【Text by Observer Network Columnist Chen Jing】
On October 30, 2025, the leaders of China and the United States met in Busan, South Korea, and reached a trade agreement covering multiple fields including tariffs, export controls, and agricultural procurement. The details of the agreement were reportedly negotiated by the China-US economic and trade negotiation teams on October 25-26 in Malaysia. From the negotiations to the announcement of the details, the entire process was relatively smooth, and the atmosphere seemed better than previous negotiations.
On the surface, this is the U.S. attack on China stalling, with "pausing for a year" still showing some lingering desire to "fight again next year." However, after years of confrontation since 2018, the U.S. strategy has been extremely failed, facing crises in multiple areas, while its biggest competitor has shown an unstoppable momentum. Now, the U.S. faces a very dangerous situation, where its hegemony could be lost at any moment.
The U.S. Attack Stalls
Before the Busan meeting, Trump even played the "G2 concept," saying some warm words to China, and after the meeting, he claimed that Sino-U.S. relations had never been so good. After the U.S. Defense Secretary Hagel met with Chinese Defense Minister Dong Jun, on November 2, he also posted a message echoing Trump's "G2" rhetoric.
But just over ten days ago, after the National Day holiday, on October 9 and 10, China announced countermeasures such as charging fees for U.S.-linked vessels and "long-arm jurisdiction" over rare earths, and the atmosphere was tense. This was the most severe economic and trade retaliation the U.S. had faced in years. Although China's retaliation was justified, as the global hegemon, the U.S. would face serious embarrassment if it couldn't respond, which was a very serious matter.
U.S. Treasury Secretary Bensons clearly broke down, unable to cope, only resorting to extreme threats like "100% tariffs" and "expelling 300,000 Chinese students in the U.S.", revealing inner panic. Bensons also personally attacked Chinese negotiators, urging India and the EU, who were threatened by the U.S., to join in opposing China's rare earth control. A series of actions were truly "angry, incoherent, and losing all dignity." During the photo session with Chinese representatives in Malaysia, Bensons' body language was as stiff as a robot.
It can be judged that the U.S. really had no more tricks left and had to make substantial concessions to China. This was not a "compromise" where they first made unreasonable demands, then bargained and withdrew slightly, ultimately gaining significant advantages. Practice has proven that Trump's usual "maximum pressure" tactics have been ineffective against China. This time, the U.S. actually had to compromise in a very embarrassing way, and from a posture standpoint, it had to be on equal terms with China. Many American elites have psychologically accepted that China is a peer competitor, which is a historic breakthrough.
The incident was triggered by the U.S. Department of Commerce's "50% ownership rule" published on September 29, i.e., "equity penetration," which affected subsidiaries of Chinese companies on the entity list, leading to the Anshide Semiconductor incident, which caused chaos in the global semiconductor and automotive industries. The U.S. "301 investigation" measures targeting China's maritime, logistics, and shipbuilding industries began charging on October 14, which were also extremely hostile acts. These two unreasonable attacks were both swallowed back by the U.S., although they said "pausing for a year," reserving the possibility of reappearing to save face, but in essence, they were firmly beaten back.
Looking back, there were two strange actions by the U.S. Although not publicly stated, Commerce Secretary Rutenberg should be responsible. After the talks in Madrid between China and the U.S. on September 14-15 regarding the TikTok issue, progress was made and it was agreed not to escalate the confrontation, but the U.S. still issued excessive sanctions, causing a sudden deterioration in the situation. Trump angrily accused him of triggering Chinese retaliation, and Rutenberg may have acted without reporting, and did not appear in the negotiation team this time.
The U.S. also promoted the "G2 peace" wind, which reminded people of India's grand victory celebration after its defeat in the India-Pakistan air battle. Although India's celebration seemed absurd, it was effective domestically, stabilizing the propaganda situation. Trump's sudden peace promotion and friendly gestures were indeed effective, and one might forget the tense situation between the two countries in mid-October, as well as the fact that it was a major defeat for the U.S. due to its reckless attack.
The U.S. also canceled the 10% fentanyl tariff, continuing to suspend the 24% tariff for another year. Before April, China had been hit twice with a 10% fentanyl tariff each. On Trump's "Liberation Day" action on April 2, there was a 10% base tariff worldwide and a 24% "reciprocal tariff" specifically targeting China. After several rounds of negotiations, now only a 10% fentanyl tariff remains, along with a 10% base tariff. However, China is different from other countries, as it had already been hit with about 19% actual effective tariffs during Trump's first term, and Biden's administration did not cancel them either.
Subsequent negotiations between China and the U.S. on fentanyl control will continue, and possibly the remaining 10% will also be canceled. The U.S. also needs China to purchase soybeans, oil, and natural gas energy products. In August, China's exports to the U.S. accounted for less than 10% of total exports. China has prepared for years for economic decoupling and has no psychological fear, and can cope with any degree of decoupling; however, the U.S. internal consensus is that long-term direction is decoupling, but "short-term decoupling too fast is unbearable," and it's hard to say about the long-term.
