Decoding the Trump-Xi Summit Outcome: Constructive Strategic Stability

Host and TAG Senior Advisor Mira Rapp-Hooper brings together two conversations to break down the strategic meaning of the Trump-Xi summit. Mira’s conversation with TAG China Managing Director Han Lin unpacks how Beijing framed the meeting around “constructive strategic stability,” why optics may have mattered more than deliverables, and how China is signaling to multinational firms that it remains open for business. Mira and TAG Managing Principal Brett Fetterly examine what this framework could mean in practice, especially for Taiwan, semiconductors, tariffs, critical minerals, and congressional reaction in Washington. Together, the conversations explore why a summit with modest visible outcomes may still mark a significant shift in U.S.-China relations. 

What Comes Next with Mira Rapp-Hooper is produced by Rivan Dwiastono, executive produced by Lauren Dueck, with editorial input from Prashant Jha. It contains music by Cody Martin via Soundstripe. 

What Comes Next is a production of The Asia Group, and is powered by TAG AI, TAG's geopolitical decision engine for businesses.

Transcript

SPEAKER_01 0:00

I thought China's performance in the summit was worthy of an Oscar. It was so meticulously detailed.

SPEAKER_02 0:07

I think it was consequential. I don't think we'll know the con the full impact of the summit for many more weeks and months. But certainly, you know, it seems to be that to me as an analyst that there is a strategic shift underway.

SPEAKER_00 0:28

With President Trump now having returned to Washington from Beijing, the time has come to dig into what exactly occurred on the ground between President Trump and President Xi. While many analysts are noting that the deliverables coming out of the summit seem far more modest than expected, our next two guests will help us unpack why the strategic significance of the summit is likely to be with us for a long time to come. First, I'll speak with Han Lin, who is a managing director of our China Practice and is based out of the Asia Group in Shanghai. Then I'll turn to Brett Federley, who is managing principal of our China Practice here in Washington and a longtime legislative expert with experience on Capitol Hill. Let's start to unpack this visit. Han Lin, thanks so much for joining us on What Comes Next?

SPEAKER_01 1:21

Thank you so much for having me on the show. I'm excited to be on with you.

SPEAKER_00 1:25

Well, we we couldn't have a more opportune uh reason for this conversation. We are still shifting through so much when it comes to what actually took place between President Trump and President Xi in Beijing. Um Han, I know you are on the circuit and you've been doing this analysis kind of over time all weekend. I'd love to sort of start at the high level with you today and ask you from your perspective on the ground in China, how the Chinese government and Xi Jinping position themselves in and coming out of the summit. And to the extent that you can help our listeners understand a little bit better, this term that the Chinese side has now applied to the relationship that is constructive strategic stability. Help us understand how that plays into this Chinese government positioning.

SPEAKER_01 2:15

So the term constructive strategic stability is not a random idea. It is very important in the mindset of how China understands the US-China relationship. Specifically, the summit itself was a strategic relationship exercise, not a reset itself. So from Beijing's perspective, they understand and accept that structural competition with the US is now permanent. So Xi Jinping's goal is to try to reduce the volatility rather than necessarily resolve core disagreements. And this is important because the more China can better manage the geopolitical stresses, the more bandwidth it can focus on the domestic economy, of which there is a lot to sort through.

SPEAKER_00 2:59

So just give us a sense, Han, when you think of the domestic economic issues, and of course you're right, there's a lot to sort through. What do you think are Xi Jinping's kind of top issues? And how exactly does constructive strategic stability and a more predictable management of this relationship buy him that space and breathing room that he needs?

SPEAKER_01 3:18

So essentially, when we think about Xi's priorities in the summit, he really wanted to focus on de-escalating any risks and particularly to buy time, especially around issues such as Taiwan, technology restrictions, military tensions. So China really wanted clear guardrails to prevent crises from spiraling into direct confrontation. And this is important because economically China still needs breathing room. China is still dealing with property sector weakness, cautious consumers, slowing foreign investment. So stabilizing ties with Washington really can help reassure multinational firms such as Apple, Tesla, and major financial institutions on Trump's CEO delegation, that China in particular remains commercially viable despite a lot of these geopolitical tensions.

SPEAKER_00 4:08

So above all, um it sounds like from your perspective, Han, constructive strategic stability in this way of managing the relationship is a positive set of signals to the private sector that essentially they should not continue or precipitate de-risking from China on the basis of US China competition, but rather should take another hard look at what China has to offer. Is that right?

SPEAKER_01 4:30

Absolutely. So part of the messaging that China wants to convey, certainly to the U.S. multinational audience, is that even the optics of US China engagement do matter for markets and multinationals. So, for example, earlier this year, the American Chamber of Commerce in China had a 2026 business survey that showed for the first time in five years, US China tensions was no longer the top business concern. So this suggests even in the absence of deliverables, dialogue itself, such as this recent summit, does foster a sense of stability and predictability, so critical to multi-year corporate planning.

