With Donald J. Trump's election as the 47th President of the United States, U.S.-China relations face a fundamental reorientation that will transform the world's most important bilateral relationship. For Beijing policy-makers, there are enormous opportunities, but also major pitfalls. The one constant is increased uncertainty in global relations under Trump.
By now, one of the very few bipartisan understandings in Washington D.C. is the belief that the United States is facing an intensifying geopolitical and geo-economic tussle with China. Building on the first Trump administration's trade wars, the Biden-Harris administration transmuted competition with China into a full-fledged tech war. Washington has sought to suppress key technological advances in China via an international regime of sanctions. Biden has also worked to strengthen alliances to contain China's geopolitical ambitions.
President Trump is likely to continue major aspects of the Biden tech sanctions, but his ambivalence vis-a-vis America's traditional allies creates the potential for greater geopolitical breathing space for China. So far, Trump has remained ambivalent on Taiwan, as well as the U.S. defense posture across East Asia in general. As with Ukraine, it is likely that his administration will ask allies and partners, including Taiwan, to pay more for their own defense, buy American goods, and permit greater access to resources and markets.
Whether this could amount to an American retreat across East Asia is uncertain. Despite Defense Secretary Pete Hegseth's announcement of continuous eight percent cuts over the next five years, U.S. forward-deployed troops in the Indo-Pacific do not expect major reductions in defense. In fact, any reductions should exclude priority areas and even increase funding for U.S. defense assets focused on China.
This presents a mixed bag for Beijing. Perhaps the biggest positive could be a reordering of regional relations to China's west as Trump steps into the Russia-Ukraine conflict. An end to the war and better U.S.-Russia relations might generate the possibility of friendlier relations with the European Union and other Western allies of the U.S.
But this positive is likely to be outweighed by a massive downside that is part and parcel of Trump 47. He loves tariffs. Already his administration has implemented a ten percent tariff on all Chinese imports to the U.S., threatened an additional ten percent and even more as different goods and channels are targeted, and pushed forward a review of Chinese shipping and ship building that could upend international trade. Restrictions on capital flows, especially from China into the U.S., are also being mulled.
What is in the works so far is unlikely to have a devastating impact on the Chinese economy. But as the country is reeling from a real estate downturn and subdued consumer and investor confidence, exports remain an important driver of economic well-being, especially in coastal areas. Therefore, the impact of another trade war could be amplified within the Chinese economy. The only silver lining is that this time China is not alone. A general closing of the American market could trigger a rerouting of global value chains and strengthen China's ties with the rest of the world.
Another hope for Beijing is that Trump is known to reverse positions, especially when under pressure from major business donors. Trump has even alluded to the possibility of striking a grand U.S.-China bargain based on the one reached during his first administration. While contours of such a deal remain highly murky, it might entail a lessening of tariffs and other restrictions in exchange for concessions on market access, investment, or more significant geopolitical matters.
Trump prides himself on changing positions and making deals. A farfetched but still likely possibility is that relations with China could improve. There already is less focus on China's human rights record, even regarding Hong Kong and Xinjiang.
Yet, uncertainty reigns. Trump is known for his inclination to absolutely offend his counterparts, and his rapprochement with Russia is not reflected in closer interactions with Beijing. Each time the focus truly shifts to China, as with the Panama Canal, the outcome seems to veer negative for the U.S.-China relationship.
In the volatile equation Beijing faces with Trump's second administration, anything is possible. A major reordering of international relations could open new geopolitical space for China. But this all could be reversed by chaos in international affairs. The worst scenario would be a single-minded focus by Washington policy-makers on China's growing capabilities, leading to a long-lasting downward spiral in U.S.-China relations.
Ironically, the perhaps most significant factor to fundamentally shape the relationship is not rooted in foreign policy but in Trump's attempts to restructure the federal government in manifold ways. That effort could create internal chaos and indecision, enabling Beijing to play possum – pretending to duck, dodge, and elude pressure from Washington while nimbly taking advantage of the confusion.
