Mark Wauck: No Surprises Summit–Xi Holds Firm

The scary part:

KJ: I’m still very worried about Elbridge Colby’s pronouncement about nuclear war. He wants to use nukes like like candies. He’s saying that there is a “misalignment” between means and ends. What he means by “ends” is: US domination, US hegemony. What he means by “means” is: conventional war. He wants to fill that “misalignment gap” with the use of tactical nukes. So I think this is a real danger that we’re facing. It’s not just Trump mouthing off. It is deep studied, researched, and promoted policy inside the bowels of the Deep state. And so we are facing existential crisis because of this mindset of the ruling imperial elite that wants to hold on to hegemony by any means necessary. They would rather see the end of the world than the end of their power and privilege.

Trump is totally in a box of his own making. His double crossing and his wars have alienated the world, and the wars on Russia and—especially—Iran have helped to put the US economy in a bind. The midterms are approaching and Trump is plumbing new depths of presidential unpopularity. But if he thought Xi Jinping would give him any excuse for some sort of victory lap, he was sadly deluded. First, it took weeks of begging to get Xi to come at all. Then, days before, China issued a strongly worded statement telling Trump to take his Iran sanctions and shove ‘em. China stop providing military assistance to Iran? You gotta be joking me. Stop buying Iranian oil? Huh? Lift restrictions on rare earths? Ha ha!

To give a flavor for what was really on Trump’s mind—relief from the bind China has Trump in—consider what the WSJ is telling the world today:

The Wall Street Journal reports that China has provided critical military and economic support to Iran amid its ongoing conflict with the United States.

• Military Supplies: Chinese entities sent approximately 1,300 shipments of “dual-use” components, electronics, and chemical compounds to Iran’s Ministry of Defense in the first half of 2026, sustaining its drone and missile programs.
• Intelligence Support: US officials linked high-resolution satellite imagery supplied by Chinese companies to Iran’s July 17 missile strike on a US base in Jordan, which killed three American troops.
• Economic Lifeline: China buys the vast majority of Iran’s oil, using a covert payment network to bypass US sanctions and funnel billions of dollars to Tehran.
• Diplomatic Context: These revelations emerged during Xi Jinping’s visit to Washington, complicating Donald Trump’s efforts to maintain relations with Beijing while confronting China’s aid to Iran.

Confront Xi about aiding Iran? As if Xi cares. Who thinks the Chinese don’t remember our missile attack on their embassy in Belgrade? The decades of threats and insults and weapons shipments to Taiwan? You reap what you sow.

I listened to John Mearsheimer recounting how China’s oil imports went from 12M/bbl/day before the war to 7M during the war—and are now at 9M and rising rapidly. The word is that there’s a lot of Iranian oil leaving the Persian Gulf on Iraqi ships. Trump says Hormuz is open. Well, yeah—it is if you happen to be China.

I’ve done an edited transcript of a smart conversation among Danny Haiphong, KJ Noh, and Ben Norton (h/t Sarah T). It does a good job of laying out the dynamics of the US – China relationship.

Trump’s Summit NIGHTMARE: China & Iran Call His Bluff | Ben Norton & KJ Noh

Danny: China during this summit rejected the US’s orders to shut down Iranian airlines worldwide, essentially calling Trump’s sanctions bluff, even as Trump was showering praise on Xi Jinping. And then on the Iranian side, as Trump was said to be trying to pressure China to reign in Iran, Iran was launching missiles in the strait of Hormuz … the 30-year Treasury has officially reach reached its highest since 2004, 5.44% up from 4.63% on the day of the Iran war. Couple that with the diesel crisis and we have a massive economic crisis on our hands.

So your reactions to the summit KJ and what the US is trying to accomplish here. How do you see Trump and Xi and the US and China?

KJ: China is clearly trying to manage things and keep things stable. There was no real substance to anything that was engaged in. But we know underneath that is this implacable environment of hostility and aggression towards China which has to do with essentially the United States understanding that its role and its position as the unipolar hegemon is seriously undermined to a great extent by its own unforced blunders. Monopoly capitalism carries within itself the seeds of its own destruction, the ugly fruits of which we are now seeing.

The crisis is very deep. These are tectonic changes not simply on a geopolitical level, but on a structural economic level. These are fundamental shifts in the political economy of the world. There is great desperation in the United States. Among the ruling class you know there’s a kind of willful misdirection and closing of the eyes towards all of this but we know that the United States is in deep economic trouble.