SPEAKER_00 5:09

Okay, that's a great point. And I want to come back to this. Um, and in particular to your point about the relative absence of deliverables, um, because this is sort of something that analysts have been talking about a lot, and I know that we're thinking about here over at the Asia Group. Um, but before we do, I just want to touch on the question of the optics that you mentioned, in particular the signaling that that sends to the private sector. Um, you know, I think it's no secret that the Chinese government usually thinks a great deal about the optics of a summit. You know, I've talked with Kurt Campbell, um, with Ling Ling Wei about the fact that the sort of meticulous planning from US-China leader meetings dates back many decades and can be quite vexing for those involved. But talk to us a little bit about how you think the optics of this summit were designed and specifically what you think Xi Jinping and the Chinese leadership were trying to convey with the way they staged this interaction with President Trump.

SPEAKER_01 6:06

I thought China's performance in the summit was worthy of an Oscar. It was so meticulously detailed. So, for example, the stop through Zhong Nanhai, where not every senior leader is invited, really suggested an attempt to try to establish a more personal relationship beyond the institutional relationships between the US and China. And this is shrewd because Beijing understand it really only has two options. If it doesn't manage Trump well, it will have to deal with a more hawkish administration. But I think what was interesting was the breadth of the audience that China was trying to reach. So, in other words, they wanted to convey the sense that they were the steadier global actor, in contrast to Washington's more election-driven political swings, and they were very focused on thinking beyond Washington itself. In other words, the summit was also aimed at Europe, Southeast Asia, and the global south. And China wants nations to see Beijing as indispensable to supply chains, climate cooperation, economic growth, in other words, to be the partner of choice. So you had quite a wide breadth of audience and some very subtle but significant messages throughout.

SPEAKER_00 7:17

Well, and to that point, Han, uh, you know, simply by demonstrating that China is seeking quote unquote constructive strategic stability, that presumably makes it easier for it to become a partner of choice with all those different audiences that you're speaking to, right? Something that we've known as analysts, um, that I certainly uh saw every day as a practitioner is that none of our partners want to feel like they're being forced to choose, and none of our partners want to feel like either the United States and China is dragging them headlong into a confrontation. Um, so from an optical perspective, if the Chinese can really wear this constructive strategic stability moniker and message it well, um, then they've largely succeeded in convincing some of these other audiences that they are a responsible party worth transacting with. Does that make sense from your perspective?

SPEAKER_01 8:09

That is very much Beijing's intent. And you can feel it in the social media uh, you know, messages domestically here as well.

SPEAKER_00 8:17

So let's turn then to the question of deliverables or relative lack thereof, right? Which you mentioned. Um, obviously, from from your perspective and what you're laying out, the Chinese government's perspective, a lot of the game here really was in the stabilization of the relationship and the kind of neutralizing of areas of potential tension that could otherwise significantly detract from China's economic focus. Um, but from an analyst's perspective, I know we here at the Asia Group and many analysts around the world were frankly a bit surprised at how modest these deliverables really turned out to be. We were all tracking, you know, day to day, week to week for many months, what appeared to be an emerging set of deliverables ahead of the summit. We knew they were quite modest. Um, you know, we knew that this summit hadn't exactly been prepared the way that uh we might have expected other US-China summits to be in the past, but we were expecting to see announcements of substantial purchase agreements of U.S. agricultural products like beans, like beef. Um, we were expecting to see a relatively large purchase agreement from the Chinese government for Boeing jets. And in pretty much every category, the deliverable came in murkier and even more modest than those very modest expectations. From my mind, I kind of wonder if the reason for this isn't the fact that the United States actually really didn't put tariffs on the table during this conversation. Since the Supreme Court has ruled that Trump's use of AIPA was illegal, the Trump administration has been conducting a 301 investigation to try to replace some of those existing tariffs with a new authority. But as a result, because that 301 investigation wasn't done, the Trump administration wasn't really prepared to negotiate about the extent of U.S. tariffs during this visit. So I wonder whether that inability, unwillingness to negotiate over tariffs helps to explain why these deliverables came in looking so much more modest than we were expecting, or whether there's something else at play here.

SPEAKER_01 10:27

So those are all excellent points. Certainly the deliverables fell far below the market's expectations. And generally, you know, there there was a there's a view in the US, perhaps, that that China may have come out on top, certainly from the optics standpoint. Uh, but certainly in the China side, there, you know, how how you know, one way to look at it is this there was an understanding in Beijing that Trump coming into China might be in a weaker leveraged position. And so one of the questions that often came up, and one of the risks was would China be overconfident? Would they overplay their hand, uh, recognizing that Trump is in a weaker position and therefore to offer less? But the counter-argument is this from the China side, nor did China get a lot of what they would want either. Yes, they got the optics, but did they get Taiwan ambiguity rollback? No. Did they get relief on legacy semiconductor export controls? Not at all. Did they get more durable tariff predictability that would have moved the needle? Hardly. So in many ways, when we look at it from the China side, China likely didn't feel like they could have they got as much as they would have desired, but they got what they expected, which was the optics. And keeping in mind that there's probably two, maybe up to three more occasions when Trump and Shi can meet each other, it probably makes sense to save the best for last.

