The More Things Change: US–China Relations After Washington October 2026

The September summit eased selected trade tensions, but strategic dependencies and regulatory instruments shaping global value chains remain.

Leverage runs in both directions

Presidents Donald Trump and Xi Jinping’s September meeting in Washington, DC, produced considerable commentary about which country entered the summit from the stronger position. China has substantial leverage. Its manufacturing scale remains formidable, it occupies important positions in advanced technologies, and its dominance of critical-mineral processing and permanent magnets provides control over inputs that are difficult to replace quickly. In 2024, China accounted for approximately 60 percent of global mined production of magnet rare earths, 91 percent of refined output, and 94 percent of sintered permanent-magnet production.

China’s industrial strength coexists with significant economic weaknesses, however. Its property sector remains in a prolonged contraction, private domestic demand is weak, debt remains high, deflationary pressures persist, and demographic trends weigh on longer-term growth. The International Monetary Fund (IMF), using China’s official statistics, reported 5 percent real gross domestic product (GDP) growth for 2025 but identified as material concerns declining labor supply, decreasing returns to investment, slowing productivity, and continued weakness in domestic demand. China’s population declined by 3.39 million in 2025.

Independent estimates present a weaker growth picture. Rhodium Group estimates that real GDP grew between 2.5 and 3.0 percent in 2025 and calculates that China’s 2025 real GDP level may have been approximately 11 percent below what official statistics imply.

The US and its allies possess different sources of leverage, particularly across advanced technologies and the specialized international ecosystem supporting semiconductor production. US export controls continue to condition access to advanced semiconductors on destination, end user, and compliance requirements. That leverage should not be confused with US self-sufficiency: the US consumes roughly one-quarter of the world’s semiconductors but fully manufactures only about 10 percent of the chips it requires.

US policy also seeks to reduce vulnerabilities across energy, critical minerals, manufacturing, and defense supply chains. Recent measures have supported greater domestic petroleum production, refining, and logistics capacity; critical-mineral extraction and processing; domestic and allied sourcing of defense inputs; deeper supply-chain mapping; large-scale energy infrastructure; and accelerated licensing and deployment of nuclear technologies.[1]

Critical minerals show both the ambition and the difficulty. In 2024, the US was 100 percent reliant on net imports for twelve critical minerals and at least 50 percent reliant for twenty-nine. Domestic mining alone does not eliminate the dependency: the US retains insufficient processing capacity for materials including cobalt, nickel, and rare earth elements.

The problem extends beyond the United States. The International Energy Agency (IEA) estimates that existing and announced diversified capacity outside the dominant producer would meet only about half of projected ex-China magnet-rare-earth mining demand in 2035, approximately one-quarter of refining demand, and below one-fifth of magnet demand.

Strategic competition therefore extends beyond control of today’s chokepoints to efforts to change where tomorrow’s chokepoints exist.

The International Institute for Strategic Studies (IISS) describes the broader economic competition as a “derisking race”; neither country currently seeks complete decoupling, but each is trying to reduce its “vulnerability to leverage or coercion while retaining or acquiring advantages over the other.” Bill Bishop has described the current political relationship as a period of “strategic stalemate” with incentives on both sides to preserve stability.

The relationship is better understood as an asymmetric interdependence rather than a simple contest over which country is ascending or declining.

For companies, the question coming out of Washington is not who “won” but instead what has changed in the operating environment—and what has not.

What changed in Washington

The summit produced tangible accommodation, but the exchange was reciprocal rather than a broad relaxation of strategic competition. The two governments endorsed tariff reductions covering approximately $30 billion in nonsensitive goods in each direction, continued their economic consultation mechanisms, expanded counternarcotics cooperation, and agreed to establish an artificial intelligence (AI) dialogue and bilateral communication channel for AI incidents. The two militaries also agreed to pursue an agreement on crisis communication and prevention.

The US obtained additional Chinese market access and purchase commitments. China agreed to import at least 10 million metric tons of US coal in both 2027 and 2028, while the tariff package covers US agricultural products, seafood, wood products, cosmetics, and medical devices. China also scheduled orphines, imposed new controls on two fentanyl precursor chemicals, and had arrested twenty-one Chinese citizens in August based on information supplied by US law enforcement.

More consequentially, Washington did not surrender the principal regulatory architecture through which it exercises technology leverage. China did not secure permanent suspension or withdrawal of the Bureau of Industry and Security (BIS) Affiliates Rule. The underlying rule remains intact.

BIS issued the Affiliates Rule in September 2025 to extend specified Entity List, Military End-User List, and related restrictions to foreign entities owned 50 percent or more, directly or indirectly and individually or in the aggregate, by covered listed parties. China secured a one-year suspension of its implementation as part of the October 2025 Korea agreement alongside US tariff and maritime concessions. China, in turn, committed to suspend expansive rare earth controls, facilitate exports of critical minerals, remove or suspend retaliatory measures, address fentanyl precursors, and expand purchases of US agricultural products.

