Trade War II will put US-China relations to the test

The past 12 months compressed a decade’s unprecedented events into a single year. Last July saw an assassination attempt against incoming President Donald Trump and the collapse of Joe Biden’s second-term campaign.

Yet those headline-grabbing incidents were overshadowed by another development with an even more enduring impact on US politics – the Supreme Court’s sweeping ruling that presidents’ official actions are beyond the reach of prosecution.

In 2025, the intensifying presence of Trump is once again the overwhelming force animating the United States body politic. 

He has decisively moved from anomaly to primacy in American political life as the vox populi rewarded him and the Republican Party with not only the presidency but a majority in Congress as well.

Trump and his team likely know that the clock is already ticking on their fragile grip on power in the House of Representatives. In their second turn at the wheel, they will likely move with greater alacrity and dexterity in implementing Trump’s agenda. 

Long hangover

As a result, his presidency may be a rare instance in which the sequel proves even more gripping than the original.

His return to power is best understood as a symptom of the long hangover following the conspicuous failures of former US president George W Bush’s administration at the start of this century. 

Just as the Vietnam War shattered the legitimacy of the Democratic Party’s elite a generation earlier, the Iraq War, the Global Financial Crisis and the failure of two centrist Republicans to secure the presidency eroded the party’s credibility.

In his first term, Trump still had to contend with traditional Republicans in the Congressional leadership, but the majority of resistance has withered since then.

In his second term, the terms of the debate over China policy have shifted such that Trump will no longer personally define the outer limits of a hardline Beijing policy.

China hawks in his party have carried the President’s logic a step further. Some Republicans are calling for the revocation of China’s most-favoured-nation status.

And some hawks in his administration may see decoupling from China as the ultimate objective of his coming trade war. 

Trump has toggled between threats and entreaties toward China during the transition, but his comments suggest he wants a deal with Beijing rather than a divorce. 

If the first trade war is at all instructive, the scope, scale and intensity of the second will depend on the dynamics between a small group of advisers in his court. 

Stock market

Traditional economic considerations are likely to intrude only in the guise of the stock market, the fluctuations of which Trump sees as a real-time measure of his success. Downturns might inhibit his appetite for prolonging the tit-for-tat exchanges with Beijing.

The course of the second trade war will depend less on his opening gambit and more on how Beijing responds. 

The trajectory will also be determined by whether or not Trump tries to expand the scope of any negotiations beyond trade to encompass security issues in East Asia, as well as the impact of conflicts in Ukraine and the Middle East.

Beijing spent much of last year attempting to mollify Washington with gestures such as releasing detained US citizens and resuming counternarcotics cooperation with the United States – even as both sides continue to compete. 

Chinese President Xi Jinping’s relative forbearance may extend into the opening phases of a trade war, especially if he smells an opportunity for a ‘grand bargain.’ Beijing’s interest in that with Trump could come at a steep price. 

Indeed, the only outcome of a second trade war that might be more inimical to the region’s security than a downward spiral in US-China relations would be a ‘G2’ deal.

That would likely involve trading away Washington’s security commitments in exchange for promises from China that are unlikely to materialise.

‘Grand bargain’

Beijing will almost certainly use the prospect of a ‘grand bargain’ to advance its goal of undermining US alliances and commitments across the region. This will undo Biden’s work to fortify and stitch together US partners to cope with the China challenge.

Beijing’s recalcitrance about helping the United States resolve other burning international problems – notably the war in Ukraine and Middle East issues – may be the most likely way Trump is disabused of the notion that China is the answer to his problems, rather than the United States’ chief challenge.

Jonathan Czin is the Michael H Armacost Chair in Foreign Policy Studies at the Brookings Institution.

This edited article is part of an East Asia Forum special feature series on the year ahead and is republished under a Creative Commons license. Read the original here.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy of China Factor.