The summit between Donald Trump and Xi Jinping, which begins on Wednesday, is taking place amid a period of deep geopolitical and economic upheaval. An end to the Iran conflict and the reopening of the Strait of Hormuz are not in sight. Even with an immediate ceasefire, months of supply chain disruptions would be expected.
Both sides are under considerable domestic and economic pressure. In the US, rising fuel prices and an increasing inflation rate have pushed Trump’s approval ratings down to around 33%. The outcome of the midterm elections in November 2026 is increasingly uncertain for the Republicans.
China continues to grapple with the fallout from the real estate collapse of recent years. Although export volumes unexpectedly rose by over 14% in April 2026, the economy is increasingly reliant on exports as domestic consumption has fallen sharply. This, however, is leading to growing resistance in many countries that are being flooded with Chinese products of all kind. Despite generous oil reserves, prices in China are rising and stocks are rapidly dwindling.
Both China and the US recognize the importance of personal summit diplomacy. Since their meeting in South Korea on Oct. 1, 2025, bilateral relations have calmed down somewhat. Yet the areas of conflict remain: trade policy, artificial intelligence, chips and semiconductors, robotics and the automotive industry – in all these sectors, both sides are watching each other with a keen eye.
The race for the technology of the future is in full swing. The fact that China has a clear lead in many rare earths and their processing further intensifies this.
The relationship is also strained by the wars in Ukraine and Iran. Washington is trying to prevent China from providing ever-greater support to Russia’s military machine. A few days ago, the U.S. Department of State imposed sanctions on three major Chinese companies that passed on to Iran satellite information about the location of American ships and military bases in the Middle East. The Trump administration assumes that the Chinese state is ultimately behind these companies or at least politically tolerates their activities.
In China, Trump’s erratic and contradictory foreign policy is viewed with head-shaking and incomprehension. The same applies to the military campaign in Iran, which has taken the leadership in Beijing by surprise. They had expected surgical strikes, not a conflagration.
Europe could seize this historic moment to make a credible offer. The Gulf states’ disappointment with the US – which at the very least undermines the long-established petrodollar system – is being closely monitored in Beijing. Offers to the Gulf states will follow.
Essentially, since the Great Recession of 2008–2009, Beijing has been convinced that the US is on the decline. In light of Trump’s incoherent policies, this process appears to have accelerated from China’s perspective. It can therefore be assumed that Xi will adopt a tough negotiating stance at the upcoming summit.
Trump is unaware of the weakness of his own policies and leadership style. He still believes he is in the strongest position in global politics, not only vis-à-vis Iran and other countries, but also vis-à-vis China. Furthermore, Trump is highly susceptible to theatrics, compliments and superficial deference. He also knows that, against the backdrop of the upcoming midterm elections and the economic burdens of the Iran war, he can hardly afford another trade war with China.
Added to this is the open question of how long the US dollar will continue to function as the reserve currency. Rumors that Iran intends to charge tolls for the Strait of Hormuz in renminbi may be symbolic in nature. However, the petrodollar model – whereby Gulf states invest their profits in US Treasury bonds in exchange for military support – has lost a great deal of credibility.
All of this means that Trump ultimately finds himself in a weaker negotiating position vis-à-vis China. Even if the perception of the US delegation, which is set to arrive in Beijing on Wednesday evening, is different. Yet, as in many other areas, Trump’s policy toward China is also characterized by wishful thinking and a lack of realism.
Klaus W. Larres is the Richard M. Krasno Distinguished Professor and teaches as Professor of History and International Relations at the University of North Carolina at Chapel Hill. Among other roles, he served as Senior Political Advisor at the German Embassy in Beijing under Ambassador Michael Clauß.
Tim Wenniges is Deputy Executive Director of Unternehmer Baden-Württemberg e. V. Previously, he headed the Konrad Adenauer Foundation in China, among other roles.
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