US-China Paris Trade Talks — Tariffs
The unusual scenario of the world's first and second largest economies engaging in direct negotiations in the capital of a third country indicates that US-China relations have moved beyond mere trade friction into a "phase of managing complex conflicts," encompassing technological hegemony, resource control, and alliance realignment. The initiation of talks at this timing, ahead of Trump's visit to China, is evidence that both countries are compelled to demonstrate a "negotiating posture" domestically and internationally, with a high risk that political theatrics will take precedence over substantive agreement.
── Understand in 3 points ─────────
- • On March 15, 2026, high-level US-China trade talks commenced in Paris, France.
- • President Trump's visit to China is scheduled soon, and the talks are positioned as groundwork for it.
- • The United States had already imposed new tariff measures against China in February 2026.
── NOW PATTERN ─────────
The US and China are locked in a structural dilemma, wielding asymmetric economic weapons—tariffs and rare earths—against each other, caught in a "spiral of conflict" yet unable to fully decouple from the "path dependency" of economic interdependence.
── Probabilities and Responses ──────
• Base case 55% — Frequent use of diplomatic platitudes like "constructive" and "positive" in joint press conferences, lack of specific numerical targets, mention of "continued talks," President Trump's social media posts about a "great deal" lacking specifics.
• Bull case 20% — Talks extended beyond schedule, additional participation of high-level officials (ministerial or higher), announcement of an interim agreement with specific figures, signing of a concrete MOU (Memorandum of Understanding) related to rare earths, positive reporting on the talks by Chinese state media.
• Bear case 25% — Early termination of talks, conclusion without a joint statement, President Trump's anti-China tweets, Chinese state media reporting criticizing the US, prolonged uncertainty regarding the China visit schedule, announcement of new export restrictions/tariffs.
📡 THE SIGNAL — What Happened
Why it matters: The unusual scenario of the world's first and second largest economies engaging in direct negotiations in the capital of a third country indicates that US-China relations have moved beyond mere trade friction into a "phase of managing complex conflicts," encompassing technological hegemony, resource control, and alliance realignment. The initiation of talks at this timing, ahead of Trump's visit to China, is evidence that both countries are compelled to demonstrate a "negotiating posture" domestically and internationally, with a high risk that political theatrics will take precedence over substantive agreement.
- Diplomacy — On March 15, 2026, high-level US-China trade talks commenced in Paris, France.
- Diplomacy — President Trump's visit to China is scheduled soon, and the talks are positioned as groundwork for it.
- Trade — The United States had already imposed new tariff measures against China in February 2026.
- Resources — China's stable supply of rare earths is expected to be one of the main topics of discussion.
- Geopolitics — Paris, a third country, was chosen as the venue for the talks, indicating a neutral ground rather than a direct bilateral channel.
- Economy — The trade volume between the US and China is approximately $700 billion annually, and tariff measures will have ripple effects across the global economy.
- Industry — China accounts for approximately 60-70% of the world's rare earth refining share, and supply restrictions directly impact the semiconductor, EV, and defense industries.
- Politics — Since his re-inauguration in 2025, the Trump administration has progressively raised tariffs on China.
- Diplomacy — French President Macron intends to demonstrate his presence as a mediator in US-China dialogue.
- Security — The rare earth issue is not only an economic problem but also directly linked to the supply chain security of military technology.
- Markets — Following reports of the talks' commencement, semiconductor-related stocks and rare earth-related shares reacted in Asian markets.
- Domestic Politics — President Trump is looking ahead to the midterm elections and is required to balance a tough stance on China with negotiation outcomes.
To understand the current state of US-China trade friction, it is necessary to survey the structural changes of at least the past decade.
China's accession to the WTO in 2001 was a landmark event that accelerated global economic integration. However, the "marketization of China's economy" envisioned at the time of its accession did not necessarily progress; instead, state capitalist industrial policies were strengthened. With China's announcement of "Made in China 2025" in 2015, a decisive recognition emerged among American policymakers that China was not merely a trade partner but a strategic competitor vying for technological hegemony.
The first Trump administration (2017-2021) materialized this recognition into policy using "tariffs" as the most visible means. Starting with steel and aluminum tariffs in 2018, tariffs on China were progressively raised in 2019, ultimately imposing a 25% tariff on approximately $370 billion worth of Chinese goods. The Biden administration did not revoke these tariffs; instead, it promoted "technological decoupling" through semiconductor export restrictions and the expansion of the Entity List (trade restriction list). The semiconductor export restrictions in October 2022 were effectively intended to contain China's advanced semiconductor manufacturing capabilities.
