China is preparing for a potentially tumultuous and unpredictable future in its intensifying rivalry with the United States, following Donald Trump‘s remarkable political resurgence that has led him back to the presidency.

His return may result in tariffs reaching as high as 60% on Chinese imports, which could severely impact economic growth in the world’s second-largest economy and disrupt global supply chains. Additionally, increased technology restrictions and aggressive rhetoric towards Beijing could further escalate tensions