SPEAKER_00 11:58

Well, that certainly makes sense. And of course, um, Han, you are alluding to the fact that President Trump shared that he had invited President Xi to the United States in the September timeframe. Um, and then we hear a tag have been tracking for a long time that the leaders could also meet on the sidelines of APEC and on the sidelines of the G20. So that's as many as three more meetings over the course of this year. Um, to the point about tariff relief, however, which we know remains really important to the Chinese, and this is really speculation. We know that these 301 investigations on the US side are supposed to be done in the coming weeks, um, you know, likely in the month of June or somewhere around that timeframe. Given the priority that the Chinese side has placed on tariff rollback, is it your sense, your gut instinct, that she would have asked for some tariff relief when those 301s conclude in exchange for an announcement of some of these things that we've been talking about here, like a big soybean purchase and Boeing purchases? Or do you think these issues are going to kind of proceed on their own tracks and perhaps wait till the leaders meet again? That is to say, is there a harvest of some of these more modest deliverables that we should think about potentially coming in the coming weeks, or do you think it's longer dated than that?

SPEAKER_01 13:20

So I do think that there are some low-hanging fruit that is still deliverable. So, for example, what that what might that include? Uh, as you I identified, airplanes, energy, agriculture, such as soybeans, maybe greater military to military communication, uh, uh even more support from China on the fentanyl precursor issues. So there's still a lot that can be discussed. My my sense was at this point, China is still trying to demonstrate strength, that they would like to have a relationship, but they don't need so. And that very much masks uh really what I see here in China, which is there are still some fundamental challenges going on with the economy right now that should be addressed, that need to be addressed, and that the government may simply be holding back at this point in time to see if they can get more leverage a little bit later.

SPEAKER_00 14:14

So say a little bit more about what you think those fundamental issues are and what the government would be holding back.

SPEAKER_01 14:21

So I think what was very clear in the readout on both sides is, for example, they have a common interest in having the Strait of Hormuz um opened up. Uh and you would think that China has significant leverage, and they do, being the primary purchaser of 90% of Iran's oil. They do have a chip, but it can only be used once, and it's not going to be given free out of goodwill. And so, therefore, it is very likely that in support for something like uh opening of Strait of Hormuz, collaboration with the US, they're going to ask for something substantive as well. Um, so in many ways, yes, Trump and she have demonstrated almost a kind of bromance uh on stage during the summit. But the differences between US and China's interests are very sharp, perhaps going to be sharpened even further going forward. And so we should expect some very hard negotiating going on forwards.

SPEAKER_00 15:22

Speaking of hard negotiating, uh it's hard to deny the uh interesting optics of Vladimir Putin heading to Beijing shortly after President Trump has just left. Um, and in particular, for those, you know, here in Washington who are making arguments about the stabilization of US-China relations being in the United States long-term interests, the kind of back-to-back bromances of Trump She followed by She Putin uh makes things a little bit harder to digest. What do you expect Han is going to come out of that Xi Putin visit? Is it mostly reassurance to she's uh no limits partner that that no limits partnership remains intact? Or is there something more afoot here? Um, and in particular, are there crossover issues between these two summits that you think Xi Jinping is going to be working?

SPEAKER_01 16:20

So I I like your analogy that you know ensure assurances are are gonna be a critical part. It's it's really interesting where from the China side, when you take a look at Putin and Xi together, it certainly looks like a very strong romance, but everyone knows, particularly in China, the complex relationship that China has had with uh Russia or certainly its predecessor, the Soviet Union. And so it is, you know, everyone in China, the students all understand that at the height of the great um the great leap forward during the famine period, China was still paying back its debt to the Soviet Union, that under the unequal treaties arrangement, um, China had to give up a landmass roughly the size of France to Russia. These are all sensitive matters. These are all uh, you know, issues that surprisingly, they aren't elevated up to the concern of Taiwan, and yet nonetheless pull at the sense of patriotism in the everyday Chinese. So the relationship between Russia and China remains complex. And I would guess that even with Putin's visit, Beijing's approach is going to be very deliberate. You know, try to engage both sides still, without formally positioning itself as a mediator while preserving its unique convening role. And I think one of the examples of constraint is that even with China's relationship with Russia, that's key banks, ICBC, Bank of China, have really pulled back from ruble-linked settlements since 2023 to try to protect their access to the US dollar system. So I think Beijing is going to continue to manage exposure very carefully. And that restraint itself is meant to be a signal to Washington.