[Up until] 2008, 2009, the US sought to absorb China into the global capitalist plantation with the idea that China would be a tenant farmer. China would have no choice. China would either have to accommodate and become part of the capitalist order or it would collapse or the US would get to absorb it. And during that period we saw the WTO accession and the kind of panda hugging for profit that was rife among the capitalist class. But then when the global capitalist financial system imploded on itself, that’s when the United States decided China is not going to collapse of its own accord. It needs a rapid shove down the stairs. That’s when the knives came out and that’s when the US literally drafted a plan of war called air sea battle. Air sea battle derives from air land battle, otherwise known as shock and awe, which is derived from Israeli war doctrine, which is essentially a doctrine of decapitation and rapid deep battle to essentially destroy command and control. The US drafted this in 2009 and a few years later it came out with a political declaration called the Pivot to Asia which was a kind of political cover for this massive militarization all along the first island chain. Then it also came up with what is called the TPP, the Trans-Pacific Partnership, which was the economic arm of this escalation to war with China. So we can see the US – China relationship in three phases. War, hedging, and now we’re back at war.

We have to understand whatever is going on right now really has to do with the fact that the US has hostile intention towards China. There has been a little bit of cooling down because the US is in a difficult spot. It has run out of munitions. It doesn’t have the defense industrial base because all of that was depleted in the wars in West Asia and also in the proxy war in Ukraine. But make no doubt about it, the hostile intention is still very clear. It’s being constantly signaled by the legislature. And if you look at the information war, if you look at the staging, if you look at the preparation of the theater, if you look at the war exercises, it’s very clear that the agenda has not changed. There’s just a little bit of minor recalibration.

Danny: I brought up Trump’s very performative approach to Xi Jinping–the red carpet treatment and all. But there are many crises right now. There’s a bond market crisis, a diesel crisis, a mortgage rate crisis–all of them related to the Iran war, and all of them related to the shifting world order. But your thoughts on the Trump summit, …

Ben: All three of us have been arguing for years now that we’re in a new Cold War–not because Beijing wanted it, but because Washington wanted it. This meeting does not change that. President Trump’s visit to Beijing in May does not change that.

So what is happening? Why is this meeting happening? First of all, it’s important to note that China simply does not have a foreign policy predicated on waging war around the world, upon extracting concessions from other countries through the use of force. China’s foreign policy is not driven by the interests of massive monopolistic corporations, like US foreign policy is. I want to read the guest list to you–the major corporate executives who attended this dinner, who were invited by the White House. Jeff Bezos, founder of Amazon, Tesla CEO Elon Musk, Nvidia CEO Jensen Hang, Meta CEO Mark Zuckerberg, AMD CEO Lisa Su, Apple chair Tim Cook, Google CEO and Alphabet CEO Sunar Pachai, Open AI CEO Sam Alman, Blackstone CEO Steven Schwarzman, Black Rock CEO Larry Frink, and Cityroup CEO Jane Fraser among others. This is a who’s who of the US corporate elite. These are the people whose interests are being represented by the Trump administration and the US government more generally. The Democrats do it in a less direct way. But Trump has taken the mask off. He has filled his administration with billionaires.

All of these corporations have been hurt by the US trade war against China–the trade war that started under Trump’s first term and was continued under Biden’s term and then was massively escalated last year in the first year of Trump’s second term. All these US corporations are entirely dependent on rare earth elements and critical minerals that China absolutely dominates in the global supply chain. These US companies would all go bankrupt if they could not get access to these Chinese critical minerals. And when Trump threatened tariffs of 145% briefly last year, China retaliated with tariffs at the same level—actual reciprocal tariffs. And the Chinese government announced these export restrictions on rare earths and critical minerals, which terrified these US corporations—especially the military-industrial complex, because the US military quite literally cannot operate without these Chinese minerals.

You had these maximalist voices in the first Trump administration represented by people like Mike Pompeo and John Bolton. In the Biden administration, you had China hawks. Certainly Blinken was a China hawk. Certainly Victoria Nuland, You had these people pushing more and more for decoupling. They now recognize that is absolutely impossible. Last year was the last hurrah in an attempt to push for a radical economic decoupling. And we saw how disastrous it was. It totally backfired on the US economy and did much more damage to the US than it did to China. It was a wake-up call for these imperial strategists in Washington and for Wall Street. I think we’re in a temporary ceasefire and then in the upcoming years they’ll get worse. But US imperial strategists had to put a pause on this containment strategy because it was doing more damage to them than it was doing to China. That explains why Trump has suddenly quite literally changed his tone, going from being extremely hawkish on China to now being very conciliatory. But listen to Trump’s rhetoric when he talks about China. A few days ago Trump blamed China for supporting anti- data center protests in the US and he says that it’s all in on AI. We either win AI or we lose the world, and it’s a race with China, is what he said.