China has a global market to develop, and there are many countries with rapidly growing exports outside the U.S., not as transit stations sending goods to the U.S. The U.S. lacks China's development capabilities, helping partner countries overcome business difficulties, export credit, infrastructure cooperation, and previously exaggerated global infrastructure plans like BBB have already failed. In various resource commodities, China is the second largest buyer, ten times larger than others, and there is no other buyer who can take over if China doesn't buy soybeans.
Even in high-end chips and other high-tech products, the U.S. is in a dilemma, not selling will lose the market, and selling or not selling may help China's industrial development. China's 14th Five-Year Plan has determined to "improve the new national system, take unconventional measures, and achieve decisive breakthroughs in key core technologies in key areas such as integrated circuits, machine tools, high-end instruments, basic software, advanced materials, and biomanufacturing." It is just a matter of time before China no longer relies on the Western technological industry chain. Some U.S. thinking has shifted to selling secondary products to slow down China's independent technological development, such as lifting the H20 ban, but China is unwilling to accept it.
Compared to the situation in the 2018 China-U.S. trade war and the passive situation in 2022 when China was targeted by the Chip Act, China now has strong confidence and can confidently gain the upper hand. The U.S. has fewer cards to play against China.
In short, on the short-term trade war and tariff war front, the U.S. attack has stalled; and in the medium-to-long-term industrial decoupling front, due to China's effective response and good progress, the U.S. attack has also stalled, and it is impossible to achieve the so-called "suppressing China's rise" results.
If the U.S. had not launched a sudden attack, China's high-tech industry probably would not have achieved the current brilliant achievements, and the market power would be incomparable, with multiple fields still dominated by Western products, and domestic substitution would be difficult to promote. Recently, China has continuously achieved major global technological breakthroughs, and the progress in the military field is nothing short of a dream, making it hard to imagine a better situation.
I believe that the current situation is very favorable for us, but very dangerous for the U.S. After years of confrontation, the U.S. has lost many advantages in various fields, and the strategic losses are huge, which are difficult to calculate, and it is currently just maintaining the appearance.
American Strategic Losses
When I say the U.S. has strategic losses, it is not referring to the tactical mistakes caused by the unauthorized actions of Lutnick, but rather the losses accumulated over years since Trump launched the trade war against China in 2018, which are astonishing when compared to the past.
I wrote a series of articles in 2019 studying the U.S. debt crisis. At that time, the U.S. debt had a bad trend, but the balance was only 21 trillion dollars, with annual interest of around 30 billion dollars. Now, the latest number is 38 trillion dollars. The U.S. debt interest is expected to reach 1.3 trillion dollars in 2025, greatly exceeding the military spending, with exponential growth heading toward 2 trillion dollars, approaching the largest social security expenditure. What does this mean? Anyone with a brain knows. The U.S. debt is long-term unreliable, and the daily "borrowing new to repay old" operation has shifted to short-term debt, with the market believing that the short-term risk of U.S. debt is not yet explosive, thus maintaining the situation. Many countries have become wary of U.S. debt, with the share of foreign-held U.S. debt dropping from a third to a fifth.
The U.S. debt crisis does not need to be publicized, as the U.S. internal has already acknowledged it as a major problem. Musk started in early 2024 to lead DOGE to cut U.S. government spending, trying to struggle, but quickly failed. Now the U.S. claims to compensate for the government deficit through tariffs, but it is impossible to save the situation. Trump doesn't care anymore, as it's only four years, and on July 4, he signed the "Big Beautiful Act," raising the debt ceiling to 5 trillion, allowing the total debt to exceed 41 trillion. The U.S. is preparing to rely on issuing bonds to get through.
The U.S. debt crisis has led to a severe loss of dollar credibility. Gold surged in 2024 and then increased by more than 50% in 2025, which is abnormal given that the Fed's interest rates are not low. This indicates that the U.S. debt crisis has spread to the dollar crisis, and the high P/E ratio of the U.S. stock market is also because the dollar is not trusted. Institutions holding dollars have considerable pressure and cannot be considered "safe assets" anymore. Their status is incomparable to gold, and the term "U.S. dollars" is just a historical habit.
Based on my pessimism about U.S. debt and the dollar, I started to be optimistic about gold below 2,000 dollars, expecting 7,000-8,000 dollars by 2027-28. What seemed like an exaggeration at the time is now normal, and there are already institutions predicting over 10,000 dollars, 6,000 dollars in spring 2026.
Dollar credibility is the foundation of the U.S. financial hegemony. Compared to 2018, the U.S. dollar's reputation is worse than ever, and it can be said that it has lost long-term value. Although the dollar exchange rate is still maintained, through comparison of U.S. and Chinese living standards, the U.S. dollar's high value is obvious.
