Trump sows uncertainty - and Xi Jinping sees an opportunity
2025-02-04
Category: economic

If China is angry at the United States for imposing an extra 10% tariff on all Chinese goods, it is doing a good job of hiding it.Both Canada and Mexico have vowed to retaliate and already Canadian Prime Minister Justin Trudeau has said his country "will not back down" as he announced a 25% levy on more than $100bn (£81bn) of American goods.US President Donald Trump has agreed to temporarily pause tarrifs of 25% on goods imported from both countries after reaching separate agreements with each of their leaders.Beijing, however, has held its fire – for now.In 2018, when Trump launched the first of many rounds of tariffs targeting Chinese imports, Beijing declared that it was "not afraid of a trade war". This time, it urged the US to talk and "meet China halfway".This isn't to say that the announcement will not sting. It will, especially  because the 10% levy adds to a slew of tariffs he imposed in his first term on tens of billions of dollars of goods. And the Chinese government's muted response is partly because it doesn't want to worry its population, when many are already concerned about the sluggish economy.But that economy is not as reliant on the US as it was back then. Beijing has strengthened its trade agreements across Africa, South America and South East Asia. It is now the largest trading partner of more than 120 countries.The additional 10% may not offer the leverage that Trump wants, says Chong Ja Ian from Carnegie China."China will think that it can probably endure 10% - hence, I think Beijing is playing it cool. Because if it's not that big a deal, there's no reason to pick a fight with the Trump administration unless there's a real benefit to Beijing."
Xi's 'win-win' as America retreats 
President Xi Jinping may also have another reason: he may see an opportunity here. Trump is sowing division in his own backyard, threatening to hit even the European Union (EU) with tariffs - all in his first week. His actions may have other US allies wondering what is in store for them.In contrast, China will want to appear a calm, stable and perhaps more attractive global trade partner."Trump's America-first policy will bring challenges and threats to almost all countries in the world," says Yun Sun, director of the China programme at the Stimson Centre."From the perspective of US-China strategic competition, a deterioration of US leadership and credibility will benefit China. it is unlikely to turn well for China on the bilateral level, but Beijing surely will try to make lemonade..."
As a leader of the world's second-largest economy, Xi has made no secret of his ambition for China to lead an alternative world order.  Since the end of the Covid pandemic, he has travelled extensively, and he has supported major international institutions such as the World Bank and agreements such as the Paris climate accords.Chinese state media has portrayed this as embracing countries across the world and deepening diplomatic ties. Before that, when Trump halted US funding to the WHO in 2020, China pledged additional funds. Expectations are high that Beijing may step in to fill America's shoes again, following Washington's exit from the WHO. The same applies for the aid freeze that is causing such chaos in countries and organisations that have long depended on US funding - China may wish to fill the gap, despite an economic downturn. On his first day back in office, Trump froze all foreign assistance provided by the US, which is by far the world's biggest aid donor. Hundreds of foreign aid programmes delivered by USAID ground to a halt. Some have since restarted, but aid contractors describe ongoing chaos as the future of the agency hangs in the balance.John Delury, a historian of modern China and Professor at Yonsei University in Seoul, says Trump's 'America First' doctrine could further weaken Washington's position as a global leader."The combination of tariffs on major trade partners and freezing of foreign assistance sends a message to the Global South and OECD alike that the US is not interested in international partnership, collaboration," he tells the BBC."President Xi's consistent message of 'win-win' globalisation takes on a whole new meaning as America retreats from the world."In its bid for global governance, Beijing has been looking for a chance to upend the the American-led world order of the last 50 years - and the uncertainty of Trump 2.0 may well be it.
New alliances
"Whether it really confers Beijing a key advantage  - of that I'm a little less sure," Mr Chong says."Many US allies and partners, especially in the Pacific, have a reason to work with Beijing, but they also have reasons to be wary. That's why we've seen Japan, South Korea, the Philippines and Australia move closer together, in part because of the apprehensions they harbour towards China."There is "gathering momentum" for a possible trilateral relationship among Australia, Japan and South Korea, motivated by "the impact of a second Trump administration", according to The Australian Institute of International Affairs.
All three are concerned about China's assertiveness in the South China Sea, along with the Philippines. They are also worried about a possible war over the self-governed island of Taiwan - Beijing sees it as a breakaway province that will, eventually, be part of the country, and has not ruled out the use of force to achieve this.Taiwan has long been one of the most contentious issues in US-China relations, with Beijing condemning any perceived support from Washington for Taipei. But it may be difficult for Washington to hit back at signs of Chinese aggression when Trump repeatedly threatens to annex Canada or buy Greenland.Most countries in the region have used a military alliance with Washington to balance their economic relationship with China. But now, wary of Beijing and usure of the US, they could create new Asian alliances, with neither of the world's biggest powers.
Calm before the storm
Trump announced the tariffs on the weekend, as Chinese families were celebrating the New Year and inviting the God of Fortune into their homes. Bright red lanterns currently swing over empty Beijing streets as most workers have left for their hometowns during the biggest holiday of the year.China's response has been far more muted than Canada or Mexico's. The commerce ministry announced plans to take legal action and use the World Trade Organisation to air its grievances.But this poses little threat to Washington. The WTO's dispute settlement system has been effectively shut down since 2019 when Donald Trump - in his first term then - blocked the appointment of judges to handle appeals.As the holiday draws to a close and party officials return to Beijing and to work – they have decisions to make.Officials have been encouraged in recent weeks by signs that the Trump administration may want to keep the relationship stable especially after the two leaders had what Mr Trump called "a great phone call" last month.For now, China is remaining calm perhaps in the hope of a doing a deal with Washington to avoid further tariffs and to keep the relationship between the world's two largest economies from spiralling out of control.But some believe this cannot last as both Republicans and Democrats have come to view China as the country's biggest foreign policy and economic threat."Mr Trump's unpredictability, his impulsiveness and recklessness will inevitably lead to significant shocks in the bilateral relationship," says Wu Xinbo, professor and director at the Centre for American Studies at Fudan University."Additionally, his team contains quite a few hawks, even extreme hawks on China. It is unavoidable that the bilateral relationship will face serious disruption over the next four years."China is certainly concerned about its relationship with the US and the harm a trade war could do to its slowing economy. But it will also be looking for ways to use the current political pendulum to swing the international community its way and within its sphere of influence.