The leaders of the United States and China, Donald Trump and Xi Jinping, appeared to set their trade war aside at a meeting this week in South Korea. Officials suggest their agreement could evolve into a strategic reset for the countries—though many analysts believe tensions over trade and other issues will persist.

Is China deliberately exploiting the world’s dependence on its rare earths? How do Trump’s and Xi’s governments relate to each other? And who has the advantage in the U.S.-China trade war?

Those are just a few of the questions that came up in my recent conversation with FP economics columnist Adam Tooze on the podcast we co-host, Ones and Tooze. What follows is an excerpt, edited for length and clarity. For the full conversation, look for Ones and Tooze wherever you get your podcasts. And check out Adam’s Substack newsletter.

Cameron Abadi: Is China weaponizing dependence on its rare earths? In some sense, did China develop its controlling stake in rare-earth supplies to get the kind of political leverage it’s been using?

Adam Tooze: I think it’s clear they understood the strategic value. The real puzzle is why other people didn’t. This does give them a tactical weapon, and they have used it. This is the third time. The first incident was in 2010 over the dispute with the Japanese over the Senkaku island chain, with a Chinese person being detained by the Japanese authorities and the Chinese immediately rationing [rare-earth] supplies. Then in 2019—after the first Trump administration ramped up trade pressure on China in the context of an overt discourse in Washington, D.C., about great power geopolitical competition—the Chinese again began to talk very assertively about the possibility of shutting down rare-earth supplies. And now they’ve done it again.

I don’t want to say the Chinese only act from a defensive posture, because that doesn’t do justice to the scale of their ambition and the purpose of the regime, but I think it’s probably best to think of rare earths as a weapon in their arsenal that they draw when they feel as though they’re being backed into a corner—as though they’re facing sanctions or protectionism or discrimination that is simply unacceptable. One of the real red lines this time was the idea that the Americans were going to impose a special tax on all Chinese vessels entering the United States. And Beijing made quite clear that if the Americans went ahead with that, then they were going to escalate and escalate hard. And they did. So I think that’s maybe the best way to think about this.

In general, the Beijing regime has a clear idea of trade as strategic, as geopolitical. They have a clear idea that they face an incumbent power in the United States that is going to push back hard. And so they are very much actively looking for ingredients of counterpressure, both to be able to pursue their own interests and to defend themselves against what they see, of course, as American attacks. And that’s what’s going on here.

CA: The United States and China have achieved a deal, but is there friction between the personalist system of government that Trump has developed and the more bureaucratic logic of Xi’s government?

AT: It’s worth looking at the video that’s been released of the interactions between the two of them. What’s really striking is the contrast in the framing. Trump is there and is obviously kind of pleased as punch to be actually meeting, and it’s a big personal moment. And Xi delivers this kind of statesman-like lecture. It’s like the big brother lecturing the little brother and saying, “Look, yeah, yeah, yeah, it’s good we’re meeting, but we do have to understand, the world is a complicated and difficult place, and it’s not surprising that the two largest economies in the world should have moments of friction, and it’s up to us to ensure that these are managed well.” And Trump’s just going, “I got a great deal, I got a great deal, this was a great meeting, 12 out of 10.”

So there’s this fundamental difference in the way they’re interacting. I would say there are three modes right now. There is this weird thing going on in the U.S. where there is this highly personalistic policy regime around Trump and then remnants of the state apparatus which themselves are undergoing a kind of MAGA change. There’s the Chinese Communist Party, which has its policy processes utterly centered on Xi but formulated in a completely different tone. You know, when Xi sits in the big meetings, he just has the badge on like everyone else. Everyone knows he’s number one, but it’s framed within a power structure that he has an interest in maintaining the optics of. And then the third thing is what used to be rules-based trade policy, which is neither of those two things. There’s recently this coalition formed of small states. I think it involves New Zealand, the Emirates, maybe Singapore. And the logic there is to say, “We want lawyers back in the room. We just want everything to be lawyered out here. We don’t want either the giant CCP apparatus or this whatever we’re going to call it, like this clown show in D.C. We want systematic argumentation around the known parameters of modern trade policy.” And they’re actually pushing this as a coalition, as an alternative to either of those first two options.