SPEAKER_00 18:07

And and how do you think that changes in the wake of the Trump visit, if it does at all? And let's actually zoom out that question to sort of ask about what changes for banks, for MNCs more broadly in the wake of the Trump-Shi visit. That is to say that if you're a Chinese bank and you're feeling increasingly well reassured that the Chinese government has just coined a new moniker to describe the US-China relationship, Xi Jinping has effectively sort of impressed President Trump with his own set of taglines and concepts for how this relationship has been managed and has not had to give much of anything in exchange for doing so. Do you now feel that you have more room to maneuver? Are these trade-offs between the United States and Russia perhaps less profound? And then from the US side, does the visit itself serve as enough reassurance that MNCs are going to be much more comfortable kind of clamoring back into China or expanding their interests there? Or are they waiting for additional signs or signals that what just took place on the leader level is really going to take root on the ground?

SPEAKER_01 19:20

So you bring up a very critical point. To what extent are leader-to-leader relationships, how does that trickle down and cascade to the business environment of multinationals? And it's actually a very complex question, but separating the fact that China wants to play off Russia against the US at various geopolitical uh levels, the messaging from the central government down to the local governments where the multinationals operate is that the summit was meant to help restore near-term confidence. And that matters. So what we're seeing is uh prudent portfolio diversification. Some companies choosing to expand Vietnamese assembly, uh, other companies looking to deepen their India capacity, but these reflect standard supply chain resilience questions, not a verdict on China itself. So, in many ways, China is trying to convince the MNCs there's no need to exit, although it's understandable if you need to build redundancy. But I would see, at least at this point in time, last week, I was speaking to a large group of various PE funds. There is still a strong sense that companies with strong China roots are looking to stay and possibly scale up investment. So these stability signals that China is trying to send in continue to help and genuinely give a sense of predictability.

SPEAKER_00 20:41

Han Lin, this has been an incredibly useful conversation today. Thanks so much for being with us.

SPEAKER_01 20:46

Thanks for having me on.

SPEAKER_00 20:48

Rhett Fetterly, thanks so much for joining us on what comes next.

SPEAKER_01 20:51

Glad to be here.

SPEAKER_00 20:52

I just had a chance to sit down with our good colleague, Han Lin. Um, and we talked in some detail about the deliverables coming out of the Trump Shi summit, or in many cases, the lack thereof. And the question of kind of why these came in much more modest and murky and even anemic than many of us were expecting. Han made the great point throughout our conversation that the Chinese government is really just trying to signal here that US-China relative stability means that China is open for business and big MNCs should clamor on back. But as I digest the last couple of days of coverage about this summit, I'm struck that there's a bit of a disjuncture here. On the one hand, analysts around the world are rightly noting that the deliverables coming out of Beijing are quite modest. And I think we would agree they underperformed our expectations. Whether you're talking about agricultural purchases, purchases of Boeing jets, pretty much anything else, we were expecting more solidity than happened in any given category. Yet sometimes. It strikes me that commentators are making the mistake of conflating modest tactical deliverables with a summit that didn't amount to much. I think you and I probably agree that this summit amounted to a great deal. But that strategic level of significance is what I really want to talk to you about today. As President Trump left Beijing, he spoke about it being a really great couple of days. When we look at Chinese comments coming out of the summit, it strikes me that the phraseology that is most important is phrases like constructive strategic stability, the fact that Xi Jinping appeared to be putting a new moniker on the US-China relationship and sort of defining that relationship on his terms. How are you processing and analyzing two days out, the question of what really happened and what its significance is?

SPEAKER_02 22:55

Yeah, great question, Mira. I think, you know, to your excellent point, um, just because commercial deliverables didn't necessarily manifest in the same way that maybe the White House originally envisioned with this summit, doesn't mean there isn't a strategic shift underway. Um, for example, let's talk commercial deliverables for a moment. You know, if the White House envisioned the president taking a seat, uh a business delegation of US CEOs to China to secure big commercial deals on par with the visits that we saw from uh British Prime Minister Keir Starmer, uh uh German Chancellor Mertz, um, or even French President Macron last December, US didn't walk away with nearly as significant of economic wins, clearly at this stage, uh, than any of those trips previously. So if the metric of success was where does uh the the US economy, uh, US consumer sentiment, whereas US corporate wins look like um in this trip, um, the the verdict's still out. Uh there's this theoretical board of trade, board of investment that is supposed to be a mechanism for continued deal making. But in general, it's unclear, you know, at least on the commercial side, where things go. Now, on the strategic side, clearly the Chinese put Taiwan front and center in these talks and had used the president's interest in commercial deal making to effectively buy uh what I would call a strategic and stable environment for the rest of the year. The fact that the Chinese committed uh Xi Jinping to a visit in September is noteworthy. Um, normally those things aren't committed so tangibly uh this far in advance. Normally, the Chinese announce that, you know, maybe a week in advance of the Xi Jinping engagement. Um the fact that the Chinese feel willing to buy uh into a kind of broader stabilizing framework that could mean another meeting with President Trump, potentially two others on the sides of APEC and the G20 um later this fall means that um they feel pretty confident that uh strategic stability is now going to be able to be defined on their terms, with Taiwan mostly at the front and center. My biggest watch point coming out of this summit is to what extent the $14 billion arms package moves forward. You know, to what extent the administration continues its freeze on competitive actions? How does a 301 uh tariff uh investigation get rolled out in July after the Section 122 uh uh tariffs expire? Is there going to be a continued hold on export control competitive actions? Um, and to what extent do you know small bureaucratic things like the DOD 1260H list getting updated, uh, which is a list that defines um that the Defense Department defines as kind of broader Chinese military-industrial complex companies? To what extent do those things move forward in this strategic stability? Um, or are they also frozen uh while the Board of Intrade, the Board of Investment, the broader economic deal making move forward?

