As Donald Trump amplifies threats of imposing new tariffs on Chinese imports, Beijing is maneuvering to mitigate potential economic shocks while simultaneously seeking negotiations with the U.S. to preempt a full-blown trade war. Analysts believe China’s strategy reflects lessons learned from Trump’s first term and aims to gain leverage before a new U.S. administration assumes office.
China’s urgency to negotiate stems from its fragile economy, which faces growing risks amid declining global trade and weak domestic demand. Beijing is keen to avoid the economic disruptions caused by additional U.S. tariffs and has already initiated retaliatory measures. This week, China launched an antitrust probe into U.S. chip giant Nvidia and earlier banned the export of critical rare earth minerals to the U.S. These moves, seen as calculated responses, are intended to compel Washington to the negotiating table rather than escalate tensions indefinitely.
Fred Neumann, Chief Asia Economist at HSBC, noted that China’s approach signifies the opening salvo in what is likely to evolve into serious trade negotiations. “This isn’t just about tariffs being slapped and everyone walking away,” he said. Instead, China appears to be positioning itself for a broader conversation with the U.S. on contentious issues such as trade, investment, and technology exchange.
Strengths and Vulnerabilities
China enters these potential negotiations better prepared than during the first U.S.-China trade war. The nation now leads globally in industries such as electric vehicles (EVs) and green energy, reducing its dependence on certain U.S. imports like gasoline-powered cars and Boeing aircraft. Beijing has cultivated domestic substitutes, including Airbus planes and its locally produced Comac C919 passenger jets, giving it more resilience in the face of U.S. economic measures.
However, China is still far from achieving complete economic independence. It remains heavily reliant on U.S. imports of strategic goods, such as advanced microchips and high-tech equipment, to support its manufacturing and technological ambitions. Additionally, Chinese manufacturers rely on U.S. consumers, a vital market that could dwindle further with additional tariffs or trade restrictions.
George Magnus, a research associate at Oxford University’s China Centre, warns that even with these advancements, a new trade war would harm China disproportionately. “Short of an ‘Armageddon announcement’ like a 60% tariff on all Chinese goods, China is better equipped to handle most tariffs,” he said. However, the prospect of deeper disruptions to supply chains and further decoupling from the U.S. economy remains a critical risk.
Strategic Timing
The timing of Beijing’s moves is key. Trump’s threat of additional tariffs could materialize before January 20, when a new U.S. president is inaugurated. China is eager to avoid these measures, especially as it pushes to renew the U.S.-China Science and Technology Agreement, which lapsed in August. The agreement has facilitated crucial bilateral collaboration in areas like scientific research and technological development, and its renewal remains uncertain amid escalating tensions.
Alicia Garcia-Herrero, chief economist for the Asia Pacific at Natixis, emphasizes that Beijing’s focus is on securing renewed commitments from Washington before any harsher restrictions are enacted. “China wants to lock in a framework that can prevent further damage to its technological ambitions and trade flows,” she said.
A Fragile Balancing Act
While China’s actions aim to project strength and readiness, the underlying economic vulnerabilities necessitate a diplomatic resolution. Analysts agree that any escalation in tariffs would ultimately hurt both nations but would disproportionately impact China’s export-driven economy. At the same time, Washington’s ability to sever supply chains and curtail high-tech exports poses a long-term challenge for Beijing.
As the clock ticks toward Trump’s inauguration, the world watches to see whether these two economic giants can negotiate a truce or escalate tensions further. The stakes are high not only for the U.S. and China but for the global economy that remains intertwined with their fortunes.
