Many were bracing for an immediate and harsh escalation of US-China trade tensions upon Donald Trump’s return to the White House on January 20. 

For months, his campaign rhetoric had hinted at aggressive measures targeting Chinese exports, with some fearing tariffs as high as 60% on goods flowing from the world’s second-largest economy into American markets. 

But his opening moves, though disruptive, were not the sledgehammer many had anticipated. Instead, they signaled a potential path toward negotiation, leaving room for cautious optimism in Beijing and among certain market watchers.

The initial volley—a 10% tariff threat linked to China’s role in America’s opioid crisis, particularly in relation to fentanyl—was enough to rattle markets. The CSI 300 index fell by 1%, Hong Kong’s Hang Seng slid 1.6%, and the offshore renminbi weakened slightly against the dollar.

Yet, the threatened measures paled in comparison to the blanket 25% tariffs Trump announced for Mexico and Canada. For Beijing, it seems that this restraint is a signal that the door to dialogue remains open, at least for now.

Strategic opening gambit

Trump’s initial moves suggest a calculated strategy. By pairing the tariff threat with an investigation into China’s broader trade practices, he has given both sides room to maneuver. 

While this approach is unlikely to erase the deep mistrust that has built up over years of economic competition, it does create an opening for constructive talks. Beijing, accustomed to Trump’s erratic style, is no doubt taking note of this measured prelude.

Trump said on Tuesday that he had spoken to Chinese President Xi Jinping days before his second inauguration, in a call in which they discussed trade, fentanyl and TikTok, according to news reports. “We didn’t talk too much about tariffs, other than he knows where I stand,” Trump said according to reports.

“Look, I put large tariffs on China. I’ve taken in hundreds of billions of dollars. Until I was president, China never paid not 10 cents to the United States,” Trump said.

China’s leadership appears to understand that Trump’s transactional approach to international relations often leaves room for deals. His hinted linkage of trade tariffs to the future of TikTok—a Chinese-controlled social media platform that has drawn scrutiny from US security hawks—underscores this point.

A deal that addresses Washington’s security concerns while preserving some economic ties could serve as a template for broader agreements. The Chinese government, already faced with a slowing economy, entrenched property crisis and mounting debt pressures, has little appetite for a full-scale trade war with the US. 

The fallout from the last round of US-China tariff battles, which strained supply chains and weighed on growth, will be fresh in policymakers’ minds. With global demand uncertain and domestic challenges piling up, Beijing likely sees negotiations as a way to stabilize its economic outlook.

For Trump, a deal with China represents a significant political opportunity. While his base often celebrates his confrontational stance, it also values results. A trade agreement that delivers concessions on issues like intellectual property theft, fentanyl exports or market access for US firms would allow Trump to claim victory without tipping the global economy into chaos.

At the same time, Trump’s tendency to view economic policy through the lens of personal branding complicates the picture. His willingness to reverse course or shift priorities based on perceived political gains could undermine the consistency needed for successful negotiations. 

Yet, this unpredictability may also work in his favor, creating opportunities to extract concessions from Beijing in exchange for scaling back his more extreme threats. The critical question now is what kind of deal would satisfy both sides. 

For the US, a meaningful agreement would need to address longstanding grievances such as forced technology transfers, intellectual property theft and the two sides’ yawning trade imbalance. For China, the priority will be securing relief from tariffs while preserving its sovereign control over key industries and technologies.

One possible area of compromise could be technology regulation. If Beijing agrees to stricter controls on data security, Washington might ease restrictions on Chinese tech companies now operating in the US, not least TikTok. Another potential avenue is joint commitments to supply chain resilience, which could help both economies weather future disruptions while fostering a sense of mutual benefit.

Risks to optimism

Of course, the risks to a potential deal remain significant. Trump’s unpredictability and penchant for last-minute demands could derail progress, as could hardliners on both sides who view compromise as weakness. Additionally, any agreement would need to address deep-seated structural issues, a task that may prove too complex for short-term diplomacy.

There is also the matter of trust—or the lack thereof. Years of tension have left both sides wary of each other’s intentions. And any agreement would likely face scrutiny from domestic constituencies eager to portray the other side as an unreliable partner.

Still, the mere possibility of negotiations has provided a glimmer of hope in an otherwise fraught relationship. For markets, Trump’s softer-than-expected opening has already delivered a sense of relief, even as uncertainty lingers. For businesses, it suggests that a return to the trade chaos of years past is not yet a done deal.

Ultimately, the road to a deal will be fraught with challenges. But the fact that both sides appear willing to engage in dialogue is a positive sign. Trump’s approach, while far from conciliatory, leaves room for pragmatism. 

For Beijing, the focus will be on crafting a deal that stabilizes its economy without conceding too much ground. For Washington, the challenge will be to balance toughness with the need for tangible results.

Article Source : asiatimes Website