SPEAKER_00 26:07

So it's an excellent question and an excellent set of watch points. And I want to come back to Taiwan in particular in just a moment. Um, before we start to dig down on those, though, um, you know, I want to ask for a little bit more thinking from you on the question of how we think the Chinese are defining this constructive strategic stability. Um, we saw the term coined, um, but then of course, Wang Yi gave a subsequent press conference in which he appeared to say that both the United States and China had signed up for this framework and that it relies on a mutual acknowledgement and respect of core interests. It's totally unsurprising to hear Chinese leadership define something in these terms, but we've subsequently seen the Trump administration, including in the White House fact sheet, endorse this term. So I'm curious for what you think it really means in terms of how this relationship will be managed going forward and what could change about what the United States does and doesn't do. You've raised the great question of do we continue competitive actions and does that live within the space of constructive strategic stability somehow comfortably or not? And to my mind, a lot of that question really relies upon how the United States and China define their core interests and how they did it in Beijing. In particular, if the Chinese side believes that it has sort of given a laydown of its core interests, and President Trump said, I understand and I respect those, then what may happen or what may have happened already is essentially a seeding of initiative where any subsequent American competitive action in the space that you defined could be seen as upsetting strategic stability, therefore shifting the burden of competition on the United States, um, which to my mind would be sort of the most problematic interpretation of this term that is still very much yet to be defined. But I'd welcome your reflections.

SPEAKER_02 28:10

Yeah, no, it's great. Uh great comment in the sense that I think the Chinese um definition of constructive strategic stability is a little more clear. The Chinese view Taiwan and technology and tariffs as kind of its core strategic interests uh at the forefront of this construct of strategic stability, you know, and in doing so have effectively put the onus on the Chinese or on the United States to um to hold to a freeze on competitive actions, as we talked about. Um what the United States um, you know, readouts, uh, and particularly the White House readouts on uh constructive strategic stability, I think it's it's unclear what those actually mean in practice. I think the White House readout, if you walk through it, the things they emphasize are bilateral meetings right after they endorse constructive strategic stability. So uh we'll meet, she will come to the United States and then we'll meet again kind of at the G20 and APEC. Then they emphasize Iran, um, they emphasize uh uh the the predictability and flow of rare earth elements and critical minerals, on which the Chinese mean no specific commitment. No specific commitment from the Chinese, but in the White House readout. Um, and then they emphasize denuclearization uh issues, particularly related to North Korea. So if the framework of strategic stability from the US side is higher level, but then commercially targeted mostly at the flow of rare earths, um, it's quite a contrast to the framework of strategic stability from the Chinese level, which is technology, which is Taiwan, which is kind of core Chinese interests as long-stated policies.

SPEAKER_00 29:56

That's a great interpretation, Brad. I think really helpful. Um, I'll just reflect um, and no comment required for you on this unless, unless you wish to, that when I've spoken to colleagues in the Trump administration in recent months, they've spoken about their feeling that they needed to stabilize relationships or sorry, relations with the Chinese in the immediate term to kind of strengthen American advantages in certain key areas so they would be in a better position to compete going forward. Um, and when I personally have pressed on this question, sort of, so what are you doing now to put us in a better position to compete? And how will that look in a few years' time? The main area they point to is critical minerals, saying essentially, you know, the Chinese have a stranglehold on this in this area now, but they may not a few years from now. Obviously, I think, you know, we know that real independence or resilience on critical minerals is many years off. But it's interesting that that definition of the Trump administration strategy that's evolved over the last few months kind of now plugs into the way that the Chinese have framed up comprehensive strategic stability, and that may be convenient for both parties. Um, so whereas in the past, we've often seen the Chinese kind of trying to set the terms through the use of new terminology and the US side very uncomfortable, um, as in during the Obama administration, trying to figure out sort of what to push back against. Um, this actually seems to be some degree of acceptance on both sides that this term can work for them.

