By Arman Sabir
TradeTrend
Published: Sep 25, 2026
WASHINGTON, September 25, 2026: The Trump-Xi meeting has eased the tariff fight, but beneath the truce, AI, chips and rare earths are emerging as strategic levers of economic power, reshaping supply chains and raising a defining question over whether technology or tariffs will shape the next global economic order.
The meeting comes after months in which Washington and Beijing have used tariffs, export controls and critical-mineral restrictions to protect economic and technological interests. The latest talks have produced space for continued engagement, but the underlying disputes now reach well beyond the price and volume of traded goods. The World Trade Organization says shifts in economic power, government intervention, global value chains, digitalization, artificial intelligence and geopolitical tensions are collectively testing the trading system built after World War II.
The WTO further stated that these forces are reshaping what is traded, how it is traded and how economic interdependence is managed, while geopolitical tensions have increasingly recast that interdependence as a security issue. It said the rapid emergence of AI is amplifying the transformation of international trade, creating economic opportunities while also presenting new challenges.
The US-China Business Council, representing companies engaged in the bilateral commercial relationship, has put a different emphasis on what comes next. In a September 17 statement, it supported formal U.S.-China channels on AI safety, policy consultations and management of significant AI incidents, while warning that both countries should avoid measures that unnecessarily restrict market and supply-chain access.
The council said businesses should have a role in bilateral and plurilateral discussions because of their central position in deploying AI. Its position puts the focus not only on strategic competition, but also on whether restrictions intended to manage technological and national-security risks could disrupt the commercial networks through which both economies remain connected.
The Limits Of Using Technology As A Strategic Lever
Washington has continued to treat advanced semiconductors, computing capacity and AI capabilities as strategic concerns, with export controls forming a central part of its technology policy toward China. U.S. policy has sought to restrict access to technologies considered critical to national security while preserving an American lead in advanced computing and AI.
Beijing has opposed that approach, arguing that Washington has stretched national-security concerns into areas of ordinary technological and commercial activity. China has also defended its AI companies against U.S. allegations over the use of American models and said the two countries should address AI risks through dialogue rather than technological containment.
The commercial concern sits between those positions. The US-China Business Council has supported formal channels for AI safety and policy consultations while urging Washington and Beijing to avoid measures that unnecessarily restrict market and supply-chain access. That places commercial connectivity alongside the security concerns driving the controls.The Asymmetric Economic Leverage: Critical Minerals vs. Technology
Comparing China's market dominance in rare-earth magnet production & refining against EU dependency and non-China 2035 supply projections.
Research from the U.S. side points to both an effect and a cost. The Center for Strategic and International Studies found that export controls can delay China's access to critical technologies, but also said broad or frequently changing restrictions can reduce revenues for U.S. firms, encourage companies to design around U.S. technology and complicate coordination with allies. It argued that carefully targeted controls should form part of a broader technology strategy.
Research examining China's technology ecosystem presents a more granular picture of what happens under those restrictions. The Asia Society Policy Institute's Center for China Analysis reported from the 2026 World Artificial Intelligence Conference that Chinese AI developers are adapting to limited access to advanced computing through domestic hardware, system-level engineering and open models. Its researchers found that compute constraints remain real, while adaptation to domestic chips carries additional engineering costs.
The same research also identified a broader institutional response. China is using the World Artificial Intelligence Cooperation Organization, established in Shanghai with 29 founding countries, to promote international cooperation and global AI governance, including capacity building and participation by developing countries. The organization operates outside the United Nations system.
That development widens the technology contest beyond access to advanced chips. CSIS has identified three institutional tracks taking shape around AI governance: the U.S.-backed Pax Silica process, the United Nations' Global Dialogue on AI Governance and China's WAICO initiative. Its researchers found that some middle powers are participating in more than one of these frameworks rather than choosing a single camp.
The record therefore points to two processes occurring at the same time. U.S. controls can slow access to leading technologies and impose costs on Chinese companies. At the same time, Chinese firms and institutions are adapting to those constraints, developing alternative capabilities and seeking a larger role in shaping AI governance. The technology relationship is consequently becoming more than a contest over access to advanced chips alone.
Rare Earths Reverse The Technology Equation
The leverage becomes more complicated when the contest moves from advanced computing to the physical materials required to build modern industry. Washington has increasingly treated China's concentration of critical-mineral refining as a supply-chain vulnerability and is pursuing a new plurilateral framework that would use measures such as border-adjusted price floors to encourage investment in alternative production and processing capacity. U.S. Trade Representative Jamieson Greer argued that current prices are too low or volatile to sustain market-based production outside China and that greater supply-chain resilience requires coordinated action with partner countries.
