In private conversations, Chinese officials are sounding something close to relaxed. Sources told the South China Morning Post that Beijing has grown bolder since deploying rare earth export restrictions in October and is now substantially less worried about the impact of US tariffs. The officials, speaking on condition of anonymity, said China has the ability to retaliate strongly and withstand pressure if Washington escalates.

Seven months ago, the two countries agreed to a trade truce: Washington eased certain tariffs, and China resumed soybean imports while suspending some rare earth export curbs. The calm was fragile then. Now, Beijing seems to think it’s durable.

That confidence travels to Seoul this week. Vice-Premier He Lifeng will meet US Treasury Secretary Scott Bessent for talks on May 12 and 13 — the final round of negotiations before President Donald Trump’s state visit to Beijing on May 14 and 15, the first by a US president to China since 2017. Both sides confirmed the schedule on Sunday.

Read the public statements like opening bids, because that’s what they are. China’s Ministry of Commerce said the talks would be “guided by the important consensus” reached between the two heads of state at their meeting in Busan and in previous phone calls, and would address “economic and trade issues of mutual concern.” Bessent posted on X that he would first meet Japanese Prime Minister Sanae Takaichi and Finance Minister Satsuki Katayama in Tokyo before heading to Seoul. Diplomatic throat-clearing. The real negotiation happens in the gaps.

A $1.2 Trillion Position

Beijing’s confidence is grounded in math. Bloomberg Economics calculates that roughly 4 percent of US GDP — approximately $1.2 trillion — is derived from industries that depend on rare earth elements. Some US sectors could absorb a supply shock. Most lack viable substitutes. Some would face outright shutdowns in the event of a Chinese cutoff.

China dominates both rare earth mining and the midstream processing that turns raw ore into the magnets essential to modern manufacturing. When Xi threatened to restrict those flows in April and October 2025 — with tariffs already past 140 percent — Trump folded rather than credibly threaten escalation, according to the Council on Foreign Relations. Beijing noticed. It has continued to occasionally throttle supplies to the US while expanding its sanctions arsenal.

The leverage has migrated from tariffs toward something more structural: China’s grip on the critical mineral supply chains that underpin both advanced manufacturing and military capability.

Weapons Drain and Commodity Strain

That leverage compounds with every missile the Pentagon expends. The rapid depletion of advanced weapons systems in the Middle East and Ukraine has deepened US vulnerabilities in rare earth supply chains, according to CFR analysis. Replenishing precision-guided munitions, interceptors, and advanced electronics requires materials processed almost entirely within China’s critical minerals ecosystem.

The Iran war intensifies the squeeze. The US Navy is blockading the Strait of Hormuz and intercepting tankers bound for China — Iran’s largest crude buyer — while Beijing provides political and possibly intelligence support to Tehran. Simultaneous rearmament across the US, Europe, and Japan, combined with surging commercial demand for batteries, semiconductors, and consumer electronics, all runs through Chinese processing.

What was once a niche industrial advantage has become a systemic lever of geopolitical influence.

The Positioning Round

The Seoul talks are a dress rehearsal. He Lifeng, 70, is a longtime Xi confidant who has led Beijing’s trade negotiations with Washington since March 2023. He knows the American team and understands the American political calendar: Trump needs a deal to brand as a win, while Xi must maintain leverage without provoking genuine supply-chain decoupling.

The agenda is heavy. Taiwan, which Chinese Foreign Minister Wang Yi has called “the biggest risk in China-US relations.” The Iran blockade and its impact on Chinese energy imports. AI regulation — the two governments are reportedly considering a safety dialogue that Beijing has long pursued. And the trade architecture neither side has rebuilt since the first Trump administration dismantled it.

The best realistic outcome, according to CFR, is a tacit truce extension with modest deliverables on agriculture, aerospace, and investment — enough to keep markets calm, ambiguous enough for both sides to claim victory.

Xi has long told cadres that “the East is rising and the West is declining” and that “time and momentum” are on China’s side. The numbers support him heading into Seoul. Washington arrives with a Treasury Secretary, a commodity squeeze, and a weapons stockpile that needs refilling. The question is not whether China has leverage. It’s what Washington will pay to pretend it doesn’t.

Sources