Japan – So far, China has had a little better-than-feared encounter with the Donald Trump 2.0 president.
In reality, Xi Jinping’s Communist Party is probably relieved to discover Trump stifling world markets, torn political relationships, and destroying the soft power that America has come to rely on so much for decades to accumulate in just 18 days.
Elon Musk, a Trump benefactor, is filmed slinging dust into US institutions and using it to espionage sensitive data, affecting trust both domestically and abroad.
Increase in Trump’s concern over his disastrous trade war. Though Trump went away with 10 % levies on Xi’s business, that was just one-sixth of the 60 % he had threatened. At the same time, the Price Man-in-chief backed away from 25 % levies on Canada and Mexico. For today, at least.
But Wall Street now senses Trump’s retreat. The biggest player in the cutting of US companies a few days ago. Today, many investors are concluding Trump’s taxes leg competition is far more wood than bit.
The principles that surround Trump 2.0 and the fear of a stock market collapse and the backlash from the oligarchs who are trying to control the country are varied. Trump’s businessman entourage is evidently worried about their earnings.
It’s possible, too, that Trump’s advisers are warning him that threatening a massive trade war are one point, devastating the world market, and Wall Street with it, is quite another.
Since Trump’s surprise victory in November, Xi has been promoting China as a more robust power than the US as the protector of free business and international economic institutions. Beijing says it stands ready to protect modernization from” serious problems” amid a “new period of volatility and shift” and disruption.
CEOs gathered in Peru for the Asia-Pacific Economic Cooperation ( APEC ) summit in November told Xi,” Dividing an interdependent world is going back in history.”
Xi was harkening again to 2017, when a turbulent Trump 1.0 White House was likewise spooking global markets. Xi in Davos stated to CEOs that trade wars and protectionism may result in “injury and damage to both sides” at the time.
However, according to Stewart Patrick, a senior fellow at the Carnegie Endowment for International Peace,” there is now Washington is located in the scheme equivalent of Tornado Alley, battered by a storm of confusing and norm-shattering professional commands that promise to upend eight years of US internationalism.”
Plan experts, Patrick says, “have become storm-chasers, tracking down the latest offense in the hopes of answering a simple question: Just what is the White House hoping to accomplish with all this conflict”?
No recent step tells us more about Trump’s “disdain for America’s global reputation” than the “reckless and arguably illegal and unconstitutional effort to dismantle” the US Agency for International Development ( USAID ) without legislative approval,” Patrick says.
The episode exposes Trump’s contextual relativism, which recognizes that the US has no purpose in world affairs. These misplaced choices may harm Americans themselves.
Yet as Trump complains about China’s supremacy, he’s paving the way for Asia’s biggest economy to grow its effect at America’s price. Beijing’s Belt and Road Initiative ( BRI ) expands its colossal infrastructure investment strategy around the world, especially in the Global South, by ending US development aid.
” None of these individuals has any thought of how the universe works,” says Stuart Stevens, a lifelong Republican strategist whose latest book is titled” The Conspiracy to Stop America.”” The country’s greatest authority wants to have as little impact as Liechtenstein. ” Either by design or unwittingly, Stevens says, the Trump-Musk label group is” going to give away National energy” to China and Russia.
Yun Sun, director of China programs at the Stimson Center, a Washington-based consider container, adds that any” decay of US management and credibility does gain China.”
That goes, also, for Chinese goods. There is confusion over why Trump’s Treasury Department gave Musk exposure to the US national payments system amid the legislation conflict in Washington.
Owners and Eastern central banks sat on hills of US Treasury securities are already sufficiently concerned about Washington’s persistently high inflation and US$ 36 trillion debt load. Then they may be concerned about a number of tech bros scurrying around Washington’s financial system for enigmatic reasons.
If Tokyo, which holds more than$ 1.1 trillion of US Treasuries, or Beijing, with$ 770 billion, doubt the sanctity of the reserve currency, it might result in titanically large debt sales and surging yields.
Though the economic fallout would rattle China’s 2025, the longer-term gains may be worth the short-term problems. It may, at a minimum, perform into Xi’s fingers as he works to export the yuan. The dollar’s influence on global commerce and finance increased over the past ten years ‘ Xi’s party.
On top of Trump’s extreme strength grabs, he’s pushing to implement another multi-trillion-dollar duty cut, wrestle decision-making power away from the Federal Reserve and apparently degrade the dollar. The odds of credit rating organizations allowing US debt to remain unchanged are decreasing.
Trump’s MAGA plan to end America’s low-cost, high-impact foreign aid programs to help fund tax cuts for the ultrawealthy is a blow to US influence abroad, according to Alan Yu, senior vice president at the Center for American Progress think tank.
Trump, Musk, and their allies are satisfied, but the aid attacks have also stifled trust and uncertainty among American allies and partners, which the United States relies on to maintain world security, Yusays.
The programs Trump is pausing, Yu explains”, strengthen the capabilities of partner nations, deter adversaries, and reduce the need for direct military intervention.”
In particular, he adds, the status of assistance to Ukraine, critical to sustaining Kyiv’s war effort against Russia, remains ambiguous. Military assistance to Taiwan, which relies on US training and equipment to deter Chinese aggression, has also been thrown into uncertainty.
