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China Gears Up for Trump’s Return, Prioritizing Relations and Stability

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As Donald Trump readies for a potential return to the White House, China is actively preparing for the economic and diplomatic challenges that may follow. Unlike the volatile trade wars that defined his first term, Beijing’s response this time is calculated, focusing on bolstering its economy and strengthening international relations. Key strategies include deepening ties with global allies, boosting self-reliance in technology, and preparing a robust economic stimulus to mitigate the impact of Trump’s potential tariffs.

A Shifting Strategy: Learning from the Past

A More Measured Response

During Trump’s initial presidency, China’s leadership reacted strongly to his aggressive trade policies and rhetoric. The ensuing trade war strained relations between the world’s two largest economies, with both sides imposing tariffs that disrupted global markets. This time, however, Beijing is adopting a more cautious approach, likely seeking to avoid the economic shocks of the past.

Zhao Minghao, an international relations expert at Fudan University, emphasized that China is unlikely to repeat the same mistakes. He pointed out that President Xi Jinping’s recent message to Trump focused on “cooperation” rather than “confrontation,” signaling a shift toward more stable relations. Zhao believes that Beijing will respond in a measured way, aiming for communication with the Trump administration rather than escalating tensions.

Managing Tariffs and Economic Vulnerabilities

The Chinese economy today is in a much weaker position than it was in 2016. Having been battered by a property crisis and mounting debt, China now struggles to maintain steady growth. While the economy grew at a rate of 6.7% during Trump’s first term, it now faces a more challenging environment, with growth hovering around 5%.

Adding to the strain, Trump has promised to end China’s most-favored-nation trade status, threatening to impose tariffs on Chinese imports of over 60%—a significant increase from the previous administration’s measures. While Zhao believes the tariffs may be somewhat lower than Trump’s campaign promises, the mere threat is enough to shake confidence within China’s export-driven economy.

The Need for Stimulus

With Trump’s proposed tariffs posing a serious threat to international trade and Chinese exports, experts anticipate a dire economic impact. Li Mingjiang, a scholar at Singapore’s Rajaratnam School of International Studies, suggests that China may require an even larger stimulus package than the $1.4 trillion already expected. The country’s heavy reliance on international trade and the potential for job losses and decreased government revenue could prompt a swift and aggressive economic response.

Strengthening Alliances: A Charm Offensive

Expanding China’s Global Footprint

In response to Trump’s “America First” policies, which reduced U.S. engagement with parts of the world, China has stepped up its diplomatic efforts. Over the past few years, Beijing has worked tirelessly to mend fences and forge stronger ties with various global powers, particularly in the Global South. In recent months, China has made significant strides in improving relationships with countries like India, Japan, and Australia, as well as boosting ties within Africa and Latin America.

Last month, China ended a four-year military standoff with India over a disputed border, while also resolving a two-year dispute with Japan regarding the release of radioactive water from the Fukushima nuclear plant. Additionally, Premier Li Qiang visited Australia in June, marking the first official visit in seven years. These diplomatic wins signal China’s commitment to strengthening its global presence and maintaining stability in its relations with key powers.

Capitalizing on U.S.-Europe Tensions

In Europe, trade tensions with China could play into Beijing’s hands as experts predict that Europe’s concerns about Trump’s foreign policy—particularly his stance on the Ukraine war—may lead to an opening for China. Eric Olander, editor-in-chief of the China-Global South Project, notes that Europe may look to counterbalance Trump’s policies by engaging with China. This dynamic could enable Beijing to exploit rifts between the U.S. and its European allies, positioning itself as a more stable partner in global trade.

Jean-Pierre Cabestan, a Hong Kong-based expert, suggests that China’s outreach to European countries, the U.K., Australia, and even Japan, will serve dual purposes: driving a wedge between the U.S. and its allies, and rebalancing its foreign trade in favor of the Global South. This diplomatic outreach reflects China’s broader strategy to shift away from U.S.-dominated markets and foster new trade relationships with emerging economies.

The Tech Rivalry: Self-Reliance and Innovation

Overcoming U.S. Technology Restrictions

One of the most significant aspects of the U.S.-China trade war was Trump’s crackdown on China’s tech sector, particularly through export controls that targeted major Chinese companies like Huawei and SMIC. These restrictions, including the ban on key components, forced China to accelerate its push for technological self-reliance.

Winston Ma, a former managing director of China’s sovereign wealth fund, the China Investment Corporation, believes that Trump’s 2018 ban on ZTE was a major turning point. It prompted China to focus on domestic innovation and reduce its reliance on foreign technology. President Xi Jinping’s call for greater self-sufficiency in science and technology has resulted in rapid advancements, particularly in areas like artificial intelligence and space exploration.

The Struggle for Technological Independence

Despite significant progress, Chinese tech companies continue to face challenges. Although China has drastically reduced its dependence on U.S. tech, the country’s chipmakers remain vulnerable to the global semiconductor supply chain. According to Ma, Chinese companies are still unable to access the latest chips, limiting their ability to compete on the global stage.

Former U.S. Commerce Department official Nazak Nikakhtar anticipates that Trump will take an even more aggressive stance on technology export controls if he returns to power. This could include expanding the U.S. Entity List, which restricts the sale of components to Chinese companies, and extending sanctions to affiliates and business partners of listed firms.

The Long-Term Implications of Tech Rivalry

As the U.S.-China tech rivalry intensifies, China will continue to face obstacles in its quest for technological independence. However, the country’s growing investment in research and development, alongside its efforts to build homegrown industries, will play a critical role in determining the future of this rivalry. Ma believes the next few years will be pivotal for China’s tech sector, as it faces mounting pressure from U.S. sanctions and attempts to secure a place in the global technology landscape.

Conclusion: A Calculated Future

China’s preparation for Donald Trump’s potential return to the White House reflects a sophisticated strategy aimed at mitigating the risks of renewed economic conflict. By strengthening diplomatic ties, investing in technological self-sufficiency, and preparing for the possibility of increased tariffs, Beijing is positioning itself to navigate the complexities of a second Trump presidency. Whether these efforts will be enough to cushion the blow of a trade war remains to be seen, but China’s approach is markedly more measured and strategic than it was eight years ago.

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