Name: The CCP’s Gloves Are Off in Trade War—What’s Next? | Lee Smith
Uploaded: 2025-11-04T17:29:13.000Z
Description: The Chinese Communist Party (CCP) recently imposed unprecedented export controls on rare earths, escalating the U.S.–China trade war.

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[RUSH TRANSCRIPT BELOW] The Chinese Communist Party (CCP) recently imposed unprecedented export controls on rare earths, escalating the U.S.–China trade war.

How is it that the Chinese regime managed to gain control of many of the most essential supply chains, from critical minerals to pharmaceuticals? How should the Trump administration approach this threat to national security?

In this episode, we sit down with Lee Smith, author of “The Plot Against the President,” and the soon-to-be-released book, <a href="https://www.amazon.com/China-Matrix-Donald-Shattered-Deadly/dp/1546008403/" target="_blank" rel="nofollow noopener">“The China Matrix: The Epic Story of How Donald Trump Shattered a Deadly Pact.”</a>

“It was simply American corruption that has allowed all of this to happen. And that’s certainly the point that [U.S. President] Donald Trump makes in the book,” Smith says.

What is Trump’s strategy when it comes to China? How does he actually view Chinese leader Xi Jinping?

Views expressed in this video are opinions of the host and the guest, and do not necessarily reflect the views of NTD.

Editor’s Note: Lee Smith previously hosted the EpochTV program “Words That Matter.”

RUSH TRANSCRIPT
Jan Jekielek:

Lee Smith, so good to have you back on American Thought Leaders.

Jan, it’s always a huge pleasure to be back with you on American Thought Leaders and to speak with you, my dear friend.

You have written a book for the ages, my friend, The China Matrix. Recently, something happened that I describe as communist China taking off its gloves, and that is these very, very detailed international rare earth export restrictions. Why don’t you lay out what you think happened here?

Yes. Well, this was in particular a response to the Trump administration’s Commerce Department listing a number of different Chinese entities. As it turns out, these entities had access to U.S. technology, which they bought, and they passed it on to the Iranians. The Iranians passed it on to their proxies, Hamas and the Houthis. In fact, it was found that it was used in the October 7th, 2023 massacre. So what the Trump administration is trying to do is protect U.S. national security from adversarial regimes. The Chinese are trying to help adversaries, or they are helping adversaries of the United States.

So Donald Trump, the Trump administration, came down and said that this is bad. We’re not going to let you do this anymore. We’re going to sharply restrict your ability to do this. The Chinese said, oh, really? How about if we go nuclear and give you no access to rare earth without having to go through an arduous process? So that’s what happened. Jan, the way you put it is accurate. It’s like they’ve taken off their velvet glove and shown what they really are.

The argument in my book here, The China Matrix, is that the velvet glove was stitched here in the United States over the course of the last half-century. As you’ve been saying here, as your colleagues at Epoch Times have been saying for years, let’s remember it’s a communist party. That’s what the regime is.

It’s a brutal regime. It’s brutal to the Chinese inside of China, outside of China, and it’s brutal to all of its adversaries, including the United States and our allies. It’s really Americans who have corporate as well as political elites. This is the subject of the book, who have protected the Chinese Communist Party regime and who have advanced this regime, making it the threat it really is today.

Well, we were founded back in 2000 to actually explain the reality of communist China to Americans, I mean, people all over the world. In fact, it’s actually been an incredibly difficult thing to do because, in the end, it’s not that complicated. As you said, it’s a communist regime. Human life is not at the top of the list of priorities for any Communist Party, especially the Chinese Communist Party, nor win-win relationships with other nations. But how did we even get to this point where the Chinese Communist Party holds control over such a significant portion of the supply chain? We can use rare earths or critical minerals as an example.

What they did was they can underbid almost anyone. This is what they did in the pharmaceutical industry. You’ll remember after COVID, people were deeply concerned to realize, like, oh, wow, penicillin and everything else is made in Wuhan. Almost all of our pharmaceuticals come from the People’s Republic of China. What will we do? What can we do?

The way they did this was with steel. They’ve done it with a number of what people call strategic industries. What people mean by strategic industries is if you need steel, for instance, to build ships and you need it to build a whole bunch of other different munitions. If you don’t make your own steel, then you’re dependent on what is right now your number one adversary. I mean, there are other countries around the world that make steel, but China is a major producer at this point. We’re talking about the same thing in terms of pharmaceuticals.

Imagine if we really wound up in a hot conflict with the Chinese Communist Party. What happens when different American soldiers, Marines, airmen, sailors are wounded and they need medication? Well, that’s coming from China. But the Chinese had a plan for that, and that’s what they did. There were no measures or few measures to protect American industries. People just figured, well, what are we going to do? We can’t compete with them. We’ll have to do something else.

