1 US-China trade deal prospects dim despite Trump-Xi call, follow-up meeting
Trump and Xi talk trade, rare earths
U.S. President Donald Trump and Chinese leader Xi Jinping had a phone call on June 5.
In a post on Truth Social, Trump said that the call lasted about an hour and a half, was focused “almost entirely” on trade, and “resulted in a very positive conclusion” for both sides. He added that “there should no longer be any questions respecting the complexity of rare earth products,” but did not explain what he meant. Trump said that trade teams from both sides would meet shortly, and the U.S. side would be represented by Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and U.S. Trade Representative Jamieson Greer. Trump also noted that Xi had invited him and Melania Trump to visit China and he reciprocated the gesture.
Per a PRC foreign ministry readout, Xi told Trump:
- “Recalibrating the direction of the giant ship of China-U.S. relations requires us to take the helm and set the right course. It is particularly important to steer clear of the various disturbances and disruptions.”
- Both sides need to use existing economic and trade consultation mechanisms to see “win-win results in the spirit of equality and respect for each other’s concerns” and the PRC side is “sincere about this, and at the same time has its principles.”
- “China has been seriously and earnestly executing” the Geneva agreement.
- Both sides should “enhance communication in such fields as foreign affairs, economy and trade, military, and law enforcement to build consensus, clear up misunderstandings, and strengthen cooperation.”
- The U.S. must “handle the Taiwan question with prudence” so that “fringe separatists” keen on “Taiwan independence” will not “drag China and America into the dangerous terrain of confrontation and even conflict.”
- Xi claimed that Trump said that the U.S. will “honor the one-China policy” and “loves to have Chinese students coming to study in America.”
On June 6, Trump posted on Truth Social that Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick, and U.S. Trade Representative Jamieson Greer will meet with PRC representatives in London on June 9, 2025 to discuss a trade deal.
Xinhua commentary on Trump-Xi call
June 6
PRC state mouthpiece Xinhua published a commentary on the Trump-Xi phone call titled, “To Steer the Giant Ship of China-U.S. Relations, the Rudder Must Be Held Firm and the Course Set Right” (校正中美關係巨輪航向須“把好舵、定好向”).
The article made the following noteworthy points:
- Direct communication between Xi and Trump was “timely, necessary, and of far-reaching significance.” Xi was praised for “correcting the core task in current bilateral relations” and for “holding the rudder firmly and setting the course prosperity, especially to eliminate interference or even sabotage.’”
- There was repeated emphasis on the importance of dialogue and consultation in resolving disputes and maintaining stability in trade and economic relations.
- “Certain U.S. figures” were blamed for “actions and rhetoric that contradict” the “correct” path of China-U.S. trade negotiations, and inconsistency has caused “interference and even damage” to bilateral ties. Meanwhile, the PRC was lauded for “always honoring words with action. Once a consensus is reached, both sides must follow through.”
- There was emphasis on the importance of cooperation and mutual benefit. For instance, the piece asserted that both can “achieve many great things” together, and the phrase “when China and the U.S. cooperate, both benefit; when they clash, both are harmed” is not mere “political rhetoric, but a hard-earned truth forged through trials and turbulence.”
- The article claimed that the PRC “actively took measures” such as canceling or suspending tariffs after the Geneva talks, and showed “maximum sincerity in upholding the outcomes of the dialogue.” However, the PRC would “never make any compromises or concessions” on issues involving national sovereignty and dignity, and urged the U.S. to “withdraw its negative measures against China.”
- In the conclusion, the article noted that preserving the political foundation of Sino-U.S. relations is essential to “ensuring that the ship stays on course and avoids running aground.” It also warned of the need to remain vigilant and properly handle major sensitive issues that could shake the foundation of the relationship—especially those like the Taiwan issue, which Xi Jinping specifically raised during the call.
- The article ended by stating that “the course has been set” and “what matters now is action. The article urged the U.S. to move in the same direction as China and truly “hold the rudder and set the course.”