When President Trump was re-inaugurated in 2025, tariff policies became even more aggressive. Under the concept of "reciprocal tariffs," additional tariffs on imports from China were intermittently imposed, with the new tariff measures in February 2026 being the latest move. What is crucial, however, is that China's response capabilities also changed significantly during this period.
China has clearly positioned rare earths as a strategic card. The rare earth export restrictions against Japan during the 2010 Senkaku Islands dispute were merely a "preview." Since 2023, China has implemented export restrictions on gallium and germanium, and in 2025, it further strengthened export controls related to rare earths. Rare earths are essential materials for electric vehicle motors, wind turbines, smartphones, and precision-guided weapons, and China is in a position to utilize this resource as a "reverse tariff"—an economic weapon in the form of supply restrictions.
The choice of Paris as the venue for the talks is also symbolic. Like Geneva or Helsinki during the Cold War, or Panmunjom during the Korean War, the selection of a neutral third country for major power negotiations indicates the difficulty of building trust through direct channels alone. France, as a leader of the EU and a nuclear power and permanent member of the UN Security Council, possesses its own diplomatic capital. Since his visit to China in 2023, President Macron has pursued a equidistant diplomacy with both the US and China, advocating for "European strategic autonomy." Hosting these talks aligns with France's diplomatic ambitions.
However, one must not misinterpret the essential structure of these talks. This is not a negotiation aimed at "resolving trade issues," but rather one exploring "methods of conflict management." Both the US and China recognize that complete decoupling would inflict severe damage on their respective economies. American consumers are suffering from inflation, and China's export industries are slowing down. Simultaneously, domestic political dynamics in both countries are working against "compromise." For President Trump, a tough stance on China is essential for maintaining his support base, and for President Xi Jinping, concessions on "core interests" would mean an erosion of authority.
In other words, the Paris talks are likely "negotiations for the sake of negotiations"—a form of diplomacy where the process itself is presented as an outcome. Limited agreements (e.g., temporary tariff exemptions for specific items or provisional guarantees of rare earth supply) may be considered as "souvenirs" for Trump's visit to China, but structural issues (technological hegemony, industrial subsidies, intellectual property rights, and the linkage between the Taiwan issue and economic security) are likely to be shelved.
Historically, economic friction between a hegemonic power and a challenger is rarely resolved by short-term "deals." The US-UK economic friction of the 1930s and the US-Japan trade war of the 1980s were both ultimately "resolved" only through structural adjustments by one party (or drastic changes in the geopolitical environment). Which path US-China relations will follow will be determined not by these Paris talks, but by the trajectory of technological innovation, demographics, and alliance relationships over the next decade.
The delta: What has decisively changed in these Paris talks is the clear elevation of rare earths from a mere "trade item" to a "strategic negotiating card." China had previously limited rare earth export restrictions to implicit threats, but after the gallium and germanium regulations, it has now positioned them as a major agenda item in formal bilateral talks. This signifies that the "terms of exchange" between tariffs (the US card) and rare earths (the China card) have officially been placed on the negotiating table, indicating that the US-China economic conflict has shifted to a new phase—a managed conflict predicated on the mutual ability to inflict "pain."
🔍 BETWEEN THE LINES — What the News Isn't Saying
The choice of Paris itself is the biggest signal. The US and China opted for a European capital instead of a direct channel to minimize the political cost for both sides of appearing to have "conceded to negotiations" domestically. The inclusion of rare earths on the agenda likely means China is playing the rare earth card as an "entry fee" to demand a review of semiconductor export restrictions. In other words, while ostensibly discussing "rectifying trade imbalances," the actual bargaining is revolving around the exchange terms of "semiconductor restrictions vs. rare earth supply guarantees." The very fact that Trump's visit to China remains unscheduled indicates that the "souvenir" contents are not yet finalized.
NOW PATTERN
Escalation Spiral × Path Dependency × Overstretch of Power
The US and China are locked in a structural dilemma, wielding asymmetric economic weapons—tariffs and rare earths—against each other, caught in a "spiral of conflict" yet unable to fully decouple from the "path dependency" of economic interdependence.
Intersection of Dynamics
The three dynamics of "Escalation Spiral," "Path Dependency," and "Overstretch of Power" do not operate independently but form a complex system that mutually reinforces itself.
As the escalation spiral progresses, both countries invest resources in developing counter-weapons against the other's "weapons." However, due to path dependency, these counter-weapons (alternative supply chains, domestic rare earth refining capabilities, new trade routes) do not function sufficiently in the short term, and existing economic ties continue to transfer the costs of conflict to consumers and businesses in both countries. This accumulation of costs accelerates the "overstretch of power."