This is part of what we saw in the 90s when it was the whole idea like, well, we don’t need to do manufacturing anymore. We’ll become a service economy. A lot of people made fun of it at the time, and a lot of other people thought it was a stroke of genius. It wasn’t just the Clinton administration; there were a lot of Republicans as well. That’s the story the book tells. It’s not just Democrats here; it’s Republicans.

Remember, this relationship started with Richard M. Nixon and Henry Kissinger, who first went to the city once called Peking in February 1972. Some of it, at a certain point, was honest miscalculation. At a certain point, there was no way to rationalize it or excuse it anymore. It was simply American corruption that allowed all of this to happen. That’s certainly the point that Donald Trump makes in the book. I interviewed Donald Trump at great length in this book. He has the first word and the last word in the book.

How could the Chinese Communist Party dominate the market so thoroughly with steel? Can you walk me through that process?

Well, I have a couple of people that talk about it, including a former steel executive named Dan DiMicco, who’s a really big fan of Donald Trump. What happened was that the Chinese just dumped it on the market. It’s subsidized, right? It’s subsidized by the party. So they can afford basically to underbid anyone they want. This is a huge problem for the United States around the world that they can underbid us because it’s subsidized. It happened with steel. It happened with pharmaceuticals.

I quote Mr. DiMicco in this story. He says that the United States wasn’t the top manufacturer of steel, but we were way up there. The Chinese were way down. I think Japan was on top. The Chinese just decided they were going to target the steel industry. They started producing steel, overproducing steel, and they started dumping it on markets, which greatly damaged our steel industry. They do that up and down the board. This is something that they do. This is not really the fault of American executives.

But it is the fault of American political officials who should have been looking at this for a long time and saying, what are we going to do when we can’t make our own ships? What are we going to do when we can’t make our own munitions? Again, Dan DiMicco says that we have very limited smelting facilities. This is a huge deal.

But Donald Trump is the first man who was elected president who talked about China. He’s been talking about the problems with China dating back at least to the year 2000. One thing I wanted to spell out is that this dumping, the subsidizing you described, that’s an effect of state-level industrial policy. There’s no independent steel industry in communist China. No, it’s a function of national security policy.

Something you talk about in the book, which is incredibly important, which I talk about quite a bit, but I’d like you to talk about a bit to start, is this idea of unrestricted warfare, of using any means as a means of warfare outside of actual kinetic warfare.

General Spalding, who I believe you’ve spoken with, wrote an excellent book on this. He went back and looked at these two Chinese colonels who said that the United States pulled off an astonishing victory in Operation Desert Storm, but there’s never going to be another war like that. We’re going to make sure there’s never going to be another war like that. So we’ll just use every other means to make war against the United States.

If you look at the different things that have gone on since the 1990s, whether we’re talking about China’s entry into the World Trade Organization, whether we’re talking about its position in the World Health Organization, or whether we’re talking about, as you say, its industrial policy, this is all a means of making war against the United States. You look at how the U.S. has been targeted economically. The big holdup in Donald Trump’s first term was that he wanted a comprehensive trade deal with the Chinese. What was the problem?

Donald Trump wanted an end to currency manipulation. He wanted the Chinese to stop stealing American intellectual property where American companies were in China. He wanted to stop the forced transfers of tech and a whole bunch of other things, which is just China cheating. They said, no, we can’t do that. Why? It’s a communist party.

I think that during that first term, Donald Trump understood what that industrial policy was about. They’re not in the global system to play fair. They’re not. talked about this with them, and they finally came back and said, no, sorry, we can’t do it. As it turns out, it’s against Chinese law. We have to keep cheating.

So that was one instance that Xi gave Donald Trump evidence to distrust him. And that’s where we are now in Donald Trump’s second term. I think it’s important for us to realize this. He does not trust Xi Jinping. He does not trust the Chinese Communist Party.

Well, I’m going to now read, this is the perfect moment to read the president’s observation that you cataloged in your book through your interview with him. So this is what he said. And this is looking at that precise trade deal that you mentioned, right?  He said, “I think you have some very powerful forces in China. President Xi is a very smart and powerful man, but you have other forces that are strong. I saw it firsthand. He viewed my relationship with him and my position as president as very important. They were very embarrassed when they said this to us because this was like having a deal ready to be signed and the deal was virtually ready to be signed and then they withdrew it. And I believe that they had some additional forces in China that did not want to. I have no doubt in my mind that deal didn’t happen.”  So this is incredibly interesting because there was this verbal agreement from Xi, yet the deal was withdrawn. And then this sort of second, highly watered-down version of a deal came through. I’m going to get your thoughts on this.

