Trade War

Newsletter 291 - Feb. 8, 2026

Welcome to the 291st edition of Trade War.

Trump and Xi discuss trade in soybeans, oil and gas, and aircraft engines in phone call. Xi says Taiwan top issue in China-US relations and warns Trump to use “prudence” in arms sales to Taipei. And President Lai Ching-te calls Taiwan-US relations “rock solid.”

Taiwan’s opposition parties block special defense spending upsetting American lawmakers. And Chinese GDP could be downgraded after over a dozen provinces revise their growth downwards.

White House launches $12 billion minerals stockpile and holds Critical Minerals Ministerial in Washington. China says it will explore mining space for rare earths. And is US-China decoupling really happening?

Notable/In depth ~

• Purge of China’s top general “a Shakespearean moment in Chinese politics”

• US should “seek to leapfrog China’s dominance”

• Countries that trade with both caught in US-China competition

Xi-Trump call on trade and Taiwan

Remember last October in South Korea, when Trump and Xi met and had their breakthrough meeting on trade and tariffs, and everyone noted the fact that Xi Jinping did not bring up Taiwan to the U.S president?

Well, that was never going to last.

During the leaders’ almost two-hour-long call on Wednesday, Xi made it very clear to Trump that Taiwan is the top issue in China-U.S. relations, and that China would never allow Taiwan to “be separated.”

As Chinese government officials have repeatedly put it, Taiwan’s future should be “purely China's internal affair.”

Handle arms sales with “prudence”

Xi cautioned Trump that the U.S. must handle arms sales to Taiwan with “prudence.”

“It is always right to do a good thing, however small, and always wrong to do a bad thing, however small,” Xi said, noting that China and the U.S. “should make progress step by step to build mutual trust.”

Beijing is feeling confident enough about the U.S.-China relationship and about their leverage over Washington (critical minerals), that they are ready to be, once again, very direct on what they consider their biggest concern: ensuring that the U.S.—and no other country—has a voice in the future of Taiwan.

Meanwhile, Taiwan’s President Lai Ching-te responded by saying to reporters in Taipei, that Taiwan-U.S. relations are “rock solid.”

Trump says call was “excellent,” “long and thorough”

Trump, for his part, made it clear that he intends to keep the relationship on an even keel, at least until he visits Beijing in April. He described the call as “excellent” and “long and thorough.”

25 million tons of Soybeans

Some of the specifics we heard from Trump: soybeans. He said that China will purchase 20 million tons this year and has agreed to purchase 25 million tons next season.

Of course, soybeans are important to Trump because states that produce soybeans are usually reliably red and Trump-supporting. But that might start to change if their all-important sales to China start to suffer again, caught up in the U.S.-China trade war.

Trump also mentioned China’s purchases of oil and gas as well as airplane engine deliveries. He said that he and Xi discussed the situation in Iran and the Ukrainian war. And he said that China’s leader is planning a trip to the U.S. late this year after his to Beijing.

“The relationship with China, and my personal relationship with President Xi, is an extremely good one, and we both realize how important it is to keep it that way,” Trump said, adding the talks were “all very positive!”

“Unfailingly shows respect to Xi”

As Ryan Hass, a former director for China and Taiwan and Mongolia at the National Security Council now at the Brookings Institution, put it Trump “unfailingly shows respect to Xi” and “acknowledges [the] importance” of the U.S.-China relationship.

Arms sales threaten state visit

Beijing has warned Washington that planned weapons sales to Taiwan could derail Trump’s planned April visit to China.