TOKYO — Since 2013, Chinese leader Xi Jinping has been looking for a strategy to make Asia’s biggest economy great again. Little did he know it would be Donald Trump’s presidency.

Fifteen months ago, as Trump 2.0 got underway, the White House radiated confidence. Trump advisers argued that sweeping tariffs would pressure Beijing to yield, redirecting the gains of a US$53 trillion economic relationship sharply in Washington’s favor.

Trump’s arrival in Beijing this week comes at a moment when, to use his own phrasing, Xi’s China “holds all the cards.”

China’s state-run Global Times goes even further, arguing that the United States is limping into the visit like a “giant with a limp” as the Iran conflict spirals, oil prices surge past US$100 a barrel, tariffs strain relations with US allies, and court rulings chip away at Washington’s leverage abroad.

Chinese media outlets relish noting that it’s Trump who has flown to Beijing in search of a trade deal — not Xi. They argue that Trump needs an agreement far more urgently than China does. At the same time, reopening the Strait of Hormuz may hinge on Xi leveraging China’s influence in Tehran. The leverage Trump once expected to wield over Beijing has become increasingly elusive.

Look no further than US inflation, which jumped 3.8% year-on-year in April, the highest rate in three years. It’s the latest sign of how the US-Israeli attack on Iran is backfiring on Trump’s economy — and slamming his approval numbers.

With the US inflation rate higher than India’s 3.48%, the odds of the Federal Reserve cutting rates this year, as Trump demanded, are essentially zero. But the real economic own goal of the Trump 2.0 era is hastening China’s ascendancy as a trade and innovation power.

Here, there’s the gap between the “old economy’ and the new one being created in real time to consider. Case in point: the fruits of the “Made in China 2025” scheme launched by Xi in 2015 are gaining increasing traction. Look no further than the speed with which Chinese electric vehicle maker BYD has driven past Tesla and shaken up Europe’s auto industry.

Trump’s assault on the Fed’s independence, meanwhile, seems like a ham-handed effort to remake the most globally respected US institution in the People’s Bank of China’s image. It’s putting trust in the dollar at risk just as Washington’s national debt flirts with the US$40 trillion mark. That’s adding momentum to Xi’s gambit to internationalize the yuan.

Since taking the reins, Xi has worked to increase the yuan’s use in global trade and finance. Trump’s exploits since returning to office in January 2025 — the tariffs, the policy chaos, opening the fiscal floodgates, the assault on the Fed, military adventurism from Venezuela to Iran — are eroding trust in US assets.

Now, as Gulf states lose confidence in US protection amid wartime disruptions, Beijing has an opportunity to create a yuan-based settlement architecture after today’s hostilities end. The postwar energy trade could indeed see the emergence of the “petroyuan” of Beijing’s dreams of.

To be sure, such a transition will take time. As Carlos Casanova, economist at Union Bancaire Privee, puts it, “while the direction of travel is clear, broad adoption appears unlikely in the foreseeable future.” Gulf monarchies, he notes, depend on US security guarantees and maintain deep ties to US capital markets.

In order for the yuan to gain real traction as an energy currency, Casanova explains, Beijing must execute a long, difficult agenda built on three pillars: deepen and exploit frictions between the UAE and Saudi Arabia; equip Iran sufficiently to pose a credible challenge to US security guarantees in the region — a destabilizing prospect even for China; and materially advance capital‑account convertibility at home while fostering stronger global demand for yuan‑denominated assets.

“Even under favorable conditions,” Casanova says, “this would likely take decades.”

Still, the Trump 2.0 era doesn’t have to make it so easy for China. In 2025, Trump was rattled by moves by the BRICS — Brazil, Russia, India, China, South Africa — to create an alternative to the dollar. His threat to impose a 100% tariff against BRICS members if they proceed with plans to rival the dollar reminded the globe why it’s grown weary of Washington.

Trump’s policy chaos is also doing the BRICS’ job for it. This week, US Treasury Secretary Scott Bessent is doing his best to bring a sense of swagger into the meetings with Japanese officials in Tokyo. On the surface, Bessent’s discussions are about the weak yen and Trump’s desire to get Tokyo’s help with the Iran war.

Under it, Prime Minister Sanae Takaichi is surely seeking assurances about the safety of the $1.2 trillion in US Treasuries it holds, the largest stockpile held by a foreign government.

News back in the US won’t be comforting for Team Takaichi. Data this week show that US tax receipts and revenues were down 17% year-on-year in April, which is typically a peak collection month. At the same time, nearly 17 months into Trump 2.0 policies — from tariffs to surging inflation — have left households in turmoil.

A recent Gallup poll found nearly half of Americans, 47%, think economic conditions are “poor,” a seven-point increase from March, while fully 73% say things are getting worse. Another recent poll, by Fox News, finds that 70% believe the economy is getting worse, matching a record high hit in 2023.