I’m really glad you picked that out because I think it’s a really important thing and really fascinating because it gives an insight into what Donald Trump not only thinks about Xi, but how Donald Trump is trying to position Xi. Right. Does Donald Trump really believe that there are powerful forces behind Xi that made it impossible for Xi to strike that deal? Or is Donald Trump basically saying that he doesn’t mind. But it’s basically that. He doesn’t mean to be disrespectful, but there are really powerful forces there and he couldn’t get it done.

So is he trying to poke Xi? Do you know what I’m saying? Or is it a combination of all different things? He’s saying Xi’s not as strong as he lets on. There are other more powerful forces behind him. So do you know what I’m saying? I think it’s a combination of different things. I think Donald Trump also believes, you know, different people told me about that, negotiations for that deal. They said, well, you know, even communist parties have politics they have to deal with.

So that’s one way to understand it. And that’s one way that Donald Trump is talking about it. But I also think that Donald Trump is zeroing in on Xi there, right? You know, he’s sensing he’s going to deal with him again. He’s going to have to negotiate with him again. And what does he want Xi Jinping to know about what Donald Trump thinks about it?

So I thought when the president was talking about this, it was super interesting and super masterful. What will Xi make of it when Trump says that he is not the ultimate power, the Secretary of the Communist Party, President of the state, and also head of the military. He’s not not the main power. So I’m really glad you picked up on that.

Well, it’s very interesting, because I do think there’s an element of what you just described. I’ll tell you what I was thinking as I read this piece, and that is President Trump understands that the Chinese Communist Party or the survival and supremacy of the Chinese Communist Party is the number one priority in this system, even above that of the survival of the general secretary and so forth.

So the way I read this is I see him understanding that there’s basically some powers, let’s call it the 200 top families that rule the country. Let’s call it the people who have influence in the military, in the Politburo Standing Committee, the Politburo itself. And especially now, as we know that Xi has lost a considerable amount of power, some people argue very convincingly that perhaps even the military isn’t really under his control anymore. These powers are kind of ascendant and in fact, playing a much bigger role in the decision-making.

What struck me when I was speaking with President Trump about this and later as I started to look at it more, it’s like the different things that they were asking for, again, basically stopping cheating, right? But that’s the nature of the regime. So Donald Trump is basically demanding. That was his deal.

That’s what he wanted. The deal was you must change your nature, Chinese Communist Party regime. If you really want to enter the world system, you must change your nature. And the regime with Xi at the top, and again, it’s unclear what the president was describing and how much he was poking at Xi.

But certainly, yes, the Communist Party regime spoke as one. No, we’re not going anywhere. We will not erase our character at the request of the American president. So that’s a very important thing, I think, to keep in the background or perhaps the foreground as we understand the different negotiations and different talks now.

But Donald Trump, other American presidents talk about it, right? They say, oh, China must stop doing this. They must stop doing that. And we must challenge China and do this and that. Well, Trump is right up against it. And look at where he is right now with the tariffs and look at what he’s talking about, 100 percent tariffs. This is astonishing.

So Donald Trump is actually fighting it and he understands what it means. Again, I’m certain that he understands what he’s asking for is something that the Chinese Communist Party cannot do. And now, as opposed to the first term, as you describe and as others have talked about it, this regime is more fragile now than it was eight years ago.

So I want to jump into the bigger picture of how we ultimately got there, because you chart that incredibly well in the China Matrix. Before I go there, I want to explore a little bit more about this specific particular moment, arguably, this whole tariff regime liberation day. From what I saw back then, and I still continue to believe this as I see the activity, a lot of it is centered on forcing China either to participate in the system, the rules-based system, so to speak, when it comes to trade or suffer immensely.

But the reality is that there’s this deep, deep economic integration, which again, you chart very in detail in the China Matrix. And this is something that was part of the project of the Chinese Communist Party all along. If we’re going to have pain, you’re going to have a lot of pain yourself. So here we are. What can happen now?

Part of the integration, part of what people talk about this deep integration. Well, one of the things that we saw during COVID was that those supply lines are, again, somewhat fragile, that they can be broken rather easily, they can be disrupted rather easily. And so that’s why a lot of American companies actually have chosen to reshore. I think that one of the things that people mean when they say how interwoven we are is, and this is a very, very important thing to understand about the trade deficit.

