Does Xi Hold the Stronger Hand in the Trade War?

Highlights

• Financial journalist Gideon Rachman argues that China's President Xi appears to hold a structurally superior position in the U.S.-China trade war.
• Despite China's apparent leverage, the article highlights significant domestic vulnerabilities in China's economy and potential shifts in global supply chains.
• Strategic decoupling efforts and supply chain realignment could potentially diminish China's economic advantages, requiring nuanced, networked approaches.

Anglo High Finance via the Financial Times: the U.S. in a subordinated position?  Don’t just rush to conclusions.

In his latest Financial Times piece (opens in a new tab), financial journalist Gideon Rachman argues that President Xi Jinping holds a structurally superior position to Donald Trump in the current U.S.-China trade war. Rachman frames Trump's escalating tariffs—and subsequent exemptions—as signs of strategic incoherence, suggesting the U.S. lacks the long-term economic resilience, political cohesion, and manufacturing infrastructure to win a prolonged contest of economic attrition.

On several fronts, Rachman’s critique holds water: America’s dependency on Chinese-origin goods, from smartphones to air conditioners and rare earths, is a real liability. He correctly identifies the leverage China holds via rare earths and pharmaceutical precursors—inputs Washington cannot easily replace.

However, Rachman’s narrative overestimates China's insulation from economic pain and underestimates the shifting global posture toward supply chain realignment. His assumption that Xi can absorb political pain more easily overlooks growing domestic vulnerabilities in China: a slowing economy, worsening capital flight, collapsing property markets, and deepening youth unemployment.

Moreover, Rachman underplays how U.S. and allied investment—particularly in rare earth processing (e.g., MP Materials, Lynas USA) and battery materials—is rapidly accelerating under Defense Production Act funding and bipartisan legislative backing. Although Rare Earth Exchanges suggests not fast enough, given there is so much more to a resilient supply chain than some basic milestones.  A whole system must evolve, and time is of the essence.

While Trump’s tactics may appear chaotic, they are catalyzing serious strategic decoupling efforts that are long overdue. Xi’s “stronger hand” may look dominant today, but if supply chains continue to realign, the leverage of authoritarian resilience could fade into irrelevance. This means that Trump must step back, adjust, and reengage in adjusted ways. A network approach is of vital importance, as are major government-backed investments in an integrated supply chain involving upstream, midstream, and downstream factors of production.