Beijing presents the issue differently. Chinese Foreign Ministry spokesperson Guo Jiakun said on September 21 that China's position on maintaining safe and stable global industrial and critical-mineral supply chains had not changed. He defended restrictions affecting Japan as controls on dual-use items under Chinese law and said all countries had a responsibility to contribute constructively to supply-chain stability.
The Three Competing Tracks of Global AI Governance
Middle powers are increasingly hedging across multiple frameworks rather than choosing a single bloc.
The International Energy Agency's supply-chain assessment shows why that dependence cannot be changed as quickly as a tariff schedule. Mining capacity can be developed in additional countries, but refining, metallization and permanent-magnet production remain considerably more concentrated. The IEA estimates that existing and announced projects outside the dominant supplier could meet about half of projected non-dominant-supplier mining demand by 2035, but only about one-quarter of refining demand and well below one-fifth of magnet demand.
That physical constraint has pushed major economies toward parallel strategies. The United States and Australia have established a framework covering mining, processing, investment, stockpiling and recycling, while India and the United States have created a separate framework spanning mining, processing, recycling and financing. These arrangements show that diversification is increasingly being incorporated into industrial and economic-security policy alongside trade policy.
But diversification does not necessarily mean disengagement. Building mines, refineries and magnet plants outside China requires capital, technology, permitting, infrastructure and time, while manufacturers still need reliable access to existing supplies. Countries can therefore seek alternative sources while continuing to depend on the Chinese processing ecosystem during the transition.
Technology controls can encourage the development of alternative capabilities over several years; rare-earth controls expose how difficult it is to replace an established physical supply chain quickly. The two sides therefore possess different forms of leverage, and attempts to reduce one dependency can create incentives to build another.
The emerging response could consequently produce not separate supply chains, but a more distributed system in which production is spread across more countries while critical stages remain interconnected.
The Supply-Chain Shift Extends Beyond Washington And Beijing
The search for alternatives to Chinese supply chains is already changing the choices facing other major economies. Japan has treated critical minerals as an economic-security issue because it remains dependent on overseas supplies, while its industrial strategy seeks to secure alternative sources, processing capacity and recycling. Japan's Ministry of Economy, Trade and Industry says critical minerals are essential to semiconductors, batteries, digital transformation and the wider industrial economy, making stable supply a matter of economic security.
Europe faces a similar constraint. The European Commission says the EU does not produce rare earths itself and that 98% of its rare-earth magnet demand is met by Chinese imports. Its Critical Raw Materials framework therefore seeks greater extraction, processing and recycling inside Europe while setting a 2030 benchmark that no more than 65% of the EU's annual consumption of a strategic raw material should come from a single third country.
Yet Europe's response is not simply a move away from China. Eurostat's 2026 assessment shows that China remains a major source of EU rare-earth-element imports. At the same time, European policy has continued to address advanced computing and semiconductor-manufacturing dependencies, showing that the response to strategic exposure extends into technology as well as minerals.
In Asia, the adjustment is producing another pattern. The Asian Development Bank's 2026 assessment says Asian production networks are becoming more diversified, multi-hub and risk-aware, with supply chains increasingly reorganized within the region. It identifies India as becoming a more active participant in these networks, while noting that Asia remains predominantly integrated through intermediate-goods trade.
India's position illustrates the complication. Research from the Institute of South Asian Studies at the National University of Singapore says China's dominance in solar manufacturing and its role in battery and processing supply chains mean India's energy transition remains dependent on Chinese technology, capital and critical minerals. It describes India's approach as selective and calibrated rather than full economic separation.
Southeast Asia has its own opportunity and constraint. International Institute for Strategic Studies research identifies ASEAN economies as important producers and emerging processing and manufacturing hubs, but says the region still faces major dependence on Chinese investment and processing capacity. In Indonesia, Chinese firms control around 75% of nickel-refining capacity, according to the analysis.
The result is not a simple relocation of production from China to other countries. Investment can move, new processing capacity can emerge and companies can diversify suppliers, while China's role in intermediate production remains embedded in many of the same networks. The ADB's 2026 assessment captures that broader pattern: Asian production is becoming more diversified and multi-hub, but regional trade remains heavily based on intermediate goods.
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