To be sure, many observers think the tariffs will eventually be imposed. The justification is that you don’t talk about the power of trade restrictions and how crucial they are to rebuilding America. Also, the ways in which Xi is pushing back may have Trump’s gang of anti-China advisors, including Peter Navarro, apoplectic.
As such, says Dominique Dwor-Frecaut, chief US economist at advisory Macro Hive”, tariff increases are likely to proceed on two tracks. The long-term track is broad-based, gradual and meant to generate revenues and support reshoring. Meanwhile, the’ opportunistic’ track is country-specific, aggressive and meant to exert leverage on trade partners.”
Dwor-Frecaut notes that during his confirmation hearing, Treasury Secretary Scott Bessent explained that tariff policy had three objectives: revenue generation, reshoring and leverage in trade negotiations”. Because the goals for generating revenue and reshoring are long-term, permanent tariff increases are required. Also, this is likely to lift prices, possibly inflation, and lower growth.”
Thickening the plot, Xi’s party struck back with tit-for-tat tariffs on US energy, manufacturing and minerals while hitting Google with an antitrust investigation. Overall, economists and analysts say, it’s a reasonable and proportional response that leaves the door open to future negotiations.
According to Julian Evans-Pritchard, an analyst for Capital Economics China, “fairly modest” is how it sounds.
However, Ian Bremmer, CEO of Eurasia Group, believes that the prospect of a market-wrecking conflict between Washington and Beijing fundamentally misunderstands both the scope of Trump’s strategy and the nature of US-China relations during the Xi era.
According to Bremmer,” the most geopolitically significant relationship in the world is fundamentally adversarial and devoid of trust.” The Biden administration made a significant effort to create and maintain 25 high-level bilateral channels across the cabinet as the only reason it remained comparatively stable in 2024.
Team Trump, by contrast”, has no interest in putting in that kind of painstaking diplomatic work for a relationship they view as fundamentally adversarial,” Bremmer says”. Without those safeguards, there will be few management and communication strategies to stop even minor incidents from developing into major crises.
Can Trump get past this reality and coerce Beijing into signing a deal? Bremmer thinks not.
” The problem, “he says”, is that his strongman tactics only work against much weaker countries. When he threatens Colombia and Panama with tariffs, they have no choice but to capitulate because, in the event that their economies would collapse, they would have to. However, hitting down is simple. China is a completely different game. It has the power and leverage to retaliate against the US in ways that other nations cannot. And punch back it will.”
According to economist Alicia Garcia Herrero at Natixis, the question that no one can answer is whether Trump might respond to Beijing’s initial retaliation in broader ways. If]Trump ] doubles down, China will have a problem,” she notes.
Agatha Kratz, economist at the Rhodium Group, tells AFP that” given the current economic downturn, China cannot afford – and does not want – to impose excessive trade barriers. China’s economy is in a fragile state, and this limits its ability to act freely. Beijing cannot afford to take reckless actions, and I don’t think it wants to.”
The bottom line is that no one really knows, so perhaps it’s best to remain agile, says Yung-Yu Ma, chief investment officer at BMO Wealth Management”. Be patient and opportunistic – there may be a time to be aggressive, but it isn’t upon us yet,” Ma notes.
According to Ma,” President Donald Trump may be willing to let the US suffer a lot of economic pain in an effort to realize his stated goals of reducing trade deficits, bringing jobs to the US, and improving border security.”
We still anticipate that the US will impose more tariffs on China later this year as part of its larger trade goals, according to Morgan Stanley’s economists, which will only lead to further retaliatory actions from China.
Part of the issue is Trump’s frustration that efforts to date haven’t slowed China’s trajectory. That goes both for Trump 1.0 policies and those of Joe Biden’s White House”. From DeepSeek to Huawei, US tech restrictions on China are backfiring,” says Diana Choyleva at Enodo Economics.
In fact, Choyleva argues, US efforts to curb China’s technological advancements may be having the opposite effect: accelerating China’s move upmarket toward self-reliance and innovation.
Huawei, Huawei, and others are providing case studies on how China Inc. is developing workarounds for US chip and other tech export controls. Along with creating genuine obstacles, decoupling efforts are incentivizing domestic innovation.
China has other opportunities ripened by Trump’s tariffs. For one thing, they’ll cost America’s friends, particularly staunch US allies Japan, South Korea, Taiwan and certain governments in Southeast Asia.
Hard feelings between Washington and top Asian democracies could generate greater distrust, increasing China’s appeal as an alternative. It has given Xi the moral support she needs, and it has made her appear more committed to capitalist principles than tycoon Trump.
Xi’s party is still benefiting from Trump’s unilateral withdrawal from the Trans-Pacific Partnership trade agreement, which later became the Comprehensive and Progressive Agreement for Trans-Pacific Partnership ( CPTPP ) without the US.
Trump 2.0, in contrast, is clinging to misguided interests in bilateral trade agreements over wider efforts to establish a Chinese military fortress.
In particular, Carnegie’s Patrick notes, the demise of USAID is an early win for Beijing. Many innocent people around the world will pass away if the agency does. As for the United States ‘ continued reputation as a nation that values its own self-interest and values itself in international affairs, Patrick concludes,” so will it do so.”
Follow William Pesek on X at @WilliamPesek