China is preparing for a potentially tumultuous and highly uncertain future amid its intensifying rivalry with the United States, especially in light of Donald Trump’s unexpected political return to claim the presidency once again.
His resurgence could reintroduce tariffs as steep as 60% on Chinese imports—a move that would have catastrophic implications for economic growth within China, the world’s second-largest economy. Such tariffs could disrupt global supply chains, lead to stricter technology regulations, and exacerbate the already tense relations between these two superpowers.
However, Trump’s staunchly protectionist trade policies and his transactional foreign policy style may inadvertently weaken US alliances and diminish its global leadership role, potentially offering Beijing a chance to exploit this vacuum and further its influence to establish a new world order.
“The return of Trump to the forefront of American politics will undoubtedly present both elevated risks and significant opportunities for China,” remarked Shen Dingli, a prominent foreign policy analyst based in Shanghai. “The eventual outcome hinges on how both nations choose to engage with each other moving forward.”
Officially, China has opted to adopt a stance of neutrality concerning Trump’s electoral victory. The Foreign Ministry expressed on Wednesday that it “respected” the democratic choice made by American voters.
On Thursday, Chinese leader Xi Jinping extended his congratulations to Trump. Despite the downturn in US-China relations during Trump’s previous term, he had a history of praising Xi, even referring to him as “a very good friend.”
Xi advised the newly-elected president that the two world powers could “discover the appropriate means” to coexist amicably in this new era, as articulated in a statement from the Chinese Foreign Ministry.
Yet, beneath the surface of this semblance of calm, Beijing is likely gearing up for the challenges and unpredictable scenarios that lie ahead.
“Trump is known for his unpredictable nature,” commented Liu Dongshu, an assistant professor specializing in international affairs at the City University of Hong Kong. “It remains uncertain whether he will enact the policies he pledged during his campaign, and to what extent he will continue with his previous agenda.”
During Trump’s first presidency, the brash populist who promised to “make America great again” instigated an aggressive trade war against China, blacklisting the Chinese telecommunications titan Huawei due to national security concerns, and attributing blame to Beijing for the Covid-19 pandemic. By the conclusion of his first term, the relationship between the two nations had deteriorated to its lowest level in decades.
This time around, Trump has threatened to impose 60% tariffs on all products manufactured in China and revoke its “permanent normal trade relations” status, which has provided China with the most favorable trading conditions with the U.S. for over twenty years.
If this punitive action is implemented, it could significantly harm an economy already struggling with a property crisis, dwindling consumer demand, declining prices, and increasing local government debts.
Investment bank Macquarie projects that imposing tariffs at this extreme 60% level could reduce China’s GDP growth by as much as two percentage points, which is nearly half of the anticipated full-year growth rate of 5%.
“The onset of Trade War 2.0 could bring an end to China’s prevailing growth model, in which exports and manufacturing have been essential drivers,” stated Larry Hu, chief economist for China at Macquarie, in a recent research note released on Wednesday.
Investor sentiment appeared to reflect these apprehensions as Trump’s lead over Vice President Kamala Harris expanded on Wednesday, triggering noticeable declines in Chinese stocks and the yuan.
Tariffs function as a tax on imports, adversely affecting consumers in the countries that impose them, and also harming businesses reliant on imported raw materials and intermediate goods for their finished products. A considerable escalation in global trade tensions is poised to inflict pain not only on China and the United States but also on other countries interconnected through global supply chains.
Unlike previous Republican leaders who came from traditional political backgrounds, Trump’s atypical and explosive approach to policymaking has intensified Beijing’s anxiety. This has added another layer of unpredictability to their strategy.
“Trump began his first term with a clear admiration for Xi Jinping, but that quickly soured when he imposed tariffs and then condemned Beijing amid the pandemic,” explained Daniel Russel, vice president for international security and diplomacy at the Asia Society Policy Institute.
Challenges and opportunities
However, experts suggest that Trump’s “America First” agenda and his transactional outlook may inadvertently benefit Beijing.
“While Beijing is acutely aware of the unpredictability that Trump’s policies may bring, it also understands that challenges can lead to opportunities,” noted Tong Zhao, a senior fellow at the Carnegie Endowment for International Peace.
“In light of fears surrounding a renewed trade war, Beijing is confident that Trump’s aggressive tariff strategies may face significant opposition in Europe. This could present an opportunity for China to deepen its economic collaborations with European nations, thereby countering the U.S.’s attempts to further separate China from Western countries technologically and in supply chains,” Zhao asserted.
Trump’s longstanding aversion to NATO, as exemplified by his remarks in February suggesting he wouldn’t defend NATO allies that fail to spend sufficiently on their own defense against potential aggression from Russia, poses a risk of undermining the alliances painstakingly fostered by outgoing President Joe Biden to confront the rising influence of China.
This situation would likely provide timely reprieve for Beijing, which perceives Washington’s efforts to encircle and contain it as an escalating threat, likening it to an “Asian NATO.”