SPEAKER_02 31:30

Yeah, no, that's a great comment. I would, I would footstomp that um, you know, in my engagements with certain administration officials over the last year or two, the the framework has has shifted to we need time to build resilience uh to compete again in the future. I think what's interesting following this summit and the Chinese readouts um was a certain extent, to a certain extent, the Chinese um, you know, have accepted that um and reframed stability, you know, more in their interest and then competition more in their interest here. So, to what extent, you know, I'm curious your reactions here. Have the Chinese kind of bought into this idea that you and many others in the Biden administration push forward in terms of buying into a framework of managed competition? Now it seems like the Chinese have have felt good about their ability to compete based on the the kind of sequence of events in the last year, particularly the the leveraging of rare earth export controls. Um, and now uh it's the United States uh seeking stability and predictability in the market as they're pursuing a broader policy of kind of leader-level détente for at least this year.

SPEAKER_00 32:40

Yeah, I think I think that's a great hypothesis. Certainly um from some of Wang Yi's comments in particular, it would seem that the Chinese side does accept that the United States and China are going to be in some framework of competition for a while, but that the objective here is to try to neutralize some of those areas of competition that are most profound for Beijing and pose the greatest risk to derailing its aspirations. And that what that's what brings us back to Taiwan and tech, um, which we should dig into a little further. So on Taiwan in particular, you and I talk about this issue um all the time. You know, we've we've both been watching it closely over the course of the year, in particular since trade talks started between the US and China. And it became very clear that the Chinese side was gonna use the trade channel to try to kind of grind down US support for Taiwan. And we've seen that occur in fits and starts over the course of the year. Um, you know, reports that an armed sales package was being held up, downgrading of defense dialogues, President Lai's uh transit of the United States last summer uh was not authorized. The arm sales package then went through. So a lot of us are feeling better for a short period of time. But then we had two leader-level phone calls where the Chinese readout both times indicated that President Xi had maybe even initiated a phone call to talk about how important Taiwan was to him and how much it would ultimately define the US-China relationship. There were fears going into this visit that the United States might formally revise its declaratory policy. As I spoke about with Ling Ling Wei, um, there had been a bit of a petition on the PRC side to try to get the United States to revise its policy from does not support Taiwan independence to opposes Taiwan independence. This is a gambit that the Chinese have tried before, including during the Biden administration, um, and did not succeed at. But as the summit approached, it seemed that more and more likely she was going to weigh in with Trump on the issue of Taiwan arm sales. And at least as we're digesting what's coming out now, that appears to be exactly what happened. Um, Scott Bessant uh gave an interview, Marco Rubio gave an interview, both of which appeared to be dropping crumbs that the president was thinking about doing something very serious on Taiwan. And then, of course, listeners um will have gotten wind of, perhaps watched in its entirety, the president's interview with Brett Bear, um, in which he identified Taiwan as being very far away and extremely close to China, identified the six assurances as being extremely old policy, um, was very clear that he did not want to go to war over the issue of Taiwan independence, and questioned on multiple occasions, including to pool members on Air Force One leaving Beijing, the question of whether Taiwan arm sales should go forward, including the 14 billion arm sales package that Congress has already authorized. Um, this is a pretty dramatic set of events. And even for those of us who thought that there was a risk here, it's a little bit surreal to see it happening in real time. So I'd welcome your thoughts on where we are on the Taiwan issue. Does the president's comments signal to you that it's overwhelmingly likely that he's going to hold up Taiwan arms sales? And as a legislative expert who has worked intimately with the Republican side, what do you see Congress's options and likely pathways forward being at this point in time, given how much Republican support there has been since the very beginning of the Taiwan Relations Act for our position on Taiwan?

SPEAKER_02 36:30

Yeah, great questions. Um I share your concern. Um the Chinese linking the core interests of Taiwan with other bilateral issues with the United States is not new. Um they've done it, you know, for for decades now in terms of finding ways to kind of move the needle on Taiwan policy um as much as possible. I think what is new is um the deal-making space with this president. I mean, the president's um impulses on Taiwan um have not are not new. Um, you know, back in the first term, you know, made similar comments regarding uh the willingness to expend American blood and treasure in defense of uh the island. You know, there is a through line there in terms of his strategic framework for how he thinks about the Taiwan issue. Um, what's clear is that in this term, and particularly with where the United States is in terms of, you know, building resilience to compete for the longer run in theory, um, that the president is willing to um actively talk about arm sales, um, both with Xi in public and probably in private, um, and with Lai, which I found an interesting uh tidbit from his gaggle on Air Force One, where he suggested that maybe he would, you know, have to chat with President Lai about, you know, this arm sales deal, um, which would evoke uh quite a vehement um condemnation from the Chinese if that were to come to pass. My read of the situation is that the president knows that this is a you know political tripwire for him because of the longstanding strategic interests the United States has had in um making sure the status quo on the on the strait holds, but then also domestically knows that there's a big bipartisan consensus in in Congress that would like to see continued arms sales to Taiwan to support closer ties economically and and even diplomatically to some extent with um with the the Taiwanese people? The president seems to have overcorrected on ambiguity here, um, uh with particularly his interview with Brett Bayer. Um and I'm curious and will be watching very closely for congressional Republican reaction on the back end of those comments. You know, to what extent do members who signed letters on the front end of the trip, you know, supporting, you know, the sale of arms to Taiwan, uh, you know, maintaining the status quo, the United States position on Taiwan, uh, do they on the back end of this trip start speaking out? Um, you know, I would see the cadence of events to be something along the lines of when members arrive back in Washington today for votes, to start being asked by journalists whether or not they believe anything has changed. And I think you'll get a mix of, you know, the president says all these types of things, but you know, at the end of the day, like he knows this is a tough issue and he'll hold the line. Uh, to what extent that talking point holds or starts morphing into more aggressive talking points, like the one we saw from the senator from Utah, John Curtis, saying now's the time to sell the package. Or maybe we should actually think about, you know, uh finding a way to talk to President Lai now. If the the ambiguity meter is ticked back one way, maybe it should find a way to tick back the other way, um, and making calls privately to do that. Whether or not Congress, you know, manifests in this election year, you know, some sort of joint resolution or um or initiative in the NDAA to unlock that $14 billion deal is I think we need a lot more data points to to watch. But um, but certainly like this is issue will not go away. There's too much bipartisan interests. And um and the midterms in November also will play a pretty key role for how you know Congress for the next two and a half years of the president's term conduct oversight on US Taiwan policy just as much as US China policy.