Part of the problem is that, so far, Trump 2.0 has done little, if anything, to raise America’s competitive game. The blunt instrument of tariffs are more gimmick than recipe to rekindle America’s innovative spirit, strengthen human capital and ensure the dollar and US Treasuries remain the circulatory system of the global economy.

In fact, says Diana Choyleva at Enodo Economics, US efforts to curb China’s technological advancements are having the opposite effect. They are accelerating China’s move upmarket toward self-reliance and innovation.

Artificial intelligence upstart DeepSeek, Huawei and others are offering case studies on how China Inc. is devising workarounds to US controls. Decoupling efforts are incentivizing domestic innovation.

China has even benefited in certain ways from the Trump 2.0 tariffs. For one thing, they’ve cost America friends, particularly staunch US allies Japan, South Korea, Taiwan and governments in Southeast Asia.

Hard feelings between Washington and top Asian democracies could generate greater distrust, increasing China’s appeal. It allowed Xi to claim the moral high ground and appear more wedded to capitalist norms than Trump.

Xi’s party also is still reaping the rewards from Trump 1.0 pulling out of the US-initiated Trans-Pacific Partnership. Trump 2.0 is clinging to a misguided focus on bilateral trade deals rather than on broader efforts to build a bulwark against Chinese dominance.

It’s not like tariffs tamed China’s trade ambitions. China’s trade surplus ended 2025 at an all-time high of US$1.2 trillion. In the meantime, it’s not clear what Trump is doing — or plans to do — to boost US competitiveness.

For a decade-plus, Team Xi has been investing trillions to dominate the future of EVs, renewable energy, aerospace, AI, biotechnology, green infrastructure, and robotics. Team Trump has no stated plan to build economic muscle by raising America’s game in chips, infrastructure, and climate change.

In fact, Trump often seems to be doing the exact opposite. At a moment when China’s BYD is shocking the industry with rapid sales growth and an ultrafast battery-charging system, Trump World is arguing that EVs, solar panels, windmills and geothermal power sources are too woke for America. He’s busy trying to make the catalytic converter great again and championing coal.

To date, Trump has largely relied on tax cuts, fiscal pump priming and demands for lower Fed interest rates to stabilize the economy. The Supreme Court’s recent tariff ruling has some economists even more stressed about a US government debt load racing past the 100% of GDP mark.

“Tariffs had been functioning as a shadow tax that helped fund spending without explicitly raising taxes,” says Mark Malek, chief investment officer at Siebert Financial. “Remove that and the deficit widens, borrowing rises, and historically that is the type of development that leans on the bond market and pressures yields higher.”

With Xi holding the geopolitical cards, he’s unlikely to give Trump the “grand bargain” trade deal he craves. Odds are, Xi’s government will throw Trump a bone or two – purchases of Boeing planes and soybeans, perhaps – and agree to talk more later in 2026.

This is but the first of several “touch points” between the two leaders this year, says Peiqian Liu, economist at Fidelity Investments. There’s the November APEC Summit in Shenzhen, the Group of 20 meeting in Miami in December and a potential reciprocal visit to the US by Xi later this year. Perhaps even before the mid-term Congressional elections.

“Given the array of issues pending discussion, including trade, technology, supply chain controls, and chokepoints — as well as other geopolitical issues such as Taiwan and Iran — we expect the leader-to-leader conversation to be more high-level and broad-based,” Liu says.

In many ways, the situation in Iran makes this summit ill-timed. “It’s awkward that, as the leaders meet, the US Navy is blockading the Strait of Hormuz and intercepting tankers bound for China, Iran’s largest crude buyer,” notes Rush Doshi, an analyst at the Council on Foreign Relations.

“Meanwhile,” Doshi adds, “Beijing is providing political and possibly intelligence support to Tehran and could be seeking to renew flows of drone parts, air defense equipment, and missiles. Neither side is likely to make progress on this issue, but the fact that the summit appears ready to proceed despite this unusual situation is proof both leaders want the optics of stability even if its foundations are shaky.”

To be sure, China’s economy is hardly state-of-the-art. Its property crisis continues to undermine economic confidence and household spending. Local government finances are in tatters, and youth unemployment is dangerously high.

Still, China’s export engine is holding up well despite global headwinds. Overseas shipments expanded by 14.1% year-on-year in April. Exports of passenger cars from China last month surged almost 85% year-on-year.

But the summit will also spotlight how Trump’s plan to stop China’s economic rise in its tracks continues to backfire. And why Trump is coming up empty-handed in his campaign to alter the US-China trade relationship.

After a year defined by rancor and disorder, the simple image of Trump and Xi smiling for the cameras is, in itself, a win for the global economy. Any gesture that cools tensions between the world’s two largest economic powers is an unqualified positive.

But the notion that Trump is about to impose his will on Xi’s China reads less like a serious strategy and more like a political punchline.

Follow William Pesek on X at @WilliamPesek