SOURCE :- THE AGE NEWS
Against the backdrop of tariff threats and an escalating tech war, Chinese President Xi Jinping had a pitch for Donald Trump.
In a phone call days before Trump returns to the White House, Xi talked up the prospect of a new era of “win-win” cooperation and, according to Chinese state media, told the president-elect he was ready to advance ties “from a new starting point”. He even suggested the “two countries can become partners and friends”.
On Tuesday, Trump becomes the man with the greatest power to frustrate Beijing’s ambitions over the next four years, and has vowed to kick things off by slapping tariffs of 10 to 60 per cent on all Chinese imports to the US.
Donald Trump and Xi Jinping struck a trade deal during the last Trump presidency but it failed to live up to expectations. Credit: AP
Trump confirmed the phone call as “very good”, posting on his social media platform Truth Social that he and Xi had spoken about trade, fentanyl and TikTok. Taiwan was also discussed, the Chinese side said.
The relationship between the superpowers is at an unpredictable juncture, but Trump’s transactional nature and love of a deal have sparked speculation that some kind of economic grand bargain can be struck between the two countries.
But Beijing is not counting on it.
It is preparing for an all-out trade war that threatens to plunge the nations into a new era of turbulence, one that has the potential to reshape worldwide trade flows with consequences for global security.
“China is preparing for two scenarios – deal or no deal,” says Wu Xinbo, director of the Centre for American Studies at Fudan University in Shanghai.
“If China can make a deal with Trump that is acceptable to both sides, we may be able to avoid a major showdown. However, if this is not possible, then China has to be prepared for a tariff war, trade war, tech war, whatever it takes, between the two sides.”
Trade-war footing
There are clear signs China has been steeling itself for the fight.
The latest customs data released last week laid bare how the country has front-loaded its exports, rushing them out the door in anticipation that Trump will make good on his tariff threat.
China announced it had achieved a record trade surplus in 2024 of almost $US1 trillion, a figure that will only fuel outrage in the US and other western countries that cheap Chinese goods are swamping overseas markets, backed by state subsidies.
Data indicates American companies have been stockpiling Chinese products to pre-empt new tariffs, with exports to the US hitting a two-year high in December of almost $US49 billion, according to a Bloomberg analysis. China’s exports to Vietnam also peaked, driven in part by companies shifting manufacturing or rerouting products destined for the US through Vietnam.
Beijing implemented a string of aggressive trade measures in the lead-up to Trump’s inauguration, marking an escalating tit-for-tat retaliation to the Biden administration’s years-long efforts to strangle China’s access to advanced chips and AI technology through export blacklists and controls. Even in his waning hours in office, Biden signed off on a flurry of new technology restrictions aimed at stymying China’s military advancement.
To counter this, Beijing this month took a leaf from Washington’s playbook and added 28 American entities to its new export control list to “safeguard national security”, banning the sale of dual-use technologies to companies including Boeing Defense, Lockheed Martin, and Raytheon. It has also launched an antitrust investigation into US chipmaker Nvidia and last month banned the export to the US of key rare minerals used in semiconductors and defence technologies.
“This can be interpreted as Beijing’s effort to build up some bargaining chips for US-China negotiations in the coming months on technological policy competition,” says Zhao Minghao, a professor of international relations at Fudan University in Shanghai.
Zhao says there is an active debate in China about whether Trump’s tariff threats are designed as leverage to bring Beijing to the negotiating table, or whether they are a means to an end, a tool for achieving the economic de-coupling with China that key figures in the incoming administration want to see.
“No one can be sure or sure what Donald Trump wants and what his economic and trade policy team want,” he says.
A grand bargain on trade?
Many experts dismiss outright the idea that a sweeping grand bargain – one that deals with tariffs, sanctions and export blacklists, let alone such foreign policy issues as the status of Taiwan – between Trump and Xi is possible. Security concerns involving China are deeply entrenched in Washington on both sides of the political aisle and it was Trump’s first administration that began efforts to cut off China’s access to high-tech chips.
“The Chinese government is under no illusion that the Trump presidency will mark any kind of improvement of relations between both countries,” says Dr Benjamin Ho, of Nanyang Technological University in Singapore.
“There may be small concessions here and there, on trade, on fentanyl, but nothing strategic.”
Instead, a narrower deal on trade that resembles the phase one deal agreed to under Trump 1.0 is more feasible, says Capital Economics’ chief Asia economist Mark Williams.
The centrepiece of the Trump 1.0 deal involved China agreeing to buy an additional $US200 billion of US products, in exchange for a rollback of some tariffs. But China’s commitments were unrealistic from the outset and hindered by the COVID pandemic, and it failed to meet them.
“The failure of the phase one deal would hang over any negotiations,” Williams assessed in a recent research note to investors.
How Trump proposes to implement the tariffs, whether through phased-in approach or as a blunt instrument hitting all Chinese imports with debilitating duties, will also determine Beijing’s negotiating stance, says Zhu Feng, dean of the School of International Studies at Nanjing University.
President-elect Donald Trump has pledged to slap Chinese imports with tariffs of up to 60 per cent when he takes office.Credit: AP
“Pounding China with overwhelming tariffs will force China into a corner and there will be no place for us to manoeuvre from,” Zhu says.
Another key factor in any deal negotiation is China’s flagging economy, which is being dragged down by domestic challenges – namely the long tail of its property market collapse. A slew of measures announced by authorities last year, including a $US1 trillion stimulus package aimed at spurring confidence and getting Chinese consumers to spend, has so far failed to significantly kickstart its economy.
“It’s possible we will see a mismatch between what Trump wants and what Beijing can offer,” Zhao says.
Recent efforts by China to foster warmer ties and goodwill with Australia, UK and parts of Europe, as well as measures such as expanding visa-free travel to China to many countries, were also part of Beijing’s preventative strategy to ameliorate a plunge in US-China relations, Zhao says.
A win-win gloss to an entrenched superpower rivalry
Xi’s words to Trump on Friday’s phone call raised to a leader-level the diplomatic platitudes of “mutually beneficial” cooperation that Beijing has pumped out for months in preparation for Trump 2.0. It’s a message that China’s vice president Han Zheng will take to Washington DC on Tuesday when he attends Trump’s inauguration as Xi’s stand-in.
Trump, too, has leaned into the quixotic posturing, repeatedly praising Xi as “amazing”, inviting him to his inauguration, and even going so far as to proclaim in December that “China and the United States can together solve all of the problems of the world”.
This effusive rhetoric belies a widely accepted view in both Beijing and Washington that the US-China relationship under Trump 2.0 will continue to be defined by an intense superpower rivalry and deep suspicion, with national security the foremost concern.
Beijing is also acutely aware that Trump has stacked his team with China hawks, among them Mike Waltz as national security adviser and Marco Rubio, his pick for Secretary of State. Rubio was unambiguous last week when he told his Senate confirmation hearing China was the “most potent and dangerous” nation the US had faced in its history.
“It’s important for China to engage Trump directly and also as early as possible. We do not want his national security hawks to control his China policy,” Wu says.
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