China’s New Trade Negotiator Is Ready to Play Hardball
He Lifeng, Beijing’s economic gatekeeper, has a clear mandate from Xi Jinping: China won’t be catering to the U.S.
The Wall Street Journal
China’s
Vice Premier He Lifeng extracted a 90-day trade truce from Trump’s team
in negotiations last month, but has since slow-walked approvals of
mineral-export licenses that were critical to the agreement. JULIEN DE ROSA/AFP/GETTY IMAGES
June 2, 2025
In its deepening face-off with the Trump administration, Beijing’s trade negotiator has given a preview of Xi Jinping’s chief objective for this trade war: It won’t be like last time.
In Geneva in mid-May, Vice Premier He Lifeng extracted a 90-day trade truce from a Trump team that had until then declined to pause a tariff blitz on China the way it had for other countries. The deal calmed the nerves of investors and markets around the world.
Now, after both sides have complained that the other wasn’t upholding the terms of the deal, that trade truce is teetering, once again jolting global investors and businesses.
At the center of the storm is He, Xi’s economic gatekeeper, who has made clear China’s strategy in this trade war is nothing like the approach it had in Trump’s first term.
During the Geneva talks, He had removed a final sticking point by agreeing to U.S. demands that China resume rare-earth exports. Yet since then He has dug in his heels, slow-walking approvals of licenses to export the minerals critical in the manufacturing of modern cars and other products.
Beijing blames the U.S. for the breakdown, saying a warning against the use of certain artificial-intelligence chips from China’s Huawei Technologies was a renewal of U.S. aggression, and complained to Washington that it undermined the trade deal. It also took offense at the U.S. plan to aggressively revoke visas for Chinese students.
The U.S. said the Huawei warning was a restatement of a previous policy. Trump has expressed hopes to talk to Xi directly to break the impasse. A call could happen as early as this week, the White House said.
New mandate
During Trump’s first presidency, two years of trade negotiations between Beijing and Washington yielded a deal widely seen as favoring the U.S. At the time, the China team was led by a Harvard-trained, pro-market pragmatist who understood U.S. concerns.
This time, Xi has given He, a firm believer in state control just like his boss, a clear mandate of not catering to America.
Last month’s Geneva deal, which China saw as a win, showed Xi the value of sticking to his guns, according to people who consult with senior Chinese officials.
Xi had started Trump’s second term with a more conciliatory approach. Beijing sent streams of delegations to Washington to try to appeal to Trump’s transactional instincts, only to have that strategy rebuffed by an administration that seemed bent on taking on China.
By early April, Trump had ratcheted up new import duties on Chinese products to a total of 145%. The Trump team also embarked on negotiations with other countries partly aimed at forming a united front to “isolate China,” as described by some Trump advisers.
Beijing shifted into playing hardball. It retaliated with matching intensity on tariffs and added other trade restrictions—the most lethal of all were rare-earth controls.
Strategically, Xi feels empowered to harden his position from Trump’s first term. The arsenal of trade tools China has built under He’s leadership, including export controls of critical materials used to make chips, cars and F-35 jets, gives it the ability to cause the U.S. real pain.
China has also narrowed the technological gap with the West, racing ahead in many strategic sectors such as renewable-energy products, robotics and artificial intelligence. Such progress makes the country less vulnerable to U.S. sanctions than in the past.
By late April, U.S. businesses and investors were making clear they couldn’t afford to wait out a trade war, as sky-high tariffs by both sides threatened to disrupt supply chains and empty store shelves. Having dismissed Beijing’s early outreach for dialogue, Trump sent Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer to Geneva in mid-May for talks with He, their Chinese counterpart.
In a sign China’s approach was working in Xi’s favor, He, who has been described as stern-faced and guarded by American executives who have interacted with him, positively beamed as he spoke of the “constructive” mood of the Geneva talks at a press briefing on the eve of the interim trade deal’s announcement.
“You see their interests in getting reciprocal treatment” from the Geneva talks, said Daniel Bahar, a former assistant U.S. trade representative who was involved in negotiations with Beijing during Trump’s first-term trade war with China. “I would expect China to continue to push for that,” said Bahar, now a managing director at Rock Creek Global Advisors in Washington.
Assertive stance
Xi’s assertive stance might seem counterintuitive, even risky, given much deeper economic malaise at home than during China’s previous trade war with the U.S.
The Chinese economy, weighed down by a property bust, rising debt and falling prices, can ill afford a plunge in exports to the U.S., estimated to represent 3% of China’s gross domestic product. Trump’s tariff barrage in April set off a steep fall in orders from across the Pacific, leading to production halts across the country that threatened job stability for millions of Chinese.
Some government advisers have privately questioned whether it’s in China’s interest to adopt a bare-knuckle approach to the U.S. With China’s economic situation becoming dire, Xi has to prevent it from falling into an abyss. Managing the relationship with the U.S. is key to that. But politically, they also acknowledged, Xi can’t be seen as weak toward a geopolitical archrival.
Tit-for-tat trade retaliation is “never a good choice” from an economic perspective, former Chinese central-bank Gov. Yi Gang said at a forum in Tokyo in December. “But there’s not much policymakers can do about that.”
In Xi’s view, the people who consult with Chinese officials said, China overall is more prepared and self-sufficient than during the trade war the two countries fought in 2018 and 2019. And the Chinese leader has readied a team to take a tougher stance this time.
He, his chief negotiator, doesn’t have the kind of U.S. experience his predecessor had. But what counts more for Xi is that He, pronounced “Huh,” thinks just like his boss.