In the international context, the U.S. controls international currency transactions through SWIFT channels, with the latest U.S. share being about 47%, which seems good. The share of the yuan has dropped from a high of 4.74% in July 2024 to 2.93% in August 2025, indicating that the "internationalization" progress seems poor. But this is because the yuan actively disengaged from SWIFT, "no longer playing with the U.S.," and instead used its own CIPS to support international trade and financial transactions. From 2020 to 2024, the processing amount was 45, 80, 97, 123, and 175 trillion yuan, respectively, and in the first half of 2025, it reached 90.19 trillion yuan, with a year-on-year increase of about 42%.
In 2022, the U.S. and Europe expelled Russia from SWIFT, causing inconvenience for Russian foreign trade, but it did not result in a fatal blow. Practical experience shows that bilateral transactions still have ways. China has actively prepared for financial decoupling, with CIPS business covering 189 countries and regions, and even the yuan's share in SWIFT has started to decline. It can be confirmed that if the U.S. launches similar financial sanctions against China, it will only harm itself, and it will also make China no longer hesitate, rapidly building a platform based on strong trade strength to promote self-controlled and controllable yuan internationalization. Previously considered a major threat, SWIFT sanctions are rarely mentioned by the U.S. now, and the U.S. financial hegemony authority is much weaker than before.
The U.S. nominal GDP has explosively increased due to excessive money supply and inflation, with high prices in medical and legal services contributing to growth, but it is useless in confronting China, instead showing weakness. China has intentionally kept its nominal GDP low, carefully managing the appreciation of the yuan and not rushing, even giving high prices to IMF to prevent it from going too far. The U.S. itself has many reflections, recognizing that China's productivity is extremely impressive, and the U.S. has significantly lagged behind in multiple areas, realizing the strength of China's "hiding its light." The difference in "hard power" growth between China and the U.S. since 2018 is enormous, and "the East rises, the West falls" is very obvious.
Entering 2025, China took decisive action, starting in April to fully retaliate against the U.S. In the past six months, several rounds of confrontation have shown China's firm determination to fight and the confidence to speak with strength, completely extinguishing the U.S. arrogance and achieving a glorious victory in the confrontation with the U.S.
The victory in the struggle is closely related to China's control over the "periodic table of elements" in production. In July 2023, China implemented export controls on gallium and germanium, and I summarized China's share and position in the production of various metals and rare elements, stating that China's advantages go far beyond the 17 rare earth elements that have caused panic among the Western bloc and left them helpless.
In the 2024 and 2025 batches of the "Dual-Use Items Export Control List" and the "List of Goods under Export License Management," China included 21 elements (and related products) in the export control list: tungsten, tellurium, bismuth, molybdenum, indium, samarium, gadolinium, terbium, dysprosium, lutetium, scandium, yttrium, gallium, germanium, antimony, graphite, niobium, tantalum, beryllium, cobalt, nickel. Among these, only seven are medium to heavy rare earth elements, and there are also rare refractory metals, rare dispersed metals, rare light metals, and other categories of heavy non-ferrous metals.
The U.S. only recently realized that rare earths are just a technical issue, and theoretically, there is a chance to overcome it, although it will take a long time. Gallium and indium, as by-products of China's large refining capacity for aluminum and copper, require astronomical investment for the U.S. to produce, and considering energy and other supporting factors, it is actually more impractical.
The U.S. needs to coordinate with the Western alliance to deal with the impact, but allies are unwilling to contribute, and progress in multiple areas is poor. G7 no longer has the ability to decide the world economy. The U.S. industrial strength "still strong" is an illusion, with clear signs of manufacturing decline. The U.S. Bureau of Statistics has used many statistical tricks to maintain numbers, and internal exposés have emerged. China can withstand G7 solely with its own strength, and multiple industries are dominant globally.
In this situation, the U.S. still wants to start a trade war globally, bullying the world, which is a path to death. Trump is just putting on a show, bullying weak countries, but getting beaten by China. Many countries are turning to cooperate with China, and if they had any hesitation before, they should now know China's strength. Trump's "die-hard fan" Millie unexpectedly won in the Argentine mid-term election with U.S. support, but is also actively developing economic and trade relations with China, changing his attitude.
The U.S. intention was to unite allies to decouple and isolate China, but it seems impossible now. I believe the situation is contrary to the U.S. intention, and the world may move towards a new globalization road centered on China. Countries will actively reduce risks and avoid the U.S., at least not blindly betting on the U.S. winning. Countries actively developing economic alliances with China are widespread globally, and in a sense, they are preparing for a major international shift. Despite the retreat of globalization due to the introduction of sovereignty factors by the U.S. and the West, global trade has not shrunk, but continued to grow, with China as an important driving force. China's exports have become the economic foundation for more and more countries, and even the most hostile countries like India have deeply recognized the importance of China's powerful manufacturing for their own country.