The negotiations extended the broader trade truce through January 10, 2027. Trade-law reporting indicates that the Affiliates Rule suspension may be extended accordingly. As of this writing, however, BIS has not published an amendment implementing that extension. The existing Export Administration Regulations still provide for the suspension to expire November 9 with the ownership-based restrictions scheduled to take effect November 10. China therefore has not secured permanent suspension or withdrawal of the rule, and even the reported short extension has yet to acquire regulatory effect.

The extension also comes while implementation of earlier Chinese commitments remains part of the bilateral negotiation. The September White House fact sheet stated that the two governments continue to work on US concerns regarding shortages of rare earths and other critical minerals. Reporting ahead of the summit documented continuing licensing delays and interruptions affecting some critical-mineral shipments. Those unresolved issues preserve the relevance of regulatory tools already available to Washington, just as China retains leverage through its position in critical-mineral processing and permanent magnets.

Both governments retain the industrial and regulatory instruments capable of constraining technology, materials, and counterparties, even as they reduce tariffs, extend implementation dates, and expand consultation mechanisms.

Competing regulatory regimes

US export controls can turn on technology content, classification, destination, end use, end user, and, increasingly, ownership. The Affiliates Rule makes that last factor particularly important: an entity does not have to appear by name on a restricted-party list for covered restrictions to apply if its ownership crosses the rule’s threshold.

Name-based screening may not be sufficient. Exporters may need to trace ownership through intermediate entities and establish whether covered listed parties collectively meet the 50 percent threshold. BIS guidance also treats significant minority ownership and other significant ties as red flags that can require additional diligence.

China has expanded its own export-control, sanctions, and strategic-material regimes. In June, China prohibited exports of dual-use items to ten US entities and prohibited organizations and individuals in any country or region from transferring or providing Chinese-origin dual-use items to those entities.

A commercial flow consequently may need to remain viable simultaneously under US, Chinese, and third-country requirements. Those regimes can apply different concepts of jurisdiction, origin, ownership, technology content, end use, and national-security interest. Regulatory permissions are dependencies alongside physical materials, production assets, transportation, finance, and insurance.

Consider a component manufactured in a third country using Chinese-origin material, incorporating US-origin technology, and destined for another jurisdiction. The same commercial flow could raise questions involving origin, classification, technology content, licensing, ownership, end use, tariffs, and transshipment. A delayed license, enhanced bank review, constrained transportation route, or insurer reassessment would add further friction.

Export controls, sanctions, tariffs, licensing, transportation, insurance, payment, and customer-market conditions can accumulate around the same commercial flow. Individually manageable constraints can make an otherwise lawful transaction too slow, expensive, or uncertain to execute under the assumptions on which the business committed to it.

Legal permissibility does not necessarily mean operational viability.

Classifications, licenses, certificates, end-user statements, origin documentation, and ownership determinations add decision-makers and elapsed time to commercial flows. A license does not have to be denied to disrupt production; receiving it too late may be enough.

When operating problems become proof problems

A customs hold, licensing delay, or sanctions review can become a contractual dispute, insurance claim, customer dispute, regulatory inquiry, or enforcement matter. The questions then turn to origin, ownership and control, technology content, routing, end use, classification, licensing, and what information was available when the company made its decision.

Requirements can also change during the commercial lifecycle. A transaction may face one regulatory environment when the purchase order is issued and another when the product is manufactured, exported, financed, or delivered.

We have described this elsewhere as the proof problem in supply-chain disputes: the ability to reconstruct and defend decisions that kept a commercial flow moving. Emerging supply-chain disputes increasingly require companies to substantiate movement, origin, ownership and control, sanctions and export-control analysis, and the decisions taken to keep supply moving.

Knowing that a supplier exists is different from validating its ownership, origin, or capacity. Knowing that a shipment traveled through an intermediate jurisdiction is different from being able to explain why. Possessing an export license is different from retaining the evidence showing that the representations underlying it remained accurate.

The operating requirement moves from visibility -> validation -> evidence -> defensibility.

Companies increasingly need to demonstrate not only that a transaction was permissible, but why they reasonably concluded that it was permissible based on the information available when the decision was made.

VCRM manages dependencies across the commercial flow

Value chain risk management (VCRM) applies to the dependencies required for a commercial flow to function. Suppliers and other third parties are part of that system; so are materials, technology, production capacity, energy, transportation, finance, insurance, regulation, customers, markets, and the internal capabilities required to manage them.

The operating process is Map -> Validate -> Escalate -> Adapt.

Map

Identify the dependencies required for a critical commercial flow to work.

The depth of analysis should follow materiality. A commodity input with multiple substitutes may require little additional work. A specialized material, controlled technology, irreplaceable production asset, critical logistics route, or government authorization capable of stopping a product may require considerably more.

