The New Trump Administration: Perspective from China
By Gracie Sun
November 8, 2024
U.S. President Donald Trump and Chinese President Xi Jinping.
Your Talking Points
The Chinese government has been strengthening ties in Southeast Asia, the Middle East and Latin America to mitigate potential geopolitical and economic risks in recognition of continuing U.S.-China tensions.
China is preparing for a 60% tariff increase from its largest trading partner by stimulating its sluggish economy, and preparing potential mitigation and retaliation strategies should the trade “war” escalate.
Trump’s "America First" diplomatic style could lead to both challenges and opportunities for cooperation in areas such as the conflict in Ukraine/Russia and Taiwan.
What Happened
With President-elect Donald Trump returning to the White House, China faces a familiar yet unpredictable challenge. During his first term, Trump’s hardline stance reshaped U.S.-China relations, pivoting to a more confrontational approach centered on trade imbalances, tariffs, and restrictions on technology. At the same time, Trump continues to praise and tout his strong relationship with President Xi Jinping. As Trump prepares for his second term, Beijing’s initial response has been one of calculated caution. While the congratulatory messages and affirmations of cooperation are positive, China’s strategic focus is more intricate, balancing a need for engagement with a readiness to protect its core interests.
The day after Trump’s election, President Xi Jinping sent a message to congratulate him, emphasizing that cooperation between the U.S. and China brings mutual benefits. Xi underscored the importance of dialogue in managing differences and expanding areas of shared interest. Vice President Han Zheng also extended congratulations to U.S. Vice President-elect James David Vance, signaling China’s commitment to maintaining a diplomatic tone amid looming tensions.
However, China has been preparing for a possible Trump Administration that could upend existing norms. In anticipation of Trump's policies, Beijing has worked to solidify relations with key global players, including Japan, Australia, and Saudi Arabia. This regional diplomacy not only diversifies China’s alliances but also reduces the potential impact of any aggressive U.S. stance especially in Asia.
Digging Deeper
The Economic Front: Trade and Tariffs
Economic issues will be at the forefront of Trump’s second-term China policy. In the past, Trump’s Administration used tariffs as a tool to pressure Beijing into concessions, particularly on trade imbalances. Trump’s campaign pledge to impose a 60% tariff on Chinese goods has sent ripples of concern through China’s business and policy circles, though experts caution that such an extreme measure could be economically destabilizing for both nations.
China’s business community remains wary about the impact on their business at home and abroad. The country’s economy continues to be dragged down by provincial debt, the ongoing real estate crisis and sluggish consumption. Tariffs will exacerbate the situation. Overseas, Chinese firms have had to navigate complicated politics when entering the United States and certain European countries.
Reflecting this concern, major Chinese think tanks, including the Center for China and Globalization (CCG) and China Finance 40 Forum (CF40), have already begun analyzing potential impacts as well as making recommendations to the Chinese government on potential mitigation and retaliation strategies.
According to CCG, while Trump may push for a continuation of trade negotiations as he did in his first term, his emphasis may be on concrete, transactional outcomes—rather than alliance-building or long-term partnership. This suggests a possible extension of the Phase One Trade Agreement.
Meanwhile, CF40 has highlighted the potential of a U.S. domestic backlash to a 60% tariff. Such a move could lead to inflation in the U.S., dampen bilateral trade, and impose higher prices on American consumers. A more moderate increase, in the range of 10-20%, seems more probable in their view, aligning with Trump's stated goals of reducing the bilateral trade deficit without triggering severe economic consequences at home. The Chief Economist Forum has also warned of the broader economic risks, suggesting that Trump’s approach could erode bilateral trade by 5-10%.
China will continue to invest heavily in its own economic resilience to mitigate the potential economic impact of Trump’s policies. This will include policies to bolster China’s domestic advanced tech capabilities, particularly in face of the possible expansion of existing extensive technology restrictions on Chinese firms. Such restrictions would intensify pressures on China’s already strained economy and further reduce U.S.-China cooperation in technology. The Chinese government also announced a $1.4 trillion stimulus to address local debt and signaled that more is coming. This move is to help revive the economy and mitigate the possible impact of raised tariffs. And China will continue to nurture existing international partnerships and build new ones in order to maintain and expand markets for Chinese goods.
Lastly, China has hinted that if pushed too hard, it is prepared to retaliate. To date, its action has been selective – banning certain companies, slowing purchases of big-ticket items like aircraft, and denying global M&A activity. Yet expect to see a commensurate tariff increase on the import of certain items from the U.S., further limits on the export of key materials such as rare earth, and the targeting of U.S. firms to limit their access in China.
Diplomacy: America First Meets Pragmatism
Trump’s foreign policy is expected to retain its focus on American interests above all else, positioning allies and adversaries alike in transactional relationships. For China, this “America First” stance could open certain diplomatic avenues. As CCG has noted, Trump’s emphasis on realism over alliances creates a competitive but potentially balanced landscape for the U.S., China, and Europe. On issues such as North Korea, climate change and even the Russia-Ukraine conflict, China could play a mediating role, leveraging its influence as Russia’s largest trading partner and as a key player in the Global South.
Trump’s commitment to ending protracted conflicts, particularly the Russia-Ukraine and Israel-Palestine situations, could prompt him to seek China’s assistance or support. Given Beijing’s extensive diplomatic connection with Russia and economic ties with Ukraine, China has the potential to contribute to an end to the conflict, in post-war rebuilding efforts and in supporting a stable diplomatic framework. It has also been strengthening its role in the Middle East and helped to mediate reestablishment of ties between Saudi Arabia and Iran.
Navigating the Taiwan Strait
Taiwan remains one of the most sensitive issues in U.S.-China relations. During his campaign, Trump hinted he might pursue stability over conflict on the topic. Analysts at CCG speculate that Trump may ultimately adhere to a “status quo” policy that avoids heightened tensions across the Taiwan Strait. While his Administration may not formally renounce arms sales to Taiwan, it could focus on preserving the established boundaries of U.S.-China relations on this matter, potentially signaling a pause in escalations.
If Trump continues to adhere to the “One China” policy and the three U.S.-China Joint Communiqués, there may be an opening for diplomatic exchanges focused on mutual interests rather than provocation. Moreover, Trump’s focus on American economic strength could make him less inclined to support policies that risk costly military engagements in the region.
Published by Basilinna Institute. All rights reserved.
