China is getting its ducks in a row for the inevitable escalation of trade tensions as Donald Trump prepares to assume the US presidency once again.
‘Great for China’
There is no love lost between the Asian nation and Donald Trump. The Economist observes that participants on Chinese social media refer to the former reality TV star as ‘Comrade Jianguo’ or ‘build the nation’, a backhander that espouses the view that Trump is so bad for America as to be great for China.
That said, Trump’s tariff proposals, which he has vowed to use most rigorously against imports from China, will leave the country with some questions about how it will return fire, economically speaking at least.
Leveraging lessons from the first trade war in 2018, Beijing is already gaming out its strategic response to Trump, with the aim of mitigating economic fallout, enhancing its ex-US resilience and fortifying its domestic market.
But the task might be tougher for the export monolith this time.
Back in pre-COVID 2018, when the first Trump administration started trade sanctions on China, the country was looking set to take over the US as the world’s largest economy.
Tougher this time
This year tells a different story, with China hobbled by debt, property and construction woes and the wounds of several harsh pandemic lockdowns.
Since the first go-round, the Asian giant has actively reduced its reliance on the United States, a shift reflected in global trade patterns. Exports to the US fell by 20% in 2023, while countries like Mexico supplanted China as the largest exporter to the US.
Despite this reduction, China has somehow managed to expand its share of global exports to 14%, increasing its dealings with war-embroiled Russia, Saudi Arabia, Argentina and Brazil as part of a diversified trade strategy.
To this end, China has launched a charm offensive aimed at bolstering ties with the European Union and other global partners – many of which are equally on notice following the US election – lifting sanctions on European officials and offering market access incentives.
And along with the charm comes the stoking of any potential divisions among US allies.
Some analysts believe that countries in Europe and Asia may resist aligning with aggressive US decoupling strategies, offering China opportunities to maintain its economic engagements and technological advancements while isolating the US diplomatically.
Along with the diplomatic endeavours, targeted retaliatory measures against American firms have become a cornerstone of China’s trade defence as it enters the new Trump era.
Wait and see approach
Recent actions against US companies operating in China, such as investigations into Calvin Klein and Bain and Company, indicate that the country may use asymmetric responses rather than sweeping economic moves – for now.
On the domestic front, Beijing has implemented monetary easing and credit-loosening measures to address internal vulnerabilities, including debt concerns and local government finances.
It has also been trying to galvanise consumer confidence and stimulate internal demand to offset potential trade shocks.
However, broader fiscal stimulus remains on hold, with authorities waiting to assess the scale of potential US actions before deploying significant economic interventions.
It’s clear Beijing is hoping to avoid any self-inflicted economic disruptions from large-scale financial manoeuvres like Treasury bond sales or yuan devaluation as it awaits the Trump presidency.
And although recent stimulus measures have been modest, analysts suggest Beijing could intensify interventions if Trump’s tariffs materialise, potentially targeting the critical housing sector.
As tensions rise, Beijing’s calculated preparations reflect a long-term strategy to weather external shocks while maintaining its global economic presence.
The evolving landscape indicates that any new trade confrontation will likely be as much about resilience as retaliation.