The recent China-US tech truce, marked by photo opportunities between Donald Trump and Xi Jinping, hides deeper supply chain conflicts ahead. China continues shipping rare-earth magnets to the US, while Washington delays restrictions on Chinese chipmakers, but both sides are preparing for future escalation through new regulations and export controls.

Behind the scenes, Beijing unveiled sweeping regulations targeting foreign companies complying with third-party sanctions, a tool to pressure multinationals. Meanwhile, Congress is pushing the US toward tougher export controls, including bills to restrict AI chip sales to China and close loopholes in chipmaking equipment exports. Both nations appear to view the truce as a strategic pause rather than peace.

While the US bets on AI's transformative potential—evidenced by a $9 billion order for intelligence agencies—the House Foreign Affairs Committee advances export control legislation. China, however, prioritizes advanced manufacturing, holding a dominant position in global supply chains according to the US Chamber of Commerce. Beijing's recent restrictions on rare-earth exports and semiconductor manufacturer Nexperia demonstrated its ability to disrupt European production, signaling a different approach than Silicon Valley's AGI-focused strategy.

The fundamental divide is clear: China is winning the advanced manufacturing race in batteries and autos, while the US struggles to de-risk supply chains. With Washington's critical minerals projects years from realization and industrial production still reliant on Chinese components, time appears to favor Beijing's industrial strategy over America's AI ambitions.