Financial, trade, and industrial strength, the U.S. is showing signs of defeat, but none compare to the shocking reversal of military strength between China and the U.S. Until the 2025 India-Pakistan air battle, sixth-generation aircraft, the 9.3 parade, and the Fujian carrier electromagnetic catapult, I finally confirmed the strength of China's military. The U.S. global military hegemony is actually facing a gradual loss.
On October 28, Trump announced that the U.S. military would abandon electromagnetic catapults and switch back to steam catapults; while China successfully launched J35 using the Fujian carrier's electromagnetic catapult, marking the first time an electric catapult stealth fighter was launched. The technical reasons are clear, the U.S. electromagnetic catapult relies on outdated flywheel energy storage systems, with too high failure rates, and has completely failed; while China uses super capacitor energy storage mainly, releasing 35 MJ of energy within 2 seconds to drive the linear motor to launch the aircraft, combined with flywheel energy storage systems for energy recovery, enhancing the system's continuous operation capability, with a scientific design and practical application leading the U.S. by two generations.
This landmark event indicates that the U.S. military-industrial system is on the brink of decline, and the reason is the decline of manufacturing and talent. In contrast, China's military industry is experiencing a strong upward trend. For years, the secrecy has been so tight that military fans have no way to obtain information, making it difficult for even insiders to imagine how far the development has gone. The twin-seat J20 paired with stealth drones has incredible combat power, plus the world's strongest radar system and air-to-air missiles with a range exceeding PL-15E, China's air force has entered the top tier of the world. Even a few Western military experts who understand the situation have changed their attitude in 2025, anxiously believing that the U.S. has been surpassed.
This year marks the 80th anniversary of Taiwan's liberation, and China has held a high-profile commemoration, demonstrating that the capability to realize national reunification is already in place. The China-U.S. trade war shows that U.S. sanctions are not scary, and we have accumulated considerable experience in dealing with economic decoupling. Militarily, the growth of China's strength has made the U.S. no longer prepare to confront directly, but instead retreat to the western hemisphere. The risk of fighting China is too great, and previously, the U.S. media said that a "bloody victory" would cost too much, but now it is afraid of being defeated, and there have been many articles suggesting "abandoning Taiwan," which is just a matter of time. This time, the U.S. and China did not comment on the Taiwan issue, which is somewhat meaningful.
In the direction of China-U.S. science and technology and economic competition, artificial intelligence has become the U.S.'s only hope. It is confirmed that the scale of the AI bubble is already very large, but the U.S. mainstream opinion believes it is benign and continues to hype it. However, unlike previous bubbles, the collapse of the U.S. stock market and investment bubble will not affect its global hegemonic status; now, the stock market bubble has become an economic pillar, and once it collapses, the consequences will be unimaginable. The U.S. needs to rely on the bubble to maintain its hegemonic image, which is a strategic step back.
Bad signs for the U.S. are that China's multiple high-level large models, such as DeepSeek, QWEN, Kimi K2, etc., have already taken the lead in the global open-source AI community, becoming the first choice for many countries, even American entrepreneurs. The U.S. closed-source vs. China's open-source, performance gap is not拉开, and the cost disadvantage is significant. Large models have been out for three years, and how to make money is still unclear.
Now, the U.S. still has some global advantages, such as SpaceX's rocket manufacturing and launch business, which is a rare manufacturing achievement. The U.S.'s most reliable advantage is still IT, internet, and chip design sectors, with multiple global big companies whose revenues are still growing. However, these big companies need to consume cash reserves, even resort to various means to raise funds, invest in GPUs and data centers, gamble on artificial intelligence, and in 2025, independently support U.S. economic growth.
Compared to 2018, the U.S. has experienced surprising declines in multiple areas of hegemony, while China has strongly risen, almost equal in standing. Since 2008, there has been the "G2" concept, and China did not accept it, as the strength difference was significant. Now, the "G2" rhetoric has strangely resurfaced, and China's strength is certainly no problem; the U.S. repeatedly scolds its allies, and in words and deeds, it only respects China's strength; after several rounds of confrontation, it must have a deep understanding, and has some respect, with "China is strong" and "peace" U.S. public opinion articles emerging like mushrooms.
The U.S. wants to ease tensions with China, then plunder other weak countries, even tally up hundreds of billions or even trillions of dollars in plunder. MAGA's revival of U.S. manufacturing and other basic strengths. This is just a fantasy, and the U.S. faces a very dangerous situation, with U.S. debt, dollar, capital markets, tech bubbles, price inflation, and geopolitical issues all full of risks, ready to trigger crises at any moment. The U.S. has lost the capital to demand.
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