Trump admin maintains ‘tough on China’ stance
June 3
Secretary of State Marco Rubio condemned the CCP’s handling of the 1989 Tiananmen Square protests in a statement. Rubio said that in response to the students protesting for “democracy, human rights, and an end to rampant corruption,” the CCP “responded with a brutal crackdown, sending the People’s Liberation Army to open fire in an attempt to extinguish the pro-democracy sentiments of unarmed civilians gathered on Beijing’s streets and in Tiananmen Square.”
Rubio added, “The CCP actively tries to censor the facts, but the world will never forget … the principles of freedom, democracy, and self-rule are not just American principles. They are human principles the CCP cannot erase.”
June 6
Reuters reported that the U.S. Commerce Department suspended licenses for nuclear equipment suppliers to sell to China’s nuclear power plants, citing four people familiar with the matter.
Our take
1. The “very positive conclusion” to the Trump-Xi phone call suggests an extension of the Sino-U.S. trade truce, which appeared to be on the rocks at the end of May after President Trump indicated that the PRC had “totally violated” the Geneva trade agreement.
The swiftness (four days) at which a high-level U.S.-China trade meeting (involving all key U.S. trade and economic officials and their PRC counterparts) was scheduled after the Trump-Xi call indirectly corroborates our assessment of why Xi Jinping recently “vanished” from public view for 14 days. In one of three possible scenarios that we laid out, we noted that “Xi could have been huddling with his trade negotiators to figure out how exactly to deal with the U.S. during the 90-day tariff truce and proceed with trade talks,” and added that Xi also went “missing” for 19 days in August 2018 around the period of heightened Sino-U.S. trade tensions.
2. The June 9 Sino-U.S. trade talks could pave the way for a deal before the 90-day tariff ceasefire that both sides find agreeable. Such a deal is likely to be a shorter one that addresses some of Washington’s key concerns, including the bilateral trade deficit, the PRC’s fentanyl trafficking, China’s overcapacity, the PRC’s control over rare earth minerals, and China’s greater economic liberalization. Meanwhile, Beijing could request that the U.S. ease up on tariffs and technology restrictions, resolve the Chinese student visa revocation issue, and reaffirm the “one-China” policy as well as other sovereignty-related issues.
Both sides are likely keen to cut a shorter, interim deal before negotiating a longer and more extensive one before the end of Trump’s second term. The PRC and the U.S. have their respective reasons for getting an initial trade agreement:
United States
- The Trump administration needs time to seal favorable trade deals with its allies and partners, as well as with China’s neighbors, so that it can conduct further negotiations with Beijing from a greater position of strength. Concurrently, the U.S. will look to disrupt the PRC’s efforts to align Europe and Global South countries with it to form a “united front” against America.
- The Trump administration needs to manage market risks and avoid turbulence that could set back its growth and tariff agendas.
- The Trump administration is likely looking to reduce the U.S. trade deficit with China without causing substantial capital market losses.
- The restructuring of supply chains for critical industries, including the onshoring and “friendshoring” of manufacturing, requires time. To minimize disruptions in key sectors, the Trump administration needs an interim trade deal with China to stabilize existing supply chains.
PRC
- Reaching a shorter deal and dragging out discussions for a more extensive one gives Beijing more time to resolve its excess capacity problem and find alternative markets for its export sector. Otherwise, the PRC faces imminent widespread business closures and mass unemployment.
- Beijing needs time to develop its so-called “new productive forces,” including advanced technologies that it can use to exert global leverage and create fresh demand for Chinese products.
- Beijing would be hoping that positive U.S.-China trade talks will inject positive sentiment into capital markets, reverse declining investor confidence in China, and stem large-scale capital outflows.
3. We remain pessimistic about the possibility of a longer-term U.S.-China trade deal being reached, as well as of the PRC being able to fully commit to an interim one. Notably, the CCP is constrained by China’s economic realities, its adherence to ideological orthodoxy, and its overriding concerns about regime stability, as we earlier analyzed.
As long as the Xi leadership clings to ideological orthodoxy to sustain its power and maintain its legitimacy, the PRC will not be able to fully liberalize its markets and undertake other World Trade Organization-compliant reforms. Beijing also cannot easily shift China away from the production and export-driven economy that it has relied on for growth over the past four decades. This means that overcapacity issues, unfair government subsidies, and other problems that the Trump administration finds with the PRC system cannot be fundamentally addressed.