KJ: T bills are what? 5.4446 for the 30-year, 5.15 for the 10year, they’re 4.6 to 4.7 for two years, etc. This is a catastrophe. If you add that to the $40 trillion worth of debt, the deficit, if you do a real accounting of it, not a cash accounting, but an accrual accounting, you realize it’s probably closer to 140 trillion. And that is a debt that can never be paid off. The fact that bond yields are soaring is essentially a statement from the rest of the world that they do not have faith in the future of the United States. I don’t think it gets any clearer than that. The United States government is a high risk investment and so the US has to offer higher yields in order to get any kind of liquidity going. But I think the larger question that you point out is the sequencing. Last year when China cut off the supply of rare earth elements, US industry had a near death experience. Car factories were within moments of being completely shuttered. China eased those restrictions but those restrictions still remain on military uses and dual uses. Anything that uses the electromagnetic force in modern society requires the use of rare earth elements–in particular, rare earth rare earth magnets.

China is the beating industrial heart of the global economic system. And if you’re a conjoined twin and you separate yourself, that beating heart goes to the other twin. And that is the thing that the US ruling elite has slowly begun to realize. Will it lead to further deescalation? I don’t think so. They’re still stuck in the ideology of domination, of unipolar hegemony, and they still see China as the enemy to eventually take down by hook or by croak.

Ben: Now you raise another interesting question. The 10-year rate was actually being managed and it was slightly falling up until February. But ever since the US launched this war of aggression against Iran, it has steadily increased by more than 100 basis points, like 125 basis points now. So the the war in Iran is one of the main reasons for this. Obviously, other issues with debt are very real. Following the supply chain disruptions of the pandemic, starting in in 2022 and 2023, what happened is that the US had all this debt, but the US treasuries had very low yields. In some cases, they actually had negative real yields because inflation was higher than the yields. That makes the debt much more manageable. But the debt is now a significant problem.

For the past two administrations, the Biden and the second Trump administration, the Treasury has been issuing a lot of debt on the front end of the yield curve, short-term bills, up to one year. And what that means is that every quarter it has to keep rolling over trillions of dollars of debt at new, higher yields. That means that now the federal government spends more just servicing its debt on interest payments than it spends on the military. And obviously the military budget is already more than a trillion dollars. That’s the official number. It’s probably $1.5T already. And Trump wants to increase it. Again, the US can print that money, but then you have more inflation–and inflation is already a very significant problem in the US. It’s not like the US bond market is going to crash. The US can and will eventually buy back that debt to suppress yields. This is called yield curve control. And there are other ways of doing it, not just quantitative easing, right? There are ways that it could implement yield curve control but, of course, you have other problems every time–it’s like whack-a-mole.

Danny: A question to both of you. Is the Trump administration, the United States as a whole, the empire, is it right now seeking to have China help manage the crisis that [the US has] produced while simultaneously trying to contain China?

Ben: When Trump visited Beijing in May, the US and China produced joint statements in which they used an interesting term called constructive strategic stability. What does that mean? It’s a reference to a term used by international relations scholars. When they say strategic stability, that means that states are in a situation where they recognize that if one state escalates against the other state, it would actually cause more negative repercussions than positive outcomes. So, the US is in this strategic stalemate. They use the term strategic stability. It’s a stalemate. If one side pushes the other side, it could probably backfire and hurt more, especially it would hurt the US more. China probably could escalate, but they’re not interested in escalating. China is governed by a communist party. It’s not governed by corporations like the US. I mean the corporate executives who were at the White House with Trump, those are real oligarchs who rule the United States. Trump is simply their representative. And that’s why US foreign policy is so extremely aggressive, so belligerent, because these US corporations want to dominate the world, but they cannot dominate China. They recognize that China is too strong to be conquered. So they have to change tactics.

Trump is definitely a China hawk. It’s not like he suddenly loves China. But Trump respects power because he’s a bully. I mean, to put it in simple terms. And bullies only pick on weak kids who can’t defend themselves. This is exactly how the US operates. And Israel, they love to bomb women and children in Gaza who can’t defend themselves and have no standing army. They love to bomb people in Iran, although they’re certainly afraid of invading Iran because they know how disastrous that would be. They love to invade Venezuela because they know Venezuela can’t defend itself. But China is on a whole different level. And also Russia, but especially China. The US is the most influential country, but US power is waning in every sphere, economic, technological–it’s still powerful in the media. It’s still very powerful in the international financial system. It’s the most powerful weapon the US has. But China is running laps around the US in so many areas. And Trump has no option but to respect that and eat humble pie. And I think that explains the situation that the US is in. It’s simply a matter of a temporary change in tactics. It’s simply a moment of stability and a strategic pause, a kind of ceasefire, and then we’ll see what happens in the upcoming years.

