What Xi’s New Playbook for Trump Means for U.S.-China Trade

SPEAKER_1 (0:00)

So your AI agents make your team more productive, right? But if they're not connected to the rest of your business, how productive can they really make your teams? IBM helps smarter businesses get more from their AI agents. Let's create smarter business, IBM.

Alex Ossola (0:18)

The Pentagon orders an aircraft carrier to the Caribbean, an escalation of the Trump administration's campaign to target drug smugglers there. Plus, yesterday's earnings may break a losing streak for Intel, but the company's problems aren't solved yet. And how Chinese leader Xi Jinping has re-calibrated his relationship with President Trump ahead of next week's summit in South Korea.

Lingling Wei (0:41)

The US seems to be trying to figure out a way to deal with the very aggressive rare earth measures put forward by the Chinese to reassert their position in this relationship.

Alex Ossola (0:57)

It's Friday, October 24th. I'm Alex Ossola for The Wall Street Journal. This is the PM Edition of What's News, the top headlines and business stories that move the world today. We begin this evening in Washington, where the Pentagon has said that it's sending the Navy's most advanced aircraft carrier to the Caribbean. A Pentagon spokesman said today that Defense Secretary Pete Hegseth has ordered the USS Gerald R. Ford carrier, which is currently deployed in the Mediterranean, to the Caribbean, bringing dozens more fighter and surveillance aircraft, along with other Navy warships that accompany a carrier. The dispatch of a carrier is the strongest sign yet that President Trump is serious about striking targets on land in what, according to two Navy officials, his administration has said is an effort to destroy drug smuggling operations. And Canadian Prime Minister Mark Carney told reporters today that his government is ready to resume trade talks when the US is ready and that his government would pick up where they had left off before President Trump ended negotiations yesterday.

Tonight, President Trump heads to Asia, where he's expected to meet with a number of foreign leaders. One of those, as we mentioned on this morning show, is Chinese leader Xi Jinping. The two haven't met in person since 2019, and this summit could shake out pretty differently, thanks to a new diplomatic playbook that Xi has embraced that's tailored specifically for Trump. WSJ Chief China correspondent Lingling Wei is here now to discuss. Lingling, what was the dynamic between Xi and Trump during Trump's first term?

Lingling Wei (2:35)

During Trump's first term, China was constantly in this very reactive posture. So Xi Jinping was frequently put off balance by President Trump's very high-handed pressure tactics. Xi Jinping was always on the back foot. During the second term, the Chinese embraced a playbook that helped the Chinese break this very reactive posture. And this involves Xi Jinping really catering to President Trump's personal likings and at the same time be very assertive and aggressive in terms of hitting back at any US policy the Chinese leadership considers harmful. So it's a mixture of pressure and appeasement.

Alex Ossola (3:33)

One example that comes to mind involves rare-earth materials, which China dominates and it recently applied strict export controls over. Is that a place where we've seen this new approach play out?

Lingling Wei (3:44)

Absolutely, Alex. That was the most powerful example so far. Earlier this month, China dramatically tightened their control over those minerals. It's also Xi Jinping's way of trying to gain leverage over Trump before this very crucial meeting in South Korea next week.

Alex Ossola (4:08)

Right. Let's talk about this meeting because it seems like it's something that the Chinese side was really pushing for. So what can we expect to come out of this?

Lingling Wei (4:18)

Despite the trade ceasefire right now, the relationship is very fragile.

So the most realistic outcome for now for this meeting is an extension of the current trade truth, meaning both sides still refrain from imposing higher tariffs on each other. China would continue to allow rare earth flows to the United States. The Chinese may also want reassurance from the US side that there won't be any more policies deemed harmful by the Chinese as long as both sides are still negotiating for a broader economic deal. Going forward, the risk of China overplaying its hand definitely is rising. The most recent rare earth measures from Beijing stirred up huge reactions, not just from the United States, but also in Europe and Asia. Because everybody was wondering if China is reliable anymore. And China's heavy-handed display could embolden the very hardliners in Washington. The Chinese want to sidestep the China hawks who are proposing much harsher policy toward China.

Alex Ossola (5:41)

That was WSJ Chief China Correspondent Lingling Wei. Thanks, Lingling.