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Trump, Xi Spark Another Standoff With World Economy at Risk

(Bloomberg) — US President Donald Trump and Chinese leader Xi Jinping’s latest tit-for-tat showdown has both countries claiming the ball is now in the other’s court, with the clock ticking toward another escalation in import tariffs. After Trump signaled openness to doing a deal with Beijing, US Vice President JD Vance on Sunday declared the […]

US President Donald Trump and Chinese leader Xi Jinping’s latest tit-for-tat showdown has both countries claiming the ball is now in the other’s court, with the clock ticking toward another escalation in import tariffs.

After Trump signaled openness to doing a deal with Beijing, US Vice President JD Vance on Sunday declared the outcome would “depend on how the Chinese respond.” Hours later, China’s Foreign Ministry made clear Beijing would take its cues from Washington’s next steps, after having already unleashed what it saw as retaliatory actions.

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“If the US continues on its wrong course, China will firmly take necessary measures to safeguard its legitimate rights and interests,” Foreign Ministry spokesman Lin Jian said at a regular briefing in Beijing. Chinese authorities haven’t yet retaliated to Trump’s threat to impose 100% tariffs over their latest rare-earth curbs, while saying there could be “exemptions” in order to facilitate trade.

WATCH: President Trump says the US wants to help China, not hurt it.Source: Bloomberg

Treasury Secretary Scott Bessent said Monday that he believes the Trump-Xi meeting “will still be on,” noting there had been “substantial communication over the weekend.” In the meantime, he expected US-China staff-level meetings this week, along with moves by the Trump administration to mobilize US allies to put pressure on Beijing, while also threatening “straight brute force countermeasures” if Beijing doesn’t act.

“This is China versus the world,” Bessent said. “They have pointed a bazooka at the supply chains and the industrial base of the entire free world. And you know, we’re not going to have it.”

The question now is which side blinks first.

The S&P 500 closed 1.6% higher Monday, its best showing since May, as investors saw the back-and-forth as strategic posturing. China’s markets showed resilience to the turmoil, with the CSI 300 benchmark for onshore shares ending Monday down just 0.5%.

While it’s hard to gauge who exactly has more leverage, what’s abundantly clear is China’s export sector can withstand US tariffs of around 50%, said Christopher Beddor, deputy China research director at Gavekal Dragonomics.

“Beijing does care if the tariffs go past 100%, but as long as that scenario doesn’t materialize, tariffs are a lesser priority,” he added. “The rare-earth actions are intended to extract US concessions on tech export controls, but it’s also not in either side’s interest to completely derail the negotiations.”

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