When Donald Trump notes that our trade deficit now, since China entered the World Trade Organization in 2001, our trade deficit is worth many, many trillions of dollars, right? But a lot of that money, it’s important to understand, that’s American companies. We’re running a trade deficit, not only with the People’s Republic of China [PRC], we’re running a trade deficit with American and other Western companies who have chosen to take their manufacturing to China, where there’s no regulatory regime.

Labor is very cheap. Obviously, there’s no protection for labor. And so they’re making tons and tons of money exporting from China back to the United States. So that’s what people mean in lots of ways when they say, so integrated. What they mean is they’re making tons of money. Americans and other Westerners are making tons and tons of money in China, and they’re very reluctant to let that go. And they have one important card in their hand, and that is that Donald Trump has three years left.

I think that most of the people who would be running for president from the Republican side appear to be very good on China. Democrats, certainly someone like Gavin Newsom, much less so. But this is what American manufacturers and this is what Chinese officials are counting on. And that in the meantime, people will throw a whole bunch of stuff at Trump to keep him off balance to make sure that he’s not able to focus on China. And when he is able to focus on China, they’ll do stuff like they did last week with the rare earth minerals.

But to come back to the idea of the integration, this is, by the way, why President Trump always likes to talk about Tim Cook, why he had him at the joint session of Congress in February, why he’s talked about him in the White House, because Tim Cook says, yes, we’re coming back. We’re investing a lot of money in the United States.

So Donald Trump wants to promote that. American corporations that are coming back, moving back their facilities to America, because it’s not just, it’s a big thing, it’s American jobs. It’s a very, very important thing, getting American jobs back.

But another big thing is that trade deficit that we’ve been running with China that’s basically paid for their military. And that’s an enormous deal. So I think that really, Donald Trump’s idea of the tariffs and the trade deficit, the trade imbalance being the fundamental problem, I think that’s a really holistic way to see it.

Well, you put it really well. We’re talking about jobs. That’s one. Two, funding, military, and the growth of an adversary, if not enemy. I don’t know if the distinction between those two words is particular. But finally, you’re talking about an unbelievable amount of lobbying power because if your manufacturing facilities of some of the greatest companies in America are actually dependent on that import, on importing goods from there, you have a wild amount of leverage. It really is a holistic, comprehensive issue.

The way that the China lobby operates is fantastically interesting. The book is a story. The protagonist, the good guy, is Donald Trump, and he stands in for all the good guys. The bad guy is Henry Kissinger, not just because Henry Kissinger was at the origins of this relationship with Nixon, but because Henry Kissinger made a career out of it, and he made a lot of money off it, and he made other people a lot of money. And it’s also how Kissinger built institutions to protect his interpretation or his version of this very dangerous relationship for Americans.

How the China lobby worked was, Kissinger was never paid directly by China. People don’t understand that. Kissinger was paid by American corporations that wanted to do business in China. So what Kissinger would do was he would take them on long trips to Beijing and they’d be wined and dined. I mean, this started with, you know, it started in the 1970s after Kissinger left government and went on until Kissinger’s death in December 2023.

So what they would do is the American corporations would hear counter pitches from Chinese officials saying, yes, we’re sure we’re very interested in doing business here. And these are big businesses, right? These are not small mom-and-pop organizations. These are big American multinationals that have the years, at least, of the president, the United States, and Congress. So they can make a phone call and they can get people on the phone.

You know, they can get someone from the White House on the phone right away. So China liked that idea very much. They’re not paying for anything. They say, yes, sure, we’d love to have you set up manufacturing here. But here’s what you have to do. You have to make sure that China stays open. It’s in your interest to make sure that China stays open, and it’s in our interest too.

There is actually a China lobby that pays people money to lobby for China, but the most influential lobbyists are political donors, people with companies worth billions and billions of dollars. So they’re not only making the case for China to the recipients of their donations, they’re also telling the people who are getting those donations, you better be nice to China. That’s what I want. That’s what I’m paying you for, to protect China, to protect China in the halls of Congress, or protect China in the White House.

So it’s really an enormous operation. And it’s not just at the national, at the federal level, it’s at the state level too. States around the country have been compromised by Chinese Communist Party operatives and by Chinese Communist Party money. A lot of people don’t remember what ChinaGate is. We talk about the Clintons a lot, but a lot of people don’t remember ChinaGate.

What ChinaGate was is when Chinese intelligence officers started pouring all sorts of money into the Democratic National Committee [DNC] in the mid-90s. And people were like, oh, it was people marginally tied to China, so it’s weird, and this and that, and Indonesia. These were all people with serious relationships with Chinese intelligence. There was actually one Chinese intelligence officer, I think the head of military intelligence, who was also the head of their Navy, who was sending money in as well.

