US and China signal a fragile truce on chips and supply chains

In short: The US and China are keeping a temporary pause in some tech fights, but both sides are preparing new moves that could restart supply chain conflict.

What's going on

US President Donald Trump and China’s leader Xi Jinping recently met and presented a calm message in public. After the meeting, China continued shipping some rare-earth magnets to the US. Rare earths are special metals used in products like electric motors and many electronics.

The US, meanwhile, is postponing some planned limits on Chinese chipmakers. Chips are the small parts that make computers and phones work (like the “brains” inside devices). But behind the scenes, both governments are getting ready for a tougher phase.

China has announced new rules that could punish foreign companies if they follow sanctions from other countries. Sanctions are government bans that restrict trade, like telling companies who they are not allowed to sell to. The idea is to pressure big global companies to choose China’s side if tensions rise.

In the US, members of Congress are pushing new bills to tighten export controls, which are rules that limit what companies can sell abroad. Some proposals target chipmaking equipment, and others aim to reduce sales of AI chips to China. AI chips are specialized chips used to run and train AI systems.

What to watch

Both countries appear to see this “truce” as a way to buy time. China is focused on building more industrial capacity, like batteries and cars, while the US is betting that faster progress in AI will strengthen its position. If new laws and restrictions move forward on either side, companies that rely on global parts and materials could face higher costs, delays, and more uncertainty.

Source: Financial Times