Mapping therefore asks more than “Who supplies it?” It asks what materials and technologies production requires; which jurisdictions regulate them; which permissions allow them to move; which transportation, financial, and insurance relationships enable the transaction; which customers and markets support its economics; and which internal capabilities are necessary to manage it.

The dependency can sit upstream, downstream, or outside the physical supply chain.

Validate

Test the assumptions supporting those dependencies.

A supplier’s existence does not establish its capacity. A country-of-origin declaration does not necessarily establish the origin of upstream inputs. Moving production to another country does not establish that the original dependency has disappeared. An alternate supplier is not an alternative if it relies on the same constrained processor, technology, transportation route, or regulatory permission.

Validation can extend to ownership and control, origin, Tier-N dependencies, capacity, substitutability, technology content, routing, end use, regulatory status, licensing requirements, financial and insurance availability, and contractual rights. The Affiliates Rule provides a direct example: the regulatory status of an apparently unrestricted counterparty may depend on ownership several entities removed from the transaction.

Material decisions should leave an evidentiary record sufficient to reconstruct why the company acted as it did.

Escalate

Define which changes require a decision and who has authority to make it.

A supplier designation can trigger escalation. So can a change in the ownership of an unlisted counterparty, activation of an ownership-based export-control rule, a license that takes sixty days instead of twenty, loss of insurance coverage, rejection of a payment, a new export classification, closure of a transportation corridor, loss of a customer market, or evidence that an alternative source retains the same upstream dependency it was intended to replace.

The threshold is a material change to an assumption supporting the commercial flow.

Procurement, legal, trade compliance, logistics, finance, security, and business leadership each may own part of the response. Decision rights should be established before the disruption requires them.

Adapt

Exercise available options while they remain viable.

Based on the dependency, adaptation may involve alternative sourcing, inventory, product redesign, different production locations, earlier licensing, different transportation routes, revised financing or insurance arrangements, contractual changes, deeper diligence, or changes to customer and market exposure.

The objective is optionality tied to the dependency creating the exposure.

A second supplier that depends on the same critical processor provides little additional resilience. Moving final assembly while retaining the same upstream material dependency may accomplish even less. An alternative route that depends on the same constrained port, insurer, or government authorization may provide no meaningful alternative.

Map what the commercial flow depends on. Validate the assumptions that allow it to function. Escalate when those assumptions materially change. Adapt while credible options remain.

After Washington

The Washington summit provided greater predictability in selected areas of the US–China relationship. But it did not remove the strategic competition reshaping global value chains. Some consequential measures remain suspended rather than resolved, while implementation of earlier commitments remains part of the bilateral negotiation.

China retains important industrial chokepoints. The US and its allies possess different sources of leverage, including technology controls and regulatory instruments that can reach through corporate ownership structures. Both governments are investing in alternatives intended to reduce their own strategic dependencies while preserving leverage.

A geopolitical negotiation can change the regulatory status of a company that was never at the negotiating table, including through ownership relationships several levels removed from the transaction. Materials, technology, production, transportation, regulatory permissions, financing, insurance, and customers all must align for the transaction to work.

The relevant VCRM questions are specific to the company and the flow: What does it depend on? Which assumptions are material? Can those assumptions be validated and defended? What changes require action? What credible options remain if the operating environment changes?

The risks are determined by how those outcomes change the dependencies on which each company’s commercial operations rely, instead of simply the summit’s outcome.

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[1] White House, “Presidential Determination Pursuant to Section 303 of the Defense Production Act of 1950, as Amended, on Domestic Petroleum Production, Refining, and Logistics Capacity” (April 20, 2026). https://www.whitehouse.gov/presidential-actions/2026/04/presidential-determination-pursuant-to-section-303-of-the-defense-production-act-of-1950-as-amended-on-domestic-petroleum-production-refining-and-logistics-capacity/; White House, “Presidential Determination Pursuant to Section 303 of the Defense Production Act of 1950, as Amended, on Development, Manufacturing, and Deployment of Large-Scale Energy and Energy-Related Infrastructure” (April 2026). https://www.whitehouse.gov/presidential-actions/2026/04/presidential-determination-pursuant-to-section-303-of-the-defense-production-act-of-1950-as-amended-on-development-manufacturing-and-deployment-of-large-scale-energy-and-energy-related-inf/; White House, “Securing America’s Defense Supply Chains and Ensuring Domestic Acquisition of Critical Materials” (July 2026). https://www.whitehouse.gov/presidential-actions/2026/07/securing-americas-defense-supply-chains-and-ensuring-domestic-acquisition-of-critical-materials/; Nuclear Regulatory Commission, “NRC Proposes Broad Overhaul of Nuclear Reactor Regulations” (September 11, 2026). https://www.nrc.gov/about-nrc/news-releases/2026/nrc-proposes-broad-overhaul-nuclear-reactor-regulations.

These measures address different policy objectives and should not be understood as a single China-specific program. Collectively, they illustrate efforts to expand or secure domestic capacity across energy and strategically important supply chains.