As various economic concessions threaten regime stability, the PRC is limited in what it can offer to the U.S. to smooth trade negotiations and live up to any deal that is reached. This means that Sino-U.S. tensions will persist and could flare up at a moment’s notice even if the current trade truce is extended through favorable talks and shorter agreements are reached.
2 Xi’s post-‘disappearance’ activities, gov’t meetings, and propaganda debunk rumors of power loss
Overseas Chinese commentators and media outlets continue to speculate intensely that Xi Jinping has “lost power” and has even already been “replaced” as CCP leader. We previously debunked several of the more prominent rumors and expressed deep skepticism about the narrative of “Xi losing power,” as well as analyzed possible reasons for the persistence of the rumors and the ramifications of buying into the surrounding narrative.
Contrary to the rumors and speculation, Xi’s recent activities, Party propaganda, and the activities of key organs indicate that Xi is firmly in charge.
Xi’s recent activities
June 4
Xi Jinping met with Belarusian president Alexander Lukashenko in Beijing.
June 5
1. Xi Jinping held a telephone call with President Donald Trump.
2. Xi signed a regulation on the construction of military facilities (軍事設施建設條例), according to state media. The regulation, which will go into effect on Aug. 1, 2025, calls for fully implementing Xi Jinping Thought on a Strong Military, fully implementing military strategic guidelines for a new era, and focusing on serving war preparedness and combat readiness.
June 6
1. Xi Jinping received the 11th Panchen Lama, Gyaltsen Norbu, at Zhongnanhai in Beijing. Xi was accompanied by Chinese People’s Political Consultative Conference chairman Wang Huning, Central General Office director Cai Qi, and United Front Work Department head Li Ganjie.
Xi last received the Panchen Lama at Zhongnanhai on June 10, 2015.
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Former United Front Work Department head Shi Taifeng previously met with the Panchen Lama in February 2023 and February 2024 in Beijing. In both meetings, Shi expressed hope that the Panchen Lama would “maintain a high degree of consistency with Party Central with Comrade Xi Jinping at the core in ideology, politics, and action.”
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Some overseas Chinese commentators argue that Xi received the Panchen Lama at his “private residence” at Zhongnanhai to dispel rumors that he has “lost power” or has been placed under “de facto house arrest.”
2. Xi sent a congratulatory message to Karol Nawrocki on his election as Poland’s president. In his message, Xi said that China and Poland, as friendly partners, should further deepen political mutual trust and enhance strategic communication in the face of a complex and turbulent international situation.
Recent activities of key organs and Party propaganda
June 5
The CCP General Office issued regulations on working procedures for Party leadership groups to discuss and decide on disciplinary actions against Party members (黨組討論並決定黨員處分事項工作程序規定), along with a notice requiring all regions and departments to earnestly implement the Regulations.
Article 1 of the Regulations states that to standardize the procedures for Party groups to discuss and decide on disciplinary matters concerning Party members, these regulations are formulated in accordance with the Regulations on the Work of Party Groups of the CCP (中國共產黨黨組工作條例) and the Provisions on the Approval Authority and Procedures for Disciplinary Actions against Party Members Who Violate Party Discipline (中國共產黨處分違紀黨員批准權限和程序規定).
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Article 3 of the Regulations on the Work of Party Groups of the CCP states that Party group work must adhere to Marxism-Leninism, Mao Zedong Thought, Deng Xiaoping Theory, the ‘Three Represents,’ the Scientific Outlook on Development, and Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era. Party group work must also resolutely uphold Xi’s core position and resolutely safeguard the “quan wei” and centralized leadership of Party Central.
Article 2 of the Provisions on the Approval Authority and Procedures for Disciplinary Actions against Party Members Who Violate Party Discipline states that officials must adhere to the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, uphold and strengthen the Party’s comprehensive leadership, adhere to the principle of Party self-governance, and, under the centralized and unified leadership of the Party Central, thoroughly implement the strategic policy of comprehensively and strictly governing the Party, and strictly apply disciplinary actions against Party members in accordance with the approval authority and procedures for disciplinary violations.
