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INTRO: AMINE LAOUEDJ, MANAGING DIRECTOR
Welcome. Once a week from London, we break down the most consequential event in the global economy and analyze exactly what it means for your business.
LAST WEEK'S KEY ECONOMIC EVENT
Last week, the US President visited Beijing to have bilateral talks with the Chinese President. He was accompanied by a delegation of CEOs from Tesla, Apple, Nvidia, Blackrock, and Boeing.
This was the first state visit to China by a sitting US president since 2017. The symbolic weight of this was significant.
The headline coverage focused on whether any major deals were signed and four items were on the table: AI chip exports, rare earth elements, an AI governance framework, and Chinese purchases of American aircraft and farm goods.
On that narrow test, zero signed agreements, and the summit looked empty. And even the verbal commitments were already being walked back by the US President within hours.
However, looking beyond, there are three dimensions worth looking at.
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The first dimension is what the US held back.
Before the summit, the US President had a 14 billion dollar Taiwan arms package pending approval, alongside another 11 billion dollar package from late 2025 that still hasn't been delivered. Neither package moved.
This matters because since 1979, the US has operated under a framework called the One China policy: The US acknowledges that Beijing claims Taiwan, without endorsing that claim, while arming Taiwan to deter China from taking it by force. Arms sales are how Washington shows how serious that defense commitment is.
When 25 billion dollars in weapons get frozen right around this summit, the message to China, Taiwan, and the region is that America's commitment has weakened.
The second dimension is what was recognized.
The Chinese President opened the summit by invoking the Thucydides Trap. This is a historical reference rooted in ancient Greece. China implicitly compared itself to Athens, the rising power of its time, and the US to Sparta, the established power. The story tells that when an established power faces a rising challenger, they almost always end up at war because neither side knows how to share the top spot.
By framing the meeting around this concept, the Chinese President asked if both nations could build a new paradigm for relations between great powers. That framing was not challenged by the US President, who offered extensive public praise and maintained silence on Taiwan. This put China on equal footing with the United States.
The third dimension is the asymmetry.
There has been a sequence that led to this summit, driven by both China’s leverage over US manufacturing and Trump’s dealmaking style.
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The first step in the sequence came in April 2025.
The US introduced the Liberation Day tariffs: a sweeping package of import taxes, hitting Chinese goods the hardest. China hit back by introducing strict licensing requirements for seven heavy rare-earth elements and the magnets made from them.
Rare earths are seventeen metallic elements essential for permanent magnets used in electric vehicle motors, wind turbines, smartphones, F-35 fighter jet components, missile guidance systems, and AI data center hardware. China controls 60% of global mining, 90% of global refining, and 90% of global magnet production.
The economic consequence was immediate: Chinese magnet exports collapsed by 74% year-on-year, and Automotive manufacturers in the US, Europe, Japan, and South Korea cut production lines or shut factories.
The US tried to fix it by building a domestic alternative. They invested 400 million dollars in MP Materials, a US rare-earth mining and processing company. But building a non-Chinese supply chain takes years and needs billions in capital and long permitting cycles.
By mid-2025, the dependency was no longer theoretical. It was binding in real time, and any escalation of a trade war would hit US factories harder than Chinese ones.
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The second step in the sequence was the US deciding to back down.
The US believes that letting Beijing access the most powerful AI chips would compromise US national security. So for years, they had built up restrictions on advanced chip exports, for example the H200, Nvidia's high-end AI chip.
Last December, the US President reversed that ban in exchange for a 25% surcharge paid to the US Treasury. The surcharge was unprecedented and was the political wrapper that made the reversal sellable in Washington.
Then, the final step of the sequence: the Summit.
Noticeably, it is the US President who went to Beijing, which in diplomatic terms is the lower-leverage position, because the visiting head of state is the one seeking the outcome.
The US offered concrete concessions on chips and Taiwan posture, in return China offered promises on Boeing aircraft and soybean purchases.
The soybean piece is particularly weak, because Beijing made a similar commitment in October 2025 to buy 25 million metric tons annually and is already failing to honor it, buying cheaper Brazilian alternatives instead.
China made no concession on the rare-earth licensing regime that started the entire sequence.
So, across the whole sequence, the US gave concrete concessions, and China gave verbal commitments on purchases but no concessions on what mattered the most.
This is asymmetric bargaining. One side has something the other side struggles greatly without reliable access. In this case, China controls the rare earths the US cannot live without. When you hold that kind of leverage, you do not give it up. You use it to extract concessions, again and again. Because the moment you actually solve the problem for the other side, you lose your leverage.
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The global implication is that the summit confirmed a new equilibrium for the US-China relationship: managed interdependence. China holds structural leverage on the inputs that matter most for advanced manufacturing, defense, and AI, and the US has shown it is willing to pay in concessions to access those inputs.
That said, the summit was not a pure loss for the US.
The reduction in near-term escalation risk has real value for businesses globally, and the verbal commitments on energy, agriculture, and aircraft, if even partially honored, will support American producers in specific sectors.
