How to Win a Summit: China’s Economic and Commercial Leverage

In this episode of Pekingology, host Henrietta Levin and guest Dr. Phil Luck unpack the economic and commercial dynamics of the upcoming U.S.-China summit in Beijing, contextualizing it within broader trade tensions, tariff shifts, and strategic leverage. The conversation centers on the U.S. administration's focus on small, tactical wins—such as soybean purchase agreements and modest tariff adjustments—rather than structural reforms. Luck argues that while both sides appear to be seeking continuity and normalization, the underlying issue of China’s non-market policies remains unaddressed, undermining long-term trade fairness. The episode also explores China’s sophisticated use of economic coercion, from agricultural trade manipulation to rare earth export controls, and how the U.S. is increasingly reliant on long-term investments to counter strategic dependencies. The ongoing closure of the Strait of Hormuz adds a layer of global economic uncertainty, increasing the stakes for both nations. Despite high expectations, Luck predicts a 'kick the can down the road' outcome with minimal concrete deliverables. Key takeaways include: 1) The U.S. is prioritizing short-term, symbolic wins over structural change in trade; 2) China benefits from a stable, low-differential tariff environment that protects its export advantage; 3) Rare earth controls and export licensing remain central but are currently frozen; 4) The U.S. lacks appetite for escalating trade pressure, favoring long-term strategic investments over immediate confrontation; 5) China’s economic coercion tools are increasingly sophisticated and U.S.-inspired, reflecting a shift in global power dynamics; 6) The Iran Strait crisis amplifies global economic risks, indirectly affecting U.S.-China negotiations; 7) Investment from China into the U.S. remains politically and economically unlikely due to security concerns and limited sectoral access; 8) Both sides have strong incentives to avoid escalation, making incremental stability the likely outcome.