The prospect of America shifting towards isolationism under Trump would be welcome news for Xi, who has intensified initiatives to assert leadership within the Global South and foster a new global order that is less dominated by Western powers.
Taiwan and relations with Russia
Additionally, Beijing may find avenues to leverage Trump’s affinity for deal-making, particularly concerning the sensitive issue of Taiwan. The island is claimed by China’s ruling Communist Party, which has never governed it.
During his campaign, Trump accused Taiwan of “stealing” the semiconductor industry from the U.S., suggesting that this self-governing democracy ought to compensate the United States for its defense.
Industry analysts contend that Taiwan has developed its domestic semiconductor industry through a mix of foresight, effort, and investment. The island has sourced nearly all its arms from U.S. defense manufacturers over the last few decades. However, Trump’s campaign language nonetheless indicated a more transactional approach toward Taiwan.
In an interview with the Wall Street Journal, Trump opined that military action in response to a hypothetical Chinese blockade on Taiwan would be unnecessary since he believed Xi respects him and considers him “crazy.” Instead, he mentioned the possibility of imposing tariffs ranging from 150% to 200% on China.
“Given Trump’s comparatively less robust commitment to defending Taiwan, Beijing may pursue greater concessions from Washington regarding Taiwan, employing both incentives and coercive tactics to persuade the U.S. to diminish its military and political backing for Taiwan,” Zhao concluded.
Trump’s favorable remarks about Russian President Vladimir Putin suggest that the U.S. might pressure Ukraine into an uneasy peace with Russia, which could have substantial implications.
While a resolution to the protracted conflict in Ukraine could ease a significant friction point in China-Europe relations, it may also complicate Russia’s burgeoning partnership with Beijing that has solidified since the invasion, according to Liu from the City University of Hong Kong.
“An easing of relations between the U.S. and Russia could create wider gaps between Russia and China, effectively causing a division between the two,” Liu elaborated.
“Trump’s statements make it evident that he regards China, rather than Russia, as the foremost adversary.”
On Thursday, Putin congratulated Trump on his electoral victory, extending an invitation for renewed engagement with the U.S.
At a policy forum in Sochi, Russia, Putin emphasized that Trump’s campaign proposals about resolving the Ukraine issue and rekindling relations with Russia “merit attention at the very least.”
When asked by a moderator if he would consider discussions with Trump, Putin responded affirmatively: “Yes we are. We’re ready.”
**Interview with Shen Dingli, Foreign Policy Analyst and Professor at Fudan University, Shanghai**
**Interviewer:** Thank you for joining us today, Shen. With Donald Trump’s return to American politics and his potential reintroduction of steep tariffs on Chinese imports, what are your thoughts on how this would affect China’s economy?
**Shen Dingli:** Thank you for having me. Trump’s potential reinstatement of tariffs, especially at 60%, would have catastrophic implications for China’s economy. It would not only slow our GDP growth significantly but also place a strain on sectors that have heavily relied on exports. The situation you’re referring to, labeled “Trade War 2.0,” could indeed reshape our economic landscape.
**Interviewer:** You mentioned earlier that these challenges could also present opportunities for China. Can you elaborate on that?
**Shen Dingli:** Certainly. While the return of Trump brings unpredictability that raises risks for China, it simultaneously creates openings. With the U.S. imposing tariffs, there may be pushback from European nations. If Europe hesitates to align with Trump’s aggressive policies, China could strengthen its economic ties with European countries, leveraging this moment to expand its influence and counteract U.S. attempts of economic separation.
**Interviewer:** Trump’s earlier presidency saw deteriorating U.S.-China relations. Do you believe a different approach will be taken this time?
**Shen Dingli:** It’s hard to say, as Trump’s nature is highly unpredictable. His prior term saw a mix of admiration for Xi Jinping and later, significant conflict. Whether he will revert to his old agenda or adopt a new approach remains uncertain and will greatly impact how China strategizes moving forward.
**Interviewer:** Speaking of strategy, how does China’s Foreign Ministry’s official neutrality towards Trump’s election play into this?
**Shen Dingli:** By publicly stating respect for the democratic process in the U.S., China aims to project stability and confidence. However, behind the scenes, preparations are likely underway for the challenges ahead. The official stance serves to keep options open while maintaining a composed international image.
**Interviewer:** Lastly, in light of Trump’s transactional methods, do you think there will be any major shifts in issues like Taiwan?
**Shen Dingli:** Trump’s transactional approach could very well extend to Taiwan. If he adopts a pay-for-defense attitude, it could escalate tensions. However, we must also consider that Taiwan has made significant strides in developing its semiconductor industry, and any rhetoric from Trump will be met with considerable domestic and international scrutiny.
**Interviewer:** Thank you, Shen, for sharing your insights. It seems we are poised for a complex and evolving geopolitical landscape.
**Shen Dingli:** Absolutely. The coming months will be critical in determining the trajectory of both U.S.-China relations and the broader international order.