June 6
1. A national work meeting for the Central Guidance Group on the Study and Education of the Spirit of the Eight-point Regulation was held in Beijing. The meeting stressed that all guidance teams must thoroughly implement Party Central’s deployments and put into practice Xi Jinping’s important speeches and instructions to ensure that guidance and supervision work is conducted thoroughly and effectively.
Shi Taifeng, a Politburo member and deputy head of the Central Leading Group on Party-building, attended the meeting and delivered a speech. Liu Jinguo, secretary of the CCP Secretariat and deputy secretary of the Central Commission for Discipline Inspection, presided over the meeting. Jiang Xinzhi, executive vice minister of the Central Organization Department, was also in attendance.
2. The Ministry of Public Security held a national conference to promote the normalization of the “anti-gang and anti-evil” (扫黑除恶) campaign.
At the meeting, public security minister Wang Xiaohong called for:
- Thoroughly implementing Xi Jinping’s instructions and the decisions and deployments of Party Central, firmly upholding the “Two Establishes,” and resolutely achieving the “Two Safeguards.” Also, public security organs must fully play their roles as the main force in cracking down on organized crime.
- Adhering to the principles of sweeping away all criminal elements, eliminating all evil, striking down all protective umbrellas, combating all corruption, and addressing all disorder, to create a safer and more stable political and social environment.
- Focusing on concentrated crackdowns and “breaking protective umbrellas and dismantling criminal networks” (打傘破網), leaving no room for criminal and evil forces to catch their breath.
June 8
The PLA Daily published a commentary titled, “A Reporter Reflects on the Party’s Self-Revolution in the Revolutionary Holy Land of Yan’an — Exploring and Understanding the ‘Second Answer’” (記者在革命聖地延安感悟黨的自我革命——探尋讀懂“第二個答案”) as the lead article on its front page.
Noteworthy points in the commentary include:
- Since the 18th Party Congress, General Secretary Xi Jinping has repeatedly referred to the “cave” conversation. In the practice of comprehensively and strictly governing the Party, the CCP has provided a second answer — that is, to continuously promote the Party’s self-revolution.
- The CCP’s revolutionary experience has proven time and again: Ferocious enemies are never truly frightening, but the most dangerous threat is a lapse in Party conduct.
- The article references anti-corruption efforts during the Yan’an period, noting that the CCP at the time strictly upheld clean governance, and never applied double standards based on one’s contributions or rank. In fact, Party members who violated laws were punished even more harshly.
- The article noted that Mao Zedong said during the Yan’an Rectification Movement: “Even if everything falls apart, even if Yan’an is lost, even if everyone is crying out, we must carry out the rectification, and we must see it through to the end, thoroughly!”
In a personal reflection appended to the commentary titled, “Answering the Cycle Conversation in the New Era,” the reporter wrote, “For a revolutionary political party and people’s army to defeat the enemy, it must first defeat itself. Only by turning the blade inward and carrying out self-revolution — eliminating all deep-rooted ailments that hinder victory — can we have the courage to march onto the battlefield and defeat powerful foes.”
Our take
1. Xi Jinping’s recent diplomatic activities indicate that he is very much still in power and has not been sidelined despite the furious speculation in Chinese language circles. While speculation about Xi’s grip on power was particularly intense after he dropped out of the public view for a 14-day stretch, we believe that there are more plausible and mundane explanations for that absence.
2. The argument that Xi meeting the Panchen Lama at Zhongnanhai is a sign that he has “lost power” does not hold water in considering the precedent set by past CCP leaders and top officials. Jiang Zemin, Zhu Rongji, and Wen Jiabao all met the Panchen Lama at the Ziguang Hall in Zhongnanhai. Since the founding of the PRC, state leaders have used the Ziguang Hall for meeting with foreign dignitaries. Other PRC officials have also met the Panchen Lama at the Great Hall of the People or the CPPCC building in Beijing.