Specifically, when the US raises tariffs (escalation spiral), American companies face increased procurement costs from Chinese suppliers, but alternative sources cannot be secured immediately (path dependency). Meanwhile, inflation progresses, fiscal deficits expand, and relations with allies erode (overstretch of power). Similarly, when China restricts rare earths (escalation spiral), it damages the US semiconductor and defense industries in the short term, but China wants to maintain other trade channels (path dependency). However, if restrictions continue, the development of alternative supplies will accelerate, and China's leverage will decrease in the long term (overstretch of power).
The Paris talks are a venue for seeking a "landing spot" within this triple dilemma. However, as long as the structural drivers remain unchanged, any agreement will only be a temporary "truce." The escalation spiral cannot reach complete decoupling due to path dependency, and path dependency cannot return to stable integration due to the escalation spiral. And the overstretch of power will increase the cost of maintaining this intermediate state over time. This is the structural stalemate of US-China relations, and regardless of the outcome of the Paris talks, this dynamic will not change.
📚 PATTERN HISTORY
1930: Smoot-Hawley Tariff Act and the Global Trade War
Escalation Spiral
Structural similarity to the present: Unilateral high tariffs led to a chain of retaliation, shrinking global trade by 66%. Protectionism may appear to protect domestic industries in the short term, but it harms all participants through a spiral of escalation.
1985: Plaza Accord and US-Japan Trade Friction
Path Dependency・Overstretch of Power
Structural similarity to the present: The US pressured Japan for currency appreciation and market opening, achieving a "victory" in the short term, but it led to Japan's economic bubble and collapse. Pressure from a hegemonic power can force structural changes in the other party, but unintended side effects return in the long term.
2010: China's Rare Earth Export Restrictions Against Japan
Overstretch of Power
Structural similarity to the present: China, which restricted rare earth exports in response to the Senkaku Islands issue, dealt a blow to Japan in the short term, but it accelerated Japan's rare earth recycling technology development and alternative material research, weakening China's monopoly in the long term. The "weaponization" of strategic resources has self-destructive aspects.
2018-2020: First US-China Trade War (First Trump Administration)
Escalation Spiral・Path Dependency
Structural similarity to the present: The tariff tit-for-tat lasted about two years, leading to a temporary truce with the "Phase One Agreement," but structural issues (industrial subsidies, intellectual property rights, forced technology transfer) remained unresolved. Partial agreements temporarily halt the spiral but reignite if fundamental causes are not addressed.
2022: Biden Administration's Semiconductor Export Restrictions Against China
Path Dependency・Escalation Spiral
Structural similarity to the present: Export restrictions on advanced semiconductors were intended to slow China's technological development, but they led to an explosive increase in China's investment in its domestic semiconductor industry and the successful manufacturing of SMIC's 7nm chips (2023). While technological blockades may be effective in the short term, they promote the opponent's self-reliance in the long term.
Patterns Revealed by History
Historical patterns consistently show that economic coercion between major powers—tariffs, export restrictions, resource limitations—while providing short-term negotiating leverage, produces three counterproductive effects in the long term. First, it provokes retaliation from the target country, intensifying conflict (Smoot-Hawley, First Trade War). Second, it accelerates the target country's self-reliance efforts, eroding the coercer's long-term advantage (rare earth restrictions against Japan, China's domestic semiconductor investment after semiconductor restrictions). Third, it causes unintended spillover effects on third parties and a contraction of the global economy as a whole (global trade collapse in the 1930s, Japan's bubble after the Plaza Accord).
The current US-China Paris talks are an extension of these historical patterns. Even if a "swap" of tariffs and rare earths is achieved in the short term, as long as structural drivers of conflict (technological hegemony, security, ideology) exist, it will only be a "truce" until the next escalation. Just as the Plaza Accord changed the structure of US-Japan relations, the true turning point for US-China relations will come when the internal structure of either country changes, or when an external shock (technological breakthrough, financial crisis, geopolitical event) compels both countries to cooperate.
🔮 NEXT SCENARIOS
The Paris talks will last for several days, with both sides evaluating them as "constructive dialogue," but without reaching a binding agreement. Limited outcomes may be announced as "atmosphere building" for Trump's visit to China (scheduled for April 2026). Specifically, temporary tariff exemptions for certain agricultural and energy products, or a vague "joint statement" level agreement regarding stable rare earth supply, are conceivable. However, core issues—relaxation of semiconductor export restrictions, reduction of industrial subsidies, institutional guarantees for rare earth export management—will remain subject to "continued talks."
