China-USA trade talks: what USA wants?

We will try to produce something which your highness can understand, Mr George White told John Keynes, during negotiations to establish the Bretton Woods Institute. A simple statement, but it highlights the deep-rooted differences among the negotiators. The American side believed that John Keynes was asking for something beyond the spirit of negotiation, which did not align with the UK’s weight. John Keynes is trying to prevent the UK from falling, preserve the existing superpower and hegemon status, and hinder the rise of a new superpower. He wants the USA to finance the UK’s war efforts and defend the UK’s trade and economic interests, at the expense of the USA.

I believe the same situation exists in the China-U.S. trade negotiations. The USA, like the UK, is a declining power and behaves similarly. It expects China to bear the USA’s burdens of war, failed economic policies, and exploitation by the military-industrial complex. President Trump and his team believe that coercive policy is a better approach. They are under the impression that the policy will deliver as it has with other countries and help the USA to secure deals on its terms.

For example, over the past few months, we’ve observed that President Trump has been calling global leaders to the White House and ridiculing them. He pressures countries to accept his terms; otherwise, there will be no deal. Many countries are succumbing to US pressure. Japan and the European Union are notable examples recently. Japan agreed to President Trump’s terms and also consented to invest around US$550 billion, on the condition that it shares 90% of the profit with the US. Furthermore, Japan agreed that if the USA secures a better deal on tariffs for chips and pharmaceuticals, Japan will have to accept those tariffs. Now, Japan must wait and hope that the USA doesn’t negotiate a better deal with another country.

The European Union is another example of President Trump’s bullying policy. Among other conditions, the EU agreed to purchase energy worth US$750 billion. Additionally, the EU will invest US$600 billion in the U.S. by 2028. The deal is being criticized and labeled as humiliating for the EU. Experts believe that the agreement has undermined the EU’s credibility as a dedicated defender of the rule-based system. That’s why many voices within the EU want to revoke the deal under these terms.

The initial success of coercive measures boosted confidence, and now the USA plans to use similar tactics against China. President Trump and his team are working to implement an even stricter policy to pressure China into accepting the USA’s proposal.

However, I cannot predict the future, but all indicators suggest that the strategy will not succeed in China’s case. First, China is a rising economic power. It is the second-largest economy in the world and the only country with a double-digit trillion-dollar economy after the USA. It is the hub of global trade and the leading trader, with US$6 trillion in trade in 2024, and it partners with more than 150 countries. Second, it has a strong production base, holding a 30% share in global manufacturing (World Bank 2022). This share is expected to rise to around 45% by 2030.

Third, China has a massive consumption market with 1.4 billion people. It is predicted that Chinese consumption will undergo changes, as about 800 million people will shift their social class. Many will move from lower to middle class and from middle to upper class. This will create a new and sizable consumer market, opening up a world of new opportunities.

Fourth, China is progressing toward comprehensively opening its economy and market. It has already opened many new sectors for foreign investment, including healthcare, elder care, and more. It has also eased conditions for investing, land access, and protecting foreign investments. At the same time, it is opening its market through innovative initiatives such as the China International Import Expo.

Fifth, China has successfully cultivated a highly advanced innovation culture. It leads the world in modern, innovative technology and ranks first among advanced nations in critical technologies. Many believe that Nvidia was allowed to sell chips to China because of the rapid progress and breakthroughs in advanced chip manufacturing by Chinese companies like Huawei. There was a fear that if the USA continued sanctions, Huawei could surpass Nvidia.

Sixth, China has absolute dominance in rare earth metals. The data shows China owns 34% (44 million metric tons) of the world’s rare earth metal reserves. China’s share of global rare earth mining is 60%. Additionally, China accounts for 85% of processing capacity and over 90% of high-strength rare earth permanent magnets produced. Therefore, any attempt to isolate China from the CHIP or technology market would be disastrous for the world.

On the other hand, China is deeply integrated into the global system. Rather than just being part of it, international supply chains heavily rely on China since it is the world’s largest manufacturer, trader, and consumer market. Additionally, China has launched numerous initiatives of global importance to further boost its international integration. First, China introduced the Belt and Road Initiative (BRI) to promote global growth through investment and to share its prosperity worldwide. An assessment of the first 10 years shows that China has invested nearly US$1 trillion in BRI-related projects. This investment has helped mobilize an additional US$2.49 trillion from other sources.

Second, China launched the Asian Infrastructure Investment Bank (AIIB). The AIIB is an alternative investment platform established by President Xi with the goal of helping Asia build a prosperous future by “Building Infrastructure for Tomorrow,” focusing on sustainability, innovation, and prosperity for its people. The organization has undertaken numerous initiatives to achieve these goals. AIIB has invested in many projects, with the list being extensive and diverse. It has financed 317 projects and programs, with many more currently in approval. As of 2024, it has disbursed US$60.59 billion for various initiatives worldwide.

In this context, the USA cannot threaten or impose its terms and conditions on China. The USA lacks the power to force China to conform. China is a recognized emerging superpower. It has launched many global initiatives, which are becoming stronger and more diverse. For example, the BRI has 153 members, and AIIB has 110 members, making it the second-largest bank after the World Bank. These initiatives assist countries in bridging the investment gap and creating alternatives for financing.

Thus, the USA should work to understand the new dynamics and recognize China’s evolving role as a rising superpower. Therefore, the USA should take China’s proposal seriously and look for ways to cooperate. To better understand Chinese concerns, the USA might refer back to George White’s statement: “We will try to produce something which your highness can understand.” This will help negotiators analyze their position and compare it with the UK’s stance during the negotiations on establishing BWI. Unfortunately, the analysis of the current situation and negotiations indicates that the USA is acting like the UK and expecting China to shoulder the burden of the USA or help maintain the USA’s status as a superpower or hegemon. It is an irrational expectation and unsustainable policy with no future.