SPEAKER_00 40:44

I think really well said, Brad, as you mentioned, there were a number of resolutions, letters signed before the president left to Beijing. Um, those did put Republican senators and congressmen on the hook, standing behind our traditional bipartisan Taiwan policy. But it will be very interesting to see how that translates to both word and deed as Congress gets back to town and this all really starts to play out. Um, you know, I want to talk in just a moment about some tech issues on what you're second to nine, but before I do, um does Congress have, you know, if if President Trump decides that he's not moving ahead with that $14 billion package, what do we know about Congress's authorities to try to force that sale? Um, there have been a number of new legislative positions, uh provisions, rather, excuse me, inserted into the last NDA, which kind of audit American policy of Taiwan. But part of what is concerning in this case is it appears that a very dramatic policy shift could take place at the direction of the president and quite swiftly. You know, what can we say about levers that Congress may have if indeed it does appear that's in the offing?

SPEAKER_02 42:00

Yeah, no, um, great point, you know, and certainly a noteworthy one given, you know, the diplomatic calendar that we've laid out. You know, if Xi Jinping's coming to the United States in September, um, and then there's two more meetings, it's hard to see um if the president and Xi Jinping both want constructive strategic stability to move forward for the rest of this year, how a $14 billion arms package fits in with that diplomatic calendar. Um, uh, you know, Congress has historically been the backstop to the US China US Taiwanese relationship. And um, you know, there have long been discussions of whether or not there is uh an update to the Taiwan's Relation Act necessary, um, both because of the strategic environment that Taiwan is now in and to the extent that now the US is maybe in a US executive maybe changing its posture as it relates to uh Taiwan. So I think there are legislative hooks. The question is can anything survive a legislative meat grinder in a midterm election year or in a second half of a lame duck of a president, you know, to actually manifest into meaningful policy. It's really hard to get things across the line in Congress. Um, but certainly this is an issue that will animate many people. Uh, but members will look to shape the political space around the White House first before actually tying the hands uh in statute.

SPEAKER_00 43:25

Well said. Um, speaking of tough issues where the Chinese are trying to sort of tug the core interests in their favor. Um, and before I have to let you go, Brett, I just want to check in on where you think we are on semiconductors and related policy. Obviously, an issue that we've watched closely over the course of the winter that you and I have spoken about many times was the administration's decision to authorize the sale of NVIDIA H200 chips to the Chinese market. Um, but after doing so, um, there's also been quite a lot of reporting and analysis that we've done here at TAG that demonstrates that the number Licenses the Department of Commerce is granted is actually relatively few. We saw Jensen Wang kind of come out of nowhere and hop on Air Force One in Alaska as uh the president's delegation traveled to Beijing. There were many an AI meme of Jensen kind of hanging off the fuselage of the aircraft as it took off. But those of us who've been watching this issue closely interpreted that as the CEO of NVIDIA wanting to really plead his case to Chinese companies to buy more H-200s. Coming out of the summit, there was a report from Reuters, I believe, that indicated that several major Chinese companies had agreed to buy more. But there doesn't seem to be kind of a consensus about what went down in this meeting or along the sidelines with respect to the H-200 and future major purchases from Chinese companies. Give us your best sense, if you would, of where we are on the semiconductor issue with the Chinese and whether there appears to be a profound tension here of the Chinese government actually continually pumping the brakes, not wanting the Chinese system to become dependent on American technology, whereas there are some leading Chinese companies that are eager to get their hands on these chips so that they can duplicate and move off on their own.

