging 21% on Chinese goods following Supreme Court invalidation of emergency levies—down from highs that reached 145%.
Trump will visit China from March 31 to April 2, marking his first trip to Beijing since 2017. The meeting arrives with both leaders navigating changed circumstances: the Supreme Court ruling has further weakened Trump’s hand, giving Beijing leverage ahead of an April summit, while the tariff rate on Chinese goods fell from a low 30s to about 21%, meaning China is now only marginally higher than rates applied to Turkey, Vietnam, or Thailand.
The Tariff Standoff Reached a Breaking Point
As of 20 February 2026, average US and China tariff rates on each other’s goods were approximately 34%. But that figure masks a volatile trajectory. Trump imposed an aggregate 54 percent on Chinese goods—including 30 percent on fentanyl ingredients and 24 percent reciprocal tariffs—prompting China to retaliate with 10 to 15 percent on selected goods and 24 percent overall; Washington escalated another 50 percent (for a total 104 percent), met with the same 50 percent retaliatory tariff; then Washington added another 21 to 125 percent and China did the same; finally, Washington added another 20 to 145 percent in April.
According to Penn Wharton Budget Model, China faces the highest effective rate among major trading partners at 34.7 percent in November 2025. Tariff rate changes raised $168.8 billion in customs revenue between January 2025 and November 2025, though behavioral changes by importers reduced potential revenue by $43.2 billion.
The February Supreme Court decision invalidated Trump’s use of the International Emergency Economic Powers Act (IEEPA) to impose tariffs. On February 20, 2026, the Supreme Court ruled that the President cannot use IEEPA to impose tariffs. Trump responded by imposing a 10 percent tariff on all countries under Section 122 with exemptions, effective February 24, 2026.
Semiconductor Controls Meet Chinese Counter-Leverage
The technology dimension represents a more durable confrontation. In January, the Commerce Department’s Bureau of Industry and Security revised its licensing policy for semiconductor exports to China, now reviewing export license applications for the Nvidia H200, AMD MI325X, and similar chips on a case-by-case basis provided certain security requirements are met. Trump announced on 14 January that it would approve the sale of NVIDIA’s H200 chips to China, while imposing a 25% tariff on advanced chips.
The shift reverses Biden-era policy that maintained a “presumption of denial” for advanced chip exports. This marks a substantial shift from US policy since 2022, which aimed to maintain the lead over China in AI by restricting its access to advanced AI chips. However, AI chips still undergo a 25% tariff and a mandatory 50% volume cap, to protect the US domestic supply.
According to Bloomsbury Intelligence and Security Institute, Chinese tech companies, led by ByteDance, are preparing orders reaching up to $14 billion for 2026. Yet the H200 is six times more powerful than any US chip available today in China or proposed by Huawei; Huawei’s best domestic chips operate at only 60-70% of H200 capability and can only be produced in hundreds of thousands, whereas NVIDIA produces millions.
China demonstrated its own leverage through rare earth export restrictions. Beijing secured a reciprocal U.S. pause on the Bureau of Industry and Security affiliate rule by threatening costs on the US defense and economic industrial base. The Affiliates Rule was suspended for one year, starting on November 10, 2025, with the pause set to conclude on November 9, 2026.
Taiwan Strait and South China Sea Tensions Persist
Military posturing continues unabated. The People’s Republic of China conducted large-scale military exercises that simulated a blockade of Taiwan from December 29-30; the exercise—named Justice Mission 2025—was the second exercise of its kind in 2025; the PLA began conducting blockade exercises around Taiwan with increasing frequency after Taiwanese President William Lai Ching-te’s inauguration in May 2024.
The PLA flew a surveillance drone through Taiwanese airspace over Pratas Island on January 17, possibly the first confirmed PLA violation of Taiwan’s territorial airspace in decades; the PRC is escalating incursions into Taiwanese-administered airspace and waters to assert its sovereignty, test Taiwan’s response, and erode Taiwan’s threat awareness.
In the South China Sea, tensions with the Philippines remain acute. According to International Crisis Group, the Philippines, Australia and U.S. conducted joint patrol exercises in the South China Sea on 15-16 February, prompting China to respond with “combat readiness patrols”; Philippines, Japan and U.S. late February conducted joint exercises in Bashi Channel between Taiwan and Philippines, marking first joint drills beyond SCS. The United States will hold over 500 military exercises with its Philippine counterparts in 2026.
Economic Leverage Shifts as Treasury Holdings Fall
China’s holdings of US treasuries fell to $682.6 billion in November, down $6.1 billion month-on-month; in November, China’s holdings US treasuries hit the lowest since September 2008, when holdings tumbled to $618.2 billion. China’s stockpile has almost halved since reaching a peak in 2013, dropping to $683 billion in November, the lowest since 2008.
“China is the third-largest non-US owner of treasuries, but its holdings have declined by more than 10 percent since the beginning of 2025.”
— Reuters, January 2026
In February, according to Bloomberg, Chinese regulators advised financial institutions to rein in their holdings of US Treasuries, citing concerns over concentration risks and market volatility; officials urged banks to limit purchases of US government bonds and instructed those with high exposure to pare down their positions. The directive doesn’t apply to China’s state holdings of US Treasuries.
China’s foreign exchange reserves totaled $3.3579 trillion at the end of December 2025, marking an increase of $11.5 billion, or 0.34 percent, from the end of November, suggesting diversification rather than liquidation.
What to Watch
The Paris talks scheduled for mid-March will determine whether the April summit produces substantive agreements or ceremonial gestures. Key agenda items include a possible Chinese purchase of Boeing planes, commitments to buy US soybeans and Taiwan.
Analysts expect the April summit to yield limited results, such as an extension of the ceasefire and sales of U.S. products, but progress is unlikely on thornier issues such as clear guidelines for export controls or rebalancing China’s economy; during a phone call earlier this month, Xi asserted to Trump that Taiwan is the “most important issue” in U.S.-China relations.
The semiconductor policy reversal faces congressional opposition. The Remote Access Security Act passed the House in January to bolster the Export Control Reform Act and allow federal authorities to restrict remote access to advanced technologies; the legislation aims to close a loophole that has allowed Chinese companies to access sanctioned AI chips by buying or renting them for use on US soil.
China’s decision whether to purchase H200 chips—or maintain its current stance of instructing companies to limit imports—will signal whether Beijing views technology dependence as manageable or a strategic vulnerability that tariff negotiations can’t resolve.