CA: There’s a stark contrast in the U.S. discourse between the historical stakes that sometimes get portrayed in this trade war and the way trade talks always seem to come down to soybeans and how many soybeans U.S. farmers are selling to China. How should we make sense of that contrast?

AT: It comes down to soybeans because Chinese people like to eat pork so much. And so they have this giant herd of pigs, which expanded really dramatically after the reform period as people’s incomes started going up. And you need to feed the pigs something. And there was a huge push. American trade policy was very influential in the ’90s and the 2000s to open up the Chinese animal feed market to global exporters. And on the back of that, the American soy producers and the great South American soy producers, but above all, the Brazilians started expanding soy cultivation to feed the Chinese appetite for pork. Basically, that’s what’s hanging on this. And this is no joke. If there is one economic indicator that Beijing really pays attention to, it’s the price of pork. If that goes up, they think they’ve got inflation. For them, what the gas price is in the U.S., the pork price is in China. It’s a key variable. But I completely agree, there’s this huge discrepancy.

The news is that China is going to buy 12 million metric tons of American soy by the end of the year. And—fellow citizens, rejoice, rejoice—over the coming years, China will be buying 25 million [metric] tons [a year]. Which is not exactly where we were pre-trade war, but it’s back from the lowest levels. And for the farm states of the U.S., that’s extremely good news. And that’s how this feeds back in: The farm states are key electoral states, especially for the Republicans, and this is what anchors the concern. Trump is famously sensitive to farm votes.

The thing is, though, that we shouldn’t be too kind of highbrow about this. If you think about America’s position in the world going back to the 19th century, these logics are absolutely key. The internationalists—such as they were in American politics through the mid-20th century—were the farm lobby, right? The farm lobby were the export-orientated chunk of the U.S. economy. The manufacturing sector, until it acquired global dominance by the late 19th, early 20th century, was massively protectionist. That was the Republican protectionist, Northeastern industrial bloc that was, it’s simplistic to call it isolationist, but it was protectionist, and it was basically betting on the development of the American national economy. It’s the plantation economy, the cotton economy of the South originally, and then the Midwestern farm states that push. And they underpin America’s rise to globalism. So rather than thinking of soybeans as the mundane, the trivial, you could think of soybeans as the material reality of the universal. What does everyone want? The vast majority of people worldwide quite like to eat pork, and that’s what’s sustained by soybeans. And that’s why soybeans matter.

CA: Who do you think has the upper hand in a U.S.-China trade war? How should we be thinking about who has the advantage?

AT: The opinion today in all the American media I’ve been able to read since the end of the meeting in Korea is unambiguously that the Chinese have emerged the stronger here. Now, these are overwhelmingly liberal journalists writing, and of course, they’re happy to find fault with President Trump, and there’s almost a kind of relish in his self-humiliation. That seems to be overwhelmingly the opinion. Now, this is like one phase of a protracted game. And in the end, after all, the Chinese are responding to American aggression, so the Americans are on the front foot. Part of the problem of American policy is they’ve been so indiscriminately aggressive that they have a high level of tariffs on all possible substitutes for China. And so if you don’t keep the Chinese tariffs at a really quite high level, what will tend to happen is that the production will relocate to China.

So the Americans, you could say, are becoming the victims of their own success in other negotiations. In the end, we are also talking about the Chinese trying as hard as they can to gain access to what Donald Trump referred to as the super-duper Nvidia chips, which they don’t make themselves. So, structurally, the Chinese have these levels of dependence [and] are, in the end, reacting to American aggression. But if the idea was that America was going to be able to straightforwardly impose its will on the Chinese and that the Chinese would come to the table with a large array of very significant concessions, we’re not seeing that. What we are seeing is a relatively self-confident Beijing that basically gave precious little ground on any of the key issues and has simply said, “OK, fine, let’s play nice around the rare earths, we can do that if you’d like.” But does it fundamentally shift the structural balance? No. So I would say I think the Chinese are ahead. It’s not a knockout by any means, but they are ahead on points.