SPEAKER_02 45:25

Yeah. It's unclear, you know, to what extent the Chinese government seems to be pumping the brakes on purchases of advanced chips, uh US chips, um, to fulfill broader kind of tech self-sufficiency initiatives to force domestic tech champions to adopt, you know, local, um local suppliers, uh, local domestic chip manufacturers integration into their supply chain faster so that those chip um uh producers can innovate faster. Um, or to what extent the the party is looking to ensure that tech champions still are beholden to the party first, um, or not extending you know external dependencies on US suppliers, um, even if US suppliers have the best, you know, GPUs uh available. And uh and I think the Chinese system seems to be calibrating for a new reality on the US side, where um at least, you know, over the last 10 years, we've debated, you know, restricting advanced chip flows to to China and now seem to be in a posture of allowing select limited flows. Um, you know, does the party not really know the party doesn't really know what to do in terms of whether to take advantage of that opening to allow and play for more and greater uh uh graphic processing units um flowing to tiny Chinese Czech champions to develop faster, to um uh run new models um and for for uh you know the Chinese economy and and and tech ecosystem to innovate and grow at a at a faster scale, or um to what extent they are interested in kind of you know using it as a leverage point in negotiations with the US over other strategic issues. So the Reuters report on the front end um of the the trip suggested that BIS had cleared, you know, new licenses for Alibaba, for Tencent, for Byte Dance. Um, you know, to you know, Jensen seems to have um had some trouble with Chinese purchasing of those advanced chips since they were cleared, you know, earlier in the year. Um and I think his presence on the trip was really designed to kind of add a little bit of a political pressure to the Chinese system to follow through on purchasing commitments there. Um and I think it'll be be key for us to see to what extent those purchases go through, to what extent chip smuggling through third countries continues to go through, and to what extent, you know, the US ecosystem, whether it's DOJ indictments of chip smuggling or congressional action restricting advanced chip sales through legislation, um, continue to shape the deal making space as the Board of Trade and Board of Investment move forward. What's clear is the Chinese um seem to have been interested now in this new dynamic to start exploring the possibility of delistings of Chinese firms on US government restricted lists, whether it's at defense, whether it's at treasury, whether it's at commerce. Um, and you know, a key watch point for me will be to see to what extent any of those lists ever get updated in this kind of freeze that we're in, um, and to what extent they start actually repealing Chinese companies and the US political reaction to them as kind of the broader deal-making space goes forward between Trump and Xi for the rest of the year.

SPEAKER_00 48:55

So, in this telling Brett, the Chinese um are basically underbuying or underauthorizing the purchase of the H200 at this point in time, trying to get some of their companies delisted.

SPEAKER_02 49:10

That's my read at the moment. Um, you know, to what extent that holds in the in the coming months will be be key to watch.

SPEAKER_00 49:17

Huge watch point. Uh, and if it occurred, obviously uh double wavy for the US chip and potentially AI lead.

SPEAKER_02 49:25

Yeah. Yeah. And the domestic political ecosystem in the United States will uh will respond to that. I mean, so much of congressional activity on the economic statecraft front for the last decade or so has been about building up the structure of these various restricted lists to making sure there are cross-listing of various Chinese companies so that, you know, a key component or a key entity involved in kind of the Chinese military-industrial complex on the defense list also lands on the Treasury and the commerce lists. Um, because uh because there is not that kind of coordinating or harmonization mech metric going on at kind of the the White House policy making level. So uh Congress has often stepped in to fill that role.

SPEAKER_00 50:08

So just to bring us back to where we started, between the phrase comprehensive strategic stability and what it may mean, issues around tech and issues around Taiwan, at least for my money, it sounds like we may have had a very consequential summit indeed.

SPEAKER_02 50:24

I think it was consequential. I don't think we'll know the con the full impact of of the summit for many more weeks and months. But certainly, you know, it seems to be that to me as an analyst that there is a strategic shift underway.

SPEAKER_00 50:39

Brett Fetterly, thanks for being with us.

SPEAKER_02 50:42

Thanks.

SPEAKER_00 50:43

As I reflect on my conversations with both Han and Brett, I'm struck that the relatively modest tactical outcomes from this summit, that is, the deliverables, which still seemed uh very modestly and ambiguously formed, really tell us a bit about the strategic significance of what transpired in Beijing. That is, the Chinese side didn't give much because it didn't feel that it had to. When you add to that some really significant new terminology and rhetoric that the Chinese side has used to talk about the relationship with the United States, such as this new term constructive strategic stability and what it might mean for the United States relationship with Taiwan, particularly if President Trump delays or cancels arm sales, you increasingly see a summit that just a few days in the rear rear looks like a significant win for China. Of course, this will all take many more weeks and months to unfold. But from where I sit, a strategic shift may have indeed taken place in Beijing, and it was not in the United States favor. This episode of What Comes Next was produced by Refund Dewey Astono, executive produced by Lauren Dewick, and with editorial input from Prashanth Jaw. It contains music from Cody Martin via Soundstripe. What comes next is a production of the Asia Group and is powered by Tag AI, Tag's geopolitical decision engine for business. We'll see you on the next episode.