President Xi Jinping recently called President-elect Trump to congratulate him on his election win but also warned that the U.S. would “gain from cooperation and lose from confrontation” with China. The Chinese Communist Party must prepare for deeper tensions as Trump has vowed to bring back the trade war of his last presidency with blanket tariffs. Xi Jinping emphasized the importance of a stable, healthy, and sustainable China-U.S. relationship, stating that it serves the common interests of both countries. He urged the two sides to enhance dialogue, peacefully coexist, and find ways to cooperate for the benefit of the two countries and the world.
Republicans recently captured control of the Senate and have favorable prospects in the undecided race for power in the House. With both chambers in Congress and the presidency, Trump would have little standing in his way to impose steep sanctions against China. U.S.-China relations have worsened in recent years not only on trade but also due to China’s threats against U.S. allies in the South China Sea and espionage activities against American military bases. During his first term, Trump increased duties by at least 10% on over $300 billion worth of goods, and Biden has not lifted these tariffs. Additionally, export controls on various items have continued under Biden, further straining the relationship between the two countries.
There have been reports that Trump has proposed a 10% tariff on all U.S. imports and a 60% tariff on Chinese-made products. If tariffs are raised to 60%, it could reduce China’s exports by $200 billion and cause a one percentage point drag on its GDP. This could have a significant impact on China’s economy, as last year, it exported about $500 billion worth of goods to the U.S., accounting for around 15% of all its exports. Mainland China and Hong Kong stocks fell following the news of Trump’s election win, while China’s exports surged in October in anticipation of potential tariffs imposed by Trump next year.
In response to a possible increase in tariffs, China has been taking key steps to bolster its markets and economy. Beijing is expected to announce a stimulus package to aid its ailing economy, as consumer spending remains lackluster and deflation is a concern. Recent increases in tariffs on electric vehicles by the U.S. and Europe have further darkened the trade outlook in a market where China has traditionally held dominance. China has an arsenal of responses to potential U.S. tariffs, including imposing duties on U.S. agricultural imports, export controls on critical minerals essential for U.S. defense, and targeting U.S. companies with interests in China.
The current economic situation between the U.S. and China remains tense, with both countries taking measures to protect their interests and economies. While there are hopes for cooperation and dialogue to resolve differences, deepening tensions over trade and security issues continue to strain the relationship. The dynamics between the two countries could have far-reaching implications not only for their individual economies but also for global trade and geopolitical stability. It remains to be seen how the new U.S. administration under President-elect Trump will navigate these challenges and interact with China in the coming years.