KJ: China is trying to manage the relationship. And the way that I’ve described it is it sees the United States driving this bus towards the cliff and China’s approach is to gently see if they can let the air out of the tires so that the bus can come to a gentle stop without killing everybody inside. That is to say, the rest of the global economy. There are fundamental risks involved here. The United States does not have this viewpoint of live and let live that China has. It does not believe in win-win. It really does, at the end of the day, believe that it has to dominate China. That the only security can have is through domination. And that’s what it euphemistically refers to as peace through strength. But there’s one last piece I think which is important here which is the AI issue. China wants to offer AI as a public utility, as a public good, as an open-sourced resource that is part of the global intellectual commons. The US wants to use it as the killer app that it wants to use to dominate China, and it is already using it on the battlefield. For example, the Palestinian genocide was facilitated through Lavender and Where’s Daddy? These are US AI apps and the recent attack on the Minab Girl School was also an AI powered attack. And CNN more recently has said that there was almost an AI selected attack on a Chinese ship because they suspected that it was transporting nuclear components. It was completely wrong. It was AI hallucination.

But China has said that it’s important to develop AI responsibly and to manage it for the common good. That is far from what the United States wants. They want an enclosed technological system that they can use to extract wealth, power and to dominate. And I think that ultimately China is going to come out ahead because China is a country which is led by engineers and scientists. The US is led by lawyers. But more than that, China’s approach is not only open-source and openweight but their approach is very practical. They understand that intelligence is something which is embodied, situated and active. That is to say, we understand things because we have bodies. We have bodies that interact and function in the world and we know things by doing things or we learn things by doing things. This is the entire physical AI, the embodied AI that China is developing out in spades. Whereas the US is working purely in large language models towards AGI, which is essentially trying to abstract intelligence from discursive knowledge. That is a dead end. You do not get intelligence from simply knowing a lot of things about things. You understand the world because you do things in the world. By knowing how, not by knowing that. And that’s the direction which China is going in. So if I were placing a bets on AI, certainly I would place them on Chinese AI. The Chinese are trying to find ways to manage the competition and they’re very much aware that the US is preparing AI for mischief and they’re worried that it will get out of hand.

Ben: Let’s not forget that Trump’s a billionaire real estate mogul, right? He is obsessed with his big beautiful ballroom. That’s the thing that really gets Trump moving. He’s waging war on Iran and destabilizing the world and all of this and trying to destroy Cuba. But what motivates Trump is a really good granite. It represents the pitiful state of the decadent US empire. I mean, you see this clown Pete Hegseth running around, like, doing push-ups one minute and then citing the Bible to say we have to wage war against the communists and the Islamists. He literally said that in a speech, like, calling for a holy war. It’s just a clown show over there. Everyone around the world can finally see the true face of the US empire. How everything’s coming apart at the seams.

Economically, people in the United States are really suffering. Most people are barely making ends meet. And what’s really holding the whole situation together with duct tape is this AI bubble that is going to pop. Moody’s Analytics, this major US financial firm, has estimated that 80% of people in the United States live in local economies that are in recession, but only because GDP figures are reported in aggregate for the entire country. It looks like the US economy is growing but that growth is concentrated in a few areas like Silicon Valley, Texas which is building all these data centers and has an oil boom. You have growth concentrated in a few areas largely because of data center construction. When that bubble pops the situation is going to get even more precarious.

Midterm elections are coming up and the situation is so bad that even Fox News acknowledges that most of Trump’s supporters have been alienated by him, not to mention the Epstein scandal and everything, the war in Iran, but just simply out of the economic situation and the high cost of living. Fox News acknowledged that they’re probably not going to vote or may even vote Democrat. Obviously, the Democrats won’t fix the situation either. It is a really desperate situation in the US, which is why scapegoating China has been convenient for so many years. They scapegoated Iran, scapegoated Russia. They’re now scapegoating China. But last year the US administration was forced to eat humble pie. The trade war backfired. US corporations told Trump you need to back off on this. We have so many investments in China. We’re dependent on the supply chain in China. We want access to the Chinese market. We have to back off. We cannot have this maximalist attempt to decouple economically. That’s where we are now. And meanwhile, you know, just politically, it’s just a clown show. For the 350 million people in the US, for the vast majority of them, it is difficult. And there are very real human consequences.

Danny: KJ, your final words.

KJ: I’m still very worried about Elbridge Colby’s pronouncement about nuclear war. He wants to use nukes like like candies. He’s saying that there is a “misalignment” between means and ends. What he means by “ends” is: US domination, US hegemony. What he means by “means” is: conventional war. He wants to fill that “misalignment gap” with the use of tactical nukes. So I think this is a real danger that we’re facing. It’s not just Trump mouthing off. It is deep studied, researched, and promoted policy inside the bowels of the Deep state. And so we are facing existential crisis because of this mindset of the ruling imperial elite that wants to hold on to hegemony by any means necessary. They would rather see the end of the world than the end of their power and privilege.