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Your guide to what Trump’s second term means for Washington, business and the world
By virtue of never interrupting his enemy when he makes a mistake, Xi Jinping is the winner of 2025. The key moment of the year was Donald Trump’s bow to Xi in South Korea in late October. The fallout from Trump’s trade war signaled a new era. After years of considering separation, US-China divorce talks were suspended. Even so-called de-risking is now under question. Trump gave their meeting 12 points out of 10. China took 10 points out of them.
Xi has profited only by waiting for the strategic gifts to arrive. Seldom has the inverted motto, “Just do nothing, stand there,” been more appropriate. Last week, Trump added to Xi’s windfall by approving the sale of Nvidia’s H200 chips, along with a 25 percent export tariff. The argument is that Nvidia is an American champion and should dominate all markets. The reality is that Trump has given the biggest gift to China so far. Advanced semiconductors is a key area where China still lags behind the US. Trump is helping to close that gap.
Their strategic objective is unclear. On the one hand, Trump is removing domestic barriers to AI development with the aim of beating China to the superintelligence finishing line. However, with his second, Trump is providing China with the tools to persist. The only consistent explanation for both is money. The AI boom is filling Trump’s coffers. Almost all the brokers are in his favor. Meanwhile, Nvidia has pledged to give 15 percent of its new China revenue to the US government. How that toll will be calculated and collected remains unclear.
It is futile to somehow look for the geopolitical logic behind Trump’s China policy. The recent National Security Strategy stopped short of referring to China and Russia as peer competitors. The document added a “Trump consequence” to the Monroe Doctrine, which has implications for China. Trump has declared the Western Hemisphere off limits to outside powers. Venezuela is also included among China’s many regional friends. China’s desire to keep Venezuela’s vast oil reserves at least partly explains Trump’s military buildup in his own backyard.
The rest of Trump’s NSS appears to be designed to increase China’s hold over the rest of the world. The United States’ best chance is to forge common purpose with Europe to contain and shape China’s rise. Instead, Trump is targeting regime change. Citing “civilizational eradication”, the US clearly aims to bring Trump-like parties to power in Europe. This turns the United States into an ideological rival to the mostly liberal democratic governments of Europe. Trump is handing China and Russia the tools to accelerate the disintegration of the West.
It is also unilaterally disarming the global energy race. The value of China’s cleantech exports in the first seven months of 2025 was double that of US fossil fuel exports. In his “Big Beautiful Bill”, Trump phased out most US tax breaks and subsidies for alternative energy. China will thus dominate the new frontiers of energy and supply those public goods to the global South. By doubling down on fossil fuels, Trump is handing the world’s energy future to China.
Will 2026 be another Year of the Dragon? Trump’s prize is his summit with Xi next April. Between now and then, he doesn’t want anything to hurt the new warmth in US-China relations. It’s hard to overstate the transformation that has taken place since they made the switch, which is a simple story. Trump showed his indifference by imposing 145 percent tariffs on China in April. Xi then pulled out his own bazooka – export controls on rare earths. This would have halted most US civilian and military production. Trump came down in October. Xi’s bazooka was revealed to be bigger for at least the next few years. Xi’s minor concessions were to freeze China’s fentanyl-related exports and to resume imports of US soybeans.
Based on the net result, 2025 has offered a rigorous tutorial. The US can resell soybeans to China, while China is assured access to rare earths. As an added bonus, China gets access to advanced AI processors, although not the most cutting-edge. Meanwhile, America’s non-China trading partners have stopped finding some method in this madness. In this time of great power competition, Trump’s journey has been an eye-opener. They have revealed the strength of China’s grip on the world’s most precious commodities. And they’ve told everyone else that they’re on their own. “America First” serves as an election slogan. In the real world, China is moving forward.
edward.luce@ft.com