Markets will initially react positively to the start of talks, with stock prices rising slightly, but will fall back as the lack of substantive agreement becomes apparent. The yuan will stabilize somewhat in the foreign exchange market, but without major movements. Rare earth-related stocks will fluctuate wildly.
During Trump's visit to China, a large "deal" may be staged, but its content will likely be symbolic (e.g., China's announcement of large orders for Boeing aircraft), and structural issues will be postponed. Major escalation will be avoided until the 2026 midterm elections, but a new round of tariffs will be prepared after the elections.
Implications for Investment/Action: Frequent use of diplomatic platitudes like "constructive" and "positive" in joint press conferences, lack of specific numerical targets, mention of "continued talks," President Trump's social media posts about a "great deal" lacking specifics.
The Paris talks progress more than expected, and a framework for a "package deal" on tariffs and rare earths is agreed upon. Specifically, this could involve the US freezing some of the additional tariffs from February 2026 (especially on consumer goods other than EV and battery-related items) for 90 days, and China guaranteeing a minimum annual supply volume for rare earth processed products exported to the US.
If this "mini-deal" is concluded, Trump's visit to China will end successfully, and a framework for further negotiations (e.g., a permanent channel like "US-China Economic Stabilization Dialogue") may be established. Markets will react strongly, with semiconductor stocks, rare earth-related stocks, and the Chinese market rising. The USD/CNY exchange rate will also move towards stability.
The conditions for the optimistic scenario to materialize are stringent. Hardliners within the Trump administration (especially Navarro-esque forces leading trade policy) must be restrained, and China's Xi Jinping must also allow short-term concessions as a strategic decision. Furthermore, both economies are slowing down, and there must be a shared recognition among leadership that "there is no room to continue the conflict as is." If global economic indicators in the first half of 2026 deteriorate more than expected, the probability of this scenario will increase.
Implications for Investment/Action: Talks extended beyond schedule, additional participation of high-level officials (ministerial or higher), announcement of an interim agreement with specific figures, signing of a concrete MOU (Memorandum of Understanding) related to rare earths, positive reporting on the talks by Chinese state media.
The Paris talks effectively collapse, and US-China relations head towards further escalation. During the talks, the US side raises issues such as strengthening semiconductor export restrictions and the Uyghur problem, to which China retaliates as "interference in internal affairs." Regarding rare earth supply, China hints at new export restriction measures (expansion of restrictions to critical elements like neodymium and dysprosium).
President Trump vehemently criticizes China on social media, and the plan for his visit to China may be postponed or canceled. Additional tariffs (a "third round" of a uniform 10-15% increase on all Chinese products) will be considered. China will strictly enforce its rare earth export licensing system or activate a ban on the outward transfer of rare earth processing technology.
Markets will be greatly shaken, leading to a correction in global stock markets and a flight to safe-haven assets (gold, US Treasury bonds, yen). Semiconductor stocks will plummet, while shares of non-Chinese rare earth companies (Lynas, MP Materials, etc.) will surge. Governments worldwide will accelerate "de-risking" of supply chains, and economic security-related legislation will rapidly advance in various countries.
Potential triggers for the pessimistic scenario include heightened military tensions in the Taiwan Strait, an escalation of China's hardline stance due to further deterioration of domestic economic indicators, or a rapid worsening of anti-China sentiment within the US (e.g., exposure of cyberattack incidents).
Implications for Investment/Action: Early termination of talks, conclusion without a joint statement, President Trump's anti-China tweets, Chinese state media reporting criticizing the US, prolonged uncertainty regarding the China visit schedule, announcement of new export restrictions/tariffs.
Key Triggers to Watch
- Announcement of the content of the Paris talks' joint statement or outcome document: March 15-20, 2026
- Official announcement or postponement report of President Trump's visit to China: Late March - Early April 2026
- Presence or absence of new rare earth export control measures by China: March-May 2026
- Imposition or postponement of additional tariffs (third round) by the US: April-June 2026
- Movement towards making China policy an election issue for the 2026 US midterm elections: From summer 2026 onwards
🔄 TRACKING LOOP
Next Trigger: Announcement of the joint statement after the conclusion of the Paris talks (expected March 18-20, 2026) — The specificity of the statement and the tone of its wording will determine the success or failure of Trump's visit to China and the future direction of escalation/de-escalation.
Continuation of this Pattern: Tracking Theme: The Future of US-China "Managed Conflict" — The next milestones are Trump's visit to China (scheduled for April 2026), followed by the decision on additional tariffs before the 2026 midterm elections (Summer 2026).
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