And in a year when the US is already at war with Iran, avoiding open conflict with China in the Pacific is itself a strategic priority, not just a tactical convenience. These benefits are real, but they are tactical and strategic at once, and they do not change the underlying fact: the structural leverage stayed with China.
WHAT IT MEANS FOR BUSINESS
So, what does this mean for business?
For years, US policy toward China was built around the strategy of decoupling: a deliberate effort to reduce US economic and technological dependence on China through tariffs, export controls, and investment into sensitive sectors.
The goal was to put enough distance between the two economies that future conflict, commercial or military, would not catastrophically disrupt US industry.
This summit showed the practical limits of that approach and marked a shift toward managed interdependence.
For most businesses, the change is in the strategic assumptions underneath their plans, not in tomorrow's cash flow.
So any corporate strategy that has been assuming a continued US push toward decoupling, a stable Taiwan defense posture, or a US-led effort to build non-Chinese rare-earth supply chains on an aggressive timeline, has been operating on an outdated understanding.
The shift creates clear losers and clear winners.
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Regarding the losers, there are four categories.
First category includes companies that moved operations out of China.
If you moved your semiconductor supply chain, your rare-earth processing, or your manufacturing, you did it expecting the US government to help cover the higher cost. That government support is now expected to be weaker than planned.
The second category includes the companies with supply chain exposure to Taiwan.
The withdrawal of approximately 25 billion dollars in pending Taiwan arms deals signals reduced US deterrent commitment. Because TSMC produces over 90% of the world's most advanced semiconductors, this practical risk extends to almost every industrial, consumer electronics, automotive, and software business at scale.
The defense contractors holding those frozen arms packages, particularly Lockheed Martin and Raytheon, also lose directly. The frozen commitments should be considered as withheld revenue, not just delayed revenue.
Third category includes the global manufacturers that need Chinese rare-earth magnets.
This hits automotive OEMs in Germany, Japan, and South Korea hardest. The summit confirmed that the April 2025 licensing restrictions are here to stay. Rare-earth magnet flows are now likely to stay at half their pre-restriction level for the foreseeable future. That is the new normal.
Fourth category includes the US chipmakers like Nvidia and AMD that were counting on a big revenue recovery from China in 2026.
The summit confirmed that even when chip sales are officially approved, the shipments do not actually happen at scale. Both governments quietly prefer slow execution, because keeping the deal open gives each of them ongoing leverage. The recovery is going to take longer than expected.
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Now, the winners.
These are the businesses already operating inside the new US-China relationship, not against it. The companies with established China operations and local Chinese partners. The companies in non-strategic sectors that benefit from a calmer trade environment. And US oil and LNG producers, who gain narrowly.
The Chinese President said he wants to buy more American energy, specifically to reduce China's dependence on the Strait of Hormuz. That signals a long-term shift in where China sources its energy.
WHAT SHOULD BUSINESS LEADERS DO NOW
So, what to do now?
For companies that moved operations out of China, based on the decoupling thesis: stress-test the financial model without the assumption of sustained US policy support. Why? Because the political appetite for paying the cost-differential of decoupling has just been publicly demonstrated to be lower than markets priced in.
For companies with Taiwan supply chain exposure: build a contingency plan for a degraded US deterrent posture, particularly for any business that cannot tolerate a six-month disruption to TSMC output.
For automotive and industrial manufacturers that need Chinese rare-earth magnets: plan for 2026 assuming you will get half of what you used to. Start qualifying suppliers in Australia and the United States now, even if they cost more. And lock in long-term contracts immediately, before China tightens the licensing rules again.
For US semiconductor companies with China revenue baked into 2026 guidance: revise the recovery timeline downward, because the summit confirmed that the December framework produces ceremony, not shipments.
Now, for businesses positioned to operate inside the new equilibrium, particularly those in agriculture, energy, or aviation: this is the moment to push for clearer terms with Chinese counterparties while the government is in a phase of public openness, because the verbal commitments the Chinese President made will be partially honored to maintain, at least, the appearance of cooperation, and the businesses that lock in early get the largest share of that follow-through.
OUTRO: AMINE LAOUEDJ, MANAGING DIRECTOR
Thank you for listening to this episode of What It Means for Business. Have a good week.
Last week, US President Trump conducted a high-stakes state visit to Beijing to meet with Chinese President Xi Jinping, accompanied by a major delegation of business leaders.
Although the summit concluded without any formally signed agreements, it signaled a profound shift in the global economy: the practical limits of US-China decoupling, the deliberate effort to reduce US economic and technological dependence on China. As the geopolitical landscape transitions toward a new equilibrium of managed interdependence, business leaders must urgently reassess their strategic assumptions.
Every week on the What It Means for Business podcast, Glenshore's Amine Laouedj cuts through the noise of global economic headlines to explain what is happening, why it matters, and what business leaders should do to adapt.
Also available on Spotify and Apple.
Date of production: 18 May 2026
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