Trump and Xi see tensions flare over AI, trade and Iran but still seek stability

WASHINGTON -- State visits usually occur when two countries are on warm terms, but U.S. President Donald Trump is hosting Chinese leader Xi Jinping in Washington this week as their economic and tech competition is only escalating, especially through an artificial intelligence race.

Neither expects any grand bargain, but the leaders are expected to play nice in their third meeting since Trump returned to the White House to try to steady fragile ties. That is despite the world’s two largest economies seeking the upper hand on AI developments and trade, while pushing for leverage in persistent hot spots like Iran and Taiwan.

“The fact that they are meeting, and there’s dialogue occurring and building that relationship, is probably as important as outcomes from the meeting,” said Sen. Steve Daines, a Montana Republican who advises Trump on China and recently traveled there to lay groundwork for the summit.

Cui Tiankai, a former Chinese ambassador to the U.S., said at a recent forum in Beijing that there are “always problems, sometimes very big problems" between the two countries, but "we'll make our best efforts to maintain overall stability.”

Trump and Xi shifted away from sky-high tariffs, but the competition is still intense

Xi's visit to Washington, which begins Wednesday, is his first in 10 years. He and Trump are meeting after their countries climbed down from last year's intense trade war, where they traded tit-for-tat sky-high tariffs that threatened the global economy. China also choked off its world-leading supplies of critical minerals needed in products from electric cars to fighter jets.

The U.S. is not only trying to balance trade but also maintain its tech dominance to protect national security and global leadership. China, which has amassed tremendous economic, technological and military power over the past several years to close gaps with the U.S., is seeking to solidify its place in the global order.

The stability both sides are seeking is “for deeply competitive reasons,” said Evan Medeiros, a senior adviser at The Asia Group consultancy. “This is basically two geopolitical strongmen circling each other on the playground, trying to determine what their next move may be.”

The countries appeared to be entering a “new normal” of “overall stability” despite blacklisting each other's companies and restricting the flow of high-tech products, said Da Wei, director of the Center for International Security and Strategy at Tsinghua University in Beijing.

The leaders now should produce deals that their governments can carry out, he said, noting that “we need to move fast.”

The AI race could strain any cooperation on the technology's advance

Developing AI technology has emerged as a key battleground, with both sides showing little interest in slowing down despite warnings from tech CEOs about threats that rogue AI could pose to humanity. “Whoever wins AI wins,” Trump has repeatedly said.

He claimed on social media Monday that the U.S. is leading over China and that he was “not going to stifle Growth, of something that will be bigger than the Industrial Revolution, or the Internet, itself.”

China cannot afford to lose either. In a rare, blunt essay, Chen Yixin, head of China's Ministry of State Security, warned that AI poses a direct threat to Communist Party rule if foreign and hostile forces achieve superior capabilities.

The U.S. is already restricting exports of the most powerful AI chips to China and has accused Chinese developers of tapping into American AI models at an industrial scale to extract their capabilities.

Beijing says the practice, known as distillation, is widely used, including by American companies, and has criticized the U.S. for trying to monopolize the industry.

Beijing also is upset about U.S. efforts to build an alliance that excludes China, so it is seeking to craft new global AI guardrails by appealing to developing nations.

However, the U.S. and China are taking a small step to cooperate on AI.

Treasury Secretary Scott Bessent said Sunday after meeting with Chinese Vice Premier He Lifeng in New York that the U.S. has proposed a new “notification mechanism” for AI incidents that could affect national security.

“We think that just like any cross-border activity, that moving from opaque to more transparency between the No. 1 and the No. 2 AI powers in the world is very important," Bessent said.

US and China have turned to targeted ways to compete instead of high tariffs

While the U.S. and China have refrained from taking broad, punitive actions that would break their trade truce, they still are blacklisting individual companies and banning specific products.

“What we’ve seen is kind of testing and probing by both sides to understand what can be done competitively, while still keeping that leader-level rapprochement on track,” said Mira Rapp-Hooper, a visiting fellow at the Brookings Institution's Center for Asia Policy Studies.

The U.S. has recently targeted Chinese telecommunications and surveillance equipment, companies accused of using forced labor in the ethnic region of Xinjiang, as well as China's advanced robots and drones. The Pentagon also has barred Alibaba, BYD, Baidu and other major Chinese businesses from receiving U.S. defense contracts.

Beijing responded with export controls on drones and related technologies as well as blacklisting six U.S. companies over their support for the punitive measures tied to Xinjiang.

Iran, Taiwan and tariffs are persistent issues

After the Supreme Court struck down Trump's tariffs on trade partners this year, the administration has been trying to impose them in other ways.

The White House in July rolled out a 12.5% tariff on imports from 60 trading partners, including China, ostensibly for failing to do enough to prevent the import of goods produced by forced labor. The U.S. is planning an additional 7.5% tariff on China, accusing it of producing far more goods than it can reasonably consume.

Analysts say the tariff levels are now acceptable to both sides, but any significant uptick could rekindle tensions.

The Trump administration, however, has launched a campaign to isolate Iran from its remaining economic partners, but Beijing has insisted on its right to trade with Tehran.

So far, the Trump administration has done little to punish China, partly to avoid jeopardizing the leaders' summit. But Washington also is losing leverage because China — Iran's biggest oil buyer and its largest trading partner — has been building up a way to make payments outside the U.S.-led financial system, said Alicia Garcia Herrero, an Asia-Pacific economist at the French investment bank Natixis.

Taiwan, a self-governing island that Beijing claims as its own territory, also remains one of the thorniest issues in U.S.-China relations. Trump paused a large weapons package to Taiwan following his May trip to Beijing, but the U.S. is obligated by a domestic law to provide it with sufficient hardware and technology for self-defense.

Analysts say Xi will most likely press Trump to further delay arms sales to sow doubts in Taiwan about Washington's commitment.

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Castillo reported from Beijing.