Pre‑summit US‑China talks flag chip‑supply risks as tariffs and rare‑earths remain unresolved

Semiconductors are the cleanest way to see what is still broken in US-China trade. The two sides have kept a rare-earths arrangement alive ahead of Donald Trump’s May 14-15 meeting with Xi Jinping in Beijing, but the bigger fight never really got fixed. Tariffs are still hanging over trade. US export controls still fence off the best AI chips. And now both governments are treating supply chains less like markets and more like leverage. ### What is actually unresolved? The narrow answer is three things. First, tariffs — the punitive duties from the trade war era still shape costs and sourcing decisions. Second, rare earths — the current arrangement keeps material flowing, but officials are still talking about whether to extend the truce and on what terms. Third, semiconductor controls — Washington still restricts China’s access to top-end AI hardware, and Beijing is still trying to reduce dependence on US technology. (straitstimes.com) ### Why do rare earths matter so much? Because “rare earths” sounds niche, but the products made from them are everywhere. The real choke point is magnets and processed materials used in electronics, vehicles, industrial systems, and defense gear. China’s dominance gives Xi something unusually concrete at the table — not just a tariff threat, but control over inputs manufacturers physically need to keep lines moving. That is why even a temporary truce matters so much to US industry. (straitstimes.com) ### Why are chips the bigger story? Because chips are where the strategic split is becoming visible in market share, not just diplomacy. In 2025, Chinese AI chipmakers captured about 41% of China’s AI accelerator server market, while Nvidia’s share fell to 55%. Total shipments were about 4 million cards. Huawei alone shipped roughly 812,000, with Alibaba’s T-Head, Baidu’s Kunlunxin, and Cambricon also gaining ground. That is not full self-sufficiency. (eenews.net) But it is a real shift. ### Does that mean China has caught up? Not really. The catch is performance. Domestic Chinese chips are taking share partly because US controls limit Nvidia’s best products and partly because Beijing is pushing buyers toward local hardware. But the leading Chinese parts still trail Nvidia’s newest systems, and the software stack is more fragmented. So China is building a parallel AI hardware market — bigger and more viable than many outsiders assumed, but still behind the frontier. (techinasia.com) ### Why does this hit supply chains now? Because procurement teams do not buy “geopolitics.” They buy lead times, approved vendors, and parts that can be swapped without redesigning a product. Tariffs raise landed costs. Rare-earth restrictions threaten upstream inputs. Chip controls force redesigns around weaker or different components. When all three move at once, companies cannot treat them as separate headaches. They become one planning problem with multiple failure points. (techinasia.com) ### What are both sides trying to prove? Washington wants to show it can protect technological advantages without losing access to critical materials. Beijing wants to show that export controls will not stop Chinese firms from building a domestic AI stack — and that China can still make US industry feel pain if talks stall. That is why this summit matters even if no grand bargain appears. The meeting is partly negotiation and partly demonstration of leverage. (digitimes.com) ### So what should businesses watch? Not a dramatic handshake line. Watch the fine print. If the rare-earths arrangement gets extended, that lowers one immediate supply risk. If tariffs stay untouched, cost pressure remains. If chip controls tighten further, Chinese substitution will accelerate again. Basically, the direction of travel is clear even if the details wobble: the US and China are still connected, but they are rebuilding that connection around mistrust. (digitimes.com) ### Bottom line This summit is not really about one deal. It is about whether the world’s two biggest economies can keep a managed rivalry from turning into recurring supply shocks. Rare earths may get the quickest fix. Chips are the slower, deeper rupture — and that is the one likely to keep reshaping trade long after the meeting ends. (usnews.com) (straitstimes.com)