The two bonded during their time as Communist Party officials in the southeastern port city of Xiamen in the mid-1980s, and share a belief in state planning and control. Since He became vice premier in early 2023, Xi has essentially put him in charge of fortifying China’s economy against the effects of U.S.-led Western tariffs and export controls.
Under He’s guidance, Beijing in early April took aim at the technology and high-end manufacturing sectors in the U.S., requiring export licenses for certain rare-earth magnets used in products such as semiconductors and electric cars. It wasn’t an outright ban but quickly caused the flow of such magnets to the U.S. to dry up as Chinese suppliers had to seek government approval for each overseas shipment.
Such export controls have become a powerful lever for Beijing, and the measure was among the most worrisome aspects of the trade conflict for Western automakers. During the Geneva talks, He agreed to resume allowing such exports during the 90 days but made no promise beyond that, the people said, allowing China to retain leverage over Washington in future trade negotiations.
On the U.S. side, the Trump administration is conducting a series of investigations that could lead to higher tariffs on China, potentially offsetting a recent U.S. court ruling that seeks to block most of Trump’s import levies. Beijing views those actions and the plan to revoke Chinese student visas as part of Trump’s effort to dial up pressure on China for future trade negotiations.
Assisting He in Geneva and in subsequent dialogue with the U.S. is Vice Commerce Minister Li Chenggang, former Chinese envoy to the World Trade Organization. Li has years of experience using global-trading rulebooks to push back against the U.S., and some Americans who have sat opposite him in negotiations call him a tough yet effective negotiator.
Li played an instrumental role in reaching an agreement with the U.S. in 2012 over China’s restrictions on imports of foreign films. The deal to give Hollywood a larger slice of the rapidly growing Chinese box office helped prevent the WTO from authorizing the U.S. to take retaliatory actions against China.
“He’s very creative in getting something of value for China by giving something to the U.S. that doesn’t cost China much,” said Christopher Adams, a former U.S. trade negotiator involved in the motion-picture discussions. “Li’s skills and expertise in international trade can complement He Lifeng,” said Adams, now a senior adviser at Washington law firm Covington & Burling.
‘Century of Humiliation’
Since the Geneva talks, Treasury Secretary Bessent has indicated that Trump’s first term “Phase One” trade agreement with Beijing would be a model for coming negotiations with Beijing.
But that deal, which required China to significantly increase purchases of American goods and services, is an unwelcome model for Xi, according to the people who consult with Chinese officials, because it asked next to nothing of the U.S.
As part of that pact, the U.S. reduced some tariffs but kept 25% levies on half of what China sold to the U.S.—far from Beijing’s goal of having all tariffs eliminated.
Within China, Phase One is seen as the modern-day version of the unequal treaties the country signed during the mid-19th century, part of what China terms its “Century of Humiliation” at the hands of foreign powers. The Chinese chief negotiator who signed Phase One, English-speaking and U.S.-trained Vice Premier Liu He, has fallen into obscurity since his retirement in 2023. China never fulfilled the purchase commitments he negotiated.
Liu had built a reputation in the West as being a reformer. Notably, during Xi’s first years in power about a decade ago, Liu tried to reduce China’s excessive manufacturing capacity. In conversations with visiting American executives during Trump’s first term, when Washington criticized China’s subsidy-heavy industrial policy as protectionist, Liu didn’t push back against the arguments, pointing to the potential waste of credit and other resources such policies had caused.
A preliminary deal Liu negotiated in early 2019 even sought to address the U.S.’s concerns over China’s use of state subsidies that benefited domestic companies at the expense of their foreign competitors. That deal also proposed changes in Chinese laws to prohibit theft of American technology. Xi ended up vetoing the pact, provoking Trump to further escalate the trade war until the Phase One agreement.
The Liu approach is essentially the opposite of what Xi wants this time.
“Liu He was too nice,” said a Chinese official who participated in some of the U.S.-China discussions during Trump’s first presidency. “He Lifeng is different.”
The
U.S. and China had lengthy conversations on trade in Switzerland. WSJ’s
Brian Schwartz reports from Geneva and explains what happened at the
meeting site. Photo: Handout/AFP/Getty images; Cheng Xin/Getty Images
Unlike Liu, He staunchly defends Beijing’s industrial policy and has shown little interest in reining in overproduction. In meetings with Western officials and executives worried about cheap Chinese products flooding global markets, He has consistently said that China’s exports of low-cost quality products are a positive for the world rather than a problem.
He is well aware that China needs to boost domestic consumption, but initiatives he has spearheaded, such as cash subsidies to consumers trading in old appliances, smartphones and equipment for new ones, have had marginal benefits, economists say.
When negotiations with the Trump trade team resume, He is unlikely to go into deeper discussions about how Beijing runs the Chinese economy. His main goal, the people who consult with Chinese officials said, is to make the U.S. tariff rollback forged in Geneva permanent.
To that end, they said, Beijing is expected to dangle to the Trump team some more purchases of American farm, energy and other products and more Chinese manufacturing investments in the U.S.
He and his team will also make a case in the coming negotiations that China should be allowed to buy goods it really needs, such as American chips and other tech products that are now subject to U.S. export controls.
“China’s own bottom line has risen quite a lot since the first trade war,” said Arthur Kroeber, founding partner and head of research at Gavekal Dragonomics. “Any negotiation will require the U.S. to give China something that it wants, not just a list of demands.”
Write to Lingling Wei at Lingling.Wei@wsj.com
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