Some observers noted that Xi met the Panchen Lama and Belarusian president Alexander Lukashenko at the Fengze Garden in Zhongnanhai instead of Yingtai or Ziguang Hall where it is more typical for such activities. This, they argued, is a sign that Xi has “lost power.” However, we believe that it is very much the contrary — Xi choosing to meet his guests at Fengze Garden underscores his paramount position rather than him being marginalized. When Mao Zedong was at the peak of his power, he would casually receive foreign dignitaries at various locations in Zhongnanhai instead of those designated for such uses. For instance, Mao famously had a meeting with Soviet leader Nikita Khrushchev at Zhongnanhai’s outdoor swimming pool where he showed up in a bathrobe and slippers before doing laps and inviting the latter to join him. If Xi is able to choose at leisure where in Zhongnanhai he wants to meet foreign dignitaries and other guests, then he, like Mao during his peak, clearly occupies the paramount position in the CCP.
Xi’s paramount position and wanting to emulate Mao (Mao initially stayed at Fengze Garden in Zhongnanhai) aside, there is another possible explanation for Xi choosing to reside at Fengze Garden and limiting his public appearances. A leaked 2009 U.S. State Department cable noted that Xi was “quite taken with Buddhist mysticism” and displayed a fascination and knowledge of “Buddhist martial arts and mystical power said to aid health.” Assuming that the information is accurate, then Xi could be acting the way he has partly on account of superstition, such as a belief in feng shui, prophecies, or other mystical forces.
3. The various recent activities of key organs and Party propaganda underscore Xi Jinping’s paramount position in the CCP and indicate no change in his political status.
i) The regulations on working procedures for Party leadership groups to discuss and decide on disciplinary actions against Party members reference earlier regulations and provisions that affirm Xi Jinping’s “core” status in the CCP and call for adherence to his political thought. Meanwhile, close Xi ally Shi Taifeng emphasized at the national work meeting for the Central Guidance Group on the Study and Education of the Spirit of the Eight-point Regulation that all guidance groups must look to Xi’s important speeches and instructions to guide their work. These examples indicate that Xi’s political theories and instructions remain the primary content for ideological indoctrination and central guide for policy direction in the CCP regime.
ii) The June 6 Ministry of Public Security national conference to promote the normalization of the “anti-gang and anti-evil” campaign urged public security organs at all levels to support Xi Jinping and his political theories. Crucially, public security minister Wang Xiaohong is a close ally of Xi and oversees the MPS’s special service bureau, which is responsible for providing security for vice national-level leaders and above and related institutions.
With the CCP’s “knife handle” still firmly in Xi’s hands and the safety and movements of top Party officials under his control, Xi is unlikely to have been ousted as others have speculated.
iii) The June 8 PLA Daily frontpage piece on the “second answer” is intended to establish Xi Jinping’s concept of “self-revolution” as orthodoxy in the CCP and promote the anti-corruption campaign. The article also indirectly promotes Xi’s status as the “core” leader of the Party and the military and justifies his ongoing purge of the military.
4. Xi Jinping’s grip on power may be secure at present, but that does not mean that he faces little or no political risk. In fact, Xi’s political risks are at an all-time high, with the PRC struggling to resolve serious economic and financial problems, as well as budding social issues. Most of those problems are being exacerbated by Sino-U.S. trade tensions and the tariff war. Any of those problems could erupt into a full-blown crisis for the regime at a moment’s notice, sparking a chain effect and transforming into existential threats to the Xi leadership and the CCP.
Nor has factional struggle in the CCP elite evaporated with Xi continually consolidating power to higher degrees. Mainland “anti-Xi” forces may find it difficult to operate domestically, but can still find ways to attack and criticize the Xi leadership by influencing overseas Chinese-speaking circles to shape the narrative about Xi Jinping, his policies, and his allies. Mainland “anti-Xi” forces could also conceivably work with external “anti-Xi” forces on more elaborate schemes to undermine the Xi leadership, including goading Beijing into prematurely invading Taiwan and shifting the growing global awareness about the CCP threat into one that focuses on removing Xi as the chief “solution” to the “China problem.”