What had happened to Bill Clinton was when he was governor of Arkansas as an up-and-coming politician, the DNC saw Clinton the way the CCP did. They saw him as a promising political figure. And I document how different figures, different Chinese allied businessmen went to Little Rock and cultivated Bill Clinton. So that’s what happened. The Chinese tried to, and I’m not saying that Bill Clinton, who I think was a pretty okay president, betrayed his country, but there’s no doubt in my mind that the Chinese actively tried to compromise him first in Arkansas, and then again as the president.

Well, there are two things, really important, that you just mentioned here. One of them is that the CCP operates at every scale of government and does precisely what you’re describing. There are multiple examples of this. They cultivate all sorts of people, cultivate in the sense that they develop their relationships, they become friendly, and then, you know, those things can be worked on further if someone happens to advance.

But here’s the other part that really struck me here, and I don’t think this is talked about enough. You’re basically telling me that the majority of the China lobbying money isn’t actually Chinese money. And that’s incredibly important. Do you have an estimate of what percentage would be money lobbying for Communist China not being Chinese money?

We’d have to look at every American company that has manufacturing in China and whatever they’re making, and whatever they’re making would have to go into what that lobby is worth. It’s trillions of dollars, right? Because all of those American businessmen want that stuff in China because they’re making a lot of money. And so what’s the argument?

You just gave a version of it, how they put it, like, oh, you don’t understand, we’re so interconnected and we’re so intertwined and we can’t pull ourselves apart. You could, you could, right? We hear all the arguments, oh, China has the supply lines and the training and no one else does. It’s like, right, it’s going to take some effort. That’s true too.

It’s going to take some effort for the United States to break free of this. But Donald Trump is the president who wants American companies to do that. And he’s offering different ways to help, including very low corporate tax rates. So a lot of the excuses, that’s part of China lobby messaging. We can’t do it. It’s too hard. We’re too interwoven with Chinese business elites. That’s messaging. That’s lobbying messaging.

The bottom line is you’re saying these policies from the current Trump administration are basically designed to, I guess, activate the self-interest of the business leaders to bring the money to America and pull it out of China?

Yes, which is hard to do. I mean, there’s a lot of people, you know, you may have seen that, you know, Jamie Dimon announced, was it $10 billion worth of investment in important American industries? And so there are a lot of people in the business world who are also starting to see that China is a real danger to the United States, right? This started to happen during COVID. That was a big deal during COVID when people saw not only the criminality of the regime that lied to us about the nature of transmission and origins of COVID, but also how the supply lines got all jammed up.

So people became concerned about that and they realized, you know, TikTok, there’s a whole bunch of different issues that have made American businessmen who were complacent, perhaps complacent before, that have put them out there on the front line and saying, yes, okay, I admit it. I fooled myself about this before, or I didn’t get it. Now I get it. We have to fight it. Here’s what I’m going to do. And Jamie Dimon really comes to the top of the list. Because for a long time, he’d been someone who got along pretty easily with Beijing.

Explain to me how the visa system was abused. You catalog that incredibly well in the book.

Yes. This is terrible what happened. And Donald Trump didn’t really have an understanding. A couple of months ago now, Donald Trump said that he wants 600,000 Chinese students here on visas. Okay, that’s definitely part of his negotiation, because I know for a fact he doesn’t. He was very worried to find out there were 300,000 Chinese graduate students on student visas during his first term.

When the president was notified about where they are, Ezra Cohen is one of the sources. He was an intelligence official in the first Trump administration, a great guy, very insightful, and very concerned about the threat of the Chinese Communist Party. That’s how they found out that there were real dangers.

Look, a lot of these students are at not classified facilities, very sensitive facilities like U.S. nuclear labs. And as Ezra explains in the book, with a lot of these things, it’s kind of messy. It’s not like it’s a perfect delineation all the time between classified work and sensitive work.

So we’ve seen different PLA [People’s Liberation Army] officials, different Chinese intelligence officials, stealing intelligence. We’ve seen that different people are stealing sensitive material or classified material. We’ve seen professors at Ivy League universities. And one of the big problems, and I’m sure your former broadcast partner, Kash Patel, knew this even before he took the job of FBI director, but with 300,000 Chinese graduate students in the country, and not to say that all of them necessarily want to spy for the PRC, but may be put in compromising positions to do so, the FBI simply can’t cover 300,000 people, right? So it’s a disaster.

So that’s what I mean when Americans, the Americans who have not recommitted to their country need to recommit. And at the top of the list are university presidents. Well, we have to face reality. We have to have this eyes-wide-open approach. But the current reality, the current status quo that we’re in, was developed without that. And now we have to deal with the consequences.

So how do we approach this?

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