Likely Second Trump term makes decoupling and escalation of conflicts inevitable – his policies on trade and securitization leave no room for co-op

By the spring of 2024, China had settled with the reality that the possibility of a second Trump presidency is not only real, but also significant. According to the national polling organization FiveThirtyEight, by May 22, 2024, former U.S. President Donald Trump has a 0.9% lead to President Joe Biden in the national presidential polls, at 41.1% versus Biden’s 40.2%. The guilty verdict in the criminal trial does not seem to have a major impact over the voters, which still is reflected in a 1.7% percent lead by Trump according to FiveThirtyEight on May 30.

The result of the U.S. election is hard to predict and could change in any direction until Election Day. However, it would not be an overstatement to say that Trump has a fair and considerable chance to win. Consequently, Beijing must prepare for potential escalation with the United States on multiple fronts, as well as heightened uncertainty and volatility.

Does China prefer Trump or Biden?

The train has left the station long ago on which candidate China prefers. Chinese experts have publicly proclaimed that whoever the winner is, both candidates are “poison” for China. In their view, Biden might bring more stability to bilateral relations, but his competition strategy has been quite effective economically and diplomatically, leaving China’s high-tech industry and diplomatic offensive in limbo. In comparison, Trump’s position on U.S. alliances and partnerships and the damage he might cause serves Beijing’s strategic agenda in the long run. Yet in the short term, Trump’s unpredictability and his use of maximum pressure will put China in extremely difficult corners, making him the less desirable option from China’s perspective.

For Chinese officials and elites who had to suffer through the free fall of U.S.-China relations during the last year of the Trump administration, it is mind-boggling and emotionally traumatizing to imagine another Trump term and how China could work with it. However, since China is more on the passive receiving end of the result of the U.S. presidential election, rather than in the position to actively shape the election’s result, which candidate China prefers is seen as a null question. After all, it is not China’s choice anyway. But given the real prospect that Trump could win the reelection, the pressing question for Beijing is how to tackle Trump, his team, and his China policies.

The U.S.-China trade war may escalate under Trump

In the current Chinese assessment, a second Trump term will most likely see a tougher U.S. stance on trade and economic relations with China, leading to further decoupling of the two economies. Earlier this year, Trump floated tariffs of 60% or higher on all Chinese goods and a 10% across-the-board tariffs on goods from all points of origin, as part of his campaign rhetoric.

If his first term serves as a precedent, such tariffs will not be just an empty threat. The Chinese Ministry of Commerce has called the trade war under Trump’s first term “the largest trade war in the history of global economy.” Following his 2016 campaign promises, on March 22, 2018, Trump imposed Section 301 tariffs on $60 billion worth of Chinese products to force China to change its “unfair trade practices.”] On July 6, 2018, an additional 25% tariff was imposed on $34 billion worth of Chinese products. The Chinese Ministry of Commerce retaliated on the same day with China’s own 25% tariff on $34 billion worth of American products, including soybeans, one of the most important agricultural exports from the United States to China.

However, also as illustrated by Trump’s first term, China does not have the ability to retaliate against the United States on an equal footing. With the imbalance in U.S.-China trade and the fact that the United States runs a significant trade deficit, obviously China could not impose the same total amount of tariffs on U.S. exports to China. In 2023, U.S. exports to China were worth $147 billion, while Chinese imports to the United States were worth $427 billion. That simple fact determines that China does not have as much leverage to impose tariffs on U.S. exports to China. And one should not forget that China direly needs some of the goods that the United States exports to China, such as high-end semiconductor chips, so imposing tariffs on these, even for retaliatory purposes, is not in China’s interest.

Nevertheless, China will put up a fight if the trade war is to escalate. After all, Beijing also has to deal with internal pressure and external optics. Years of taking a harsh stance toward the United States under Chinese President Xi Jinping has put Chinese nationalism on steroids, which in turn backs Beijing into a corner. Escalation and volatility will be the result.