Trump stokes fears about what he will do to get his red-carpet moment with Xi

Adding his signature to yet another executive order, US President Donald Trump has extended China’s trade negotiating window for a further 90 days, giving the two sides until November to reach a deal.

The extension averts a return to the triple-digit tariff war instigated by Trump that effectively created a mutual trade embargo earlier this year before a truce was struck in May.

Allowing more time for trade talks to continue amid easing tensions is a good thing for businesses, global markets, and for those of us who value living in a world where two superpowers aren’t waging a dangerous game of economic Armageddon.

The 90-day reprieve has also added to speculation that Trump is clearing the path for a potential summit in China later this year, where he can close out the deal with President Xi Jinping himself against the backdrop of Beijing’s stately red-carpet opulence.

But Trump has alarmed the Republicans’ China hawks with a string of recent moves where he has swapped cudgel for carrot in what has been widely interpreted as an effort to sweeten the chances of a deal and a meeting with Xi. These include blocking the Taiwanese president’s plans to transit through the US on the way to South America, and cancelling a meeting between US officials and Taiwan’s defence minister in June.

There is now growing unease among Trump’s critics about the shifting Overton window on what a final deal between China and the US could look like, as the US president signals his openness to bargain on US chip policy.

Take his decision to allow Nvidia to sell its H20 chip to China – and the unprecedented development today that the US government will take a 15 per cent cut from the sales revenue.

The move overturns Trump’s own decision in April, when he imposed an export ban on H20 chips, building on Biden-era efforts to hobble Beijing’s tech advances. Nvidia designed the H20 chip as a China-specific product after the Biden administration banned the sale of the most advanced AI chips.

Some experts have disputed that the H20 chips pose national security risks, arguing they are not cutting-edge and not likely to give China a leg up in the AI race.

Others disagree, including 20 security experts and former US officials who signed an open letter on July 28 condemning the decision.

“By supplying China with these chips, we are fuelling the very infrastructure that will be used to modernise and expand the Chinese military,” stated the letter, whose signatories included Trump’s first-term deputy national security adviser Matt Pottinger.

Then on Monday, Trump floated the idea of a new deal with Nvidia that would allow the company to sell a scaled-back version of its most advanced AI “Blackwell” chip to China, while describing the H20 as an “obsolete” chip.

“It’s possible I’d make a deal,” said Trump, adding that Nvidia chief executive Jensen Huang was “coming to see me again about that”.

For Trump’s critics, it’s another conciliatory move that they fear presages a bigger, bad, grand bargain with Xi and sends a signal to other countries and companies that national security export controls are up for sale in trade negotiations.

“We may look back on this as the moment America voluntarily chose to subsidise our own strategic decline – handing Beijing the very AI chips that gave us our edge in the most consequential technology race of our time,” Liza Tobin, a China director at the National Security Council during the Trump and Biden administrations, told the Financial Times.

Tobin and Pottinger are also colleagues at Garnaut Global LLC, a China-focused advisory firm that has strong ties to Washington circles.

Whether a deal-oriented summit is indeed something Xi has in mind is unclear, though he did extend a general invitation for Trump to visit China when the pair spoke via phone in June.

Beijing confirmed its agreement to the 90-day extension on Tuesday, but gave no further signals on a possible leaders meeting. One option reportedly discussed by US and Chinese officials is a meeting in China before the Asia-Pacific Economic Cooperation summit in South Korea on October 30.

It would be Trump and Xi’s first face-to-face meeting since they met on the sidelines of the 2019 G20 summit in Osaka.

For his part, Trump has denied seeking a meeting with Xi.

“If we don’t make a deal, I’m not going to have a meeting,” he told CNBC last week.

Whether the meeting happens or not, Trump and his team face a Sisyphean task over the next three months to deliver something that satisfies the MAGA base’s demands for China to “pay” for the trade imbalance, but does not isolate Trump’s hardnose hawks.

All the while, Beijing undoubtedly still has its hand on its rare earths lever, ready to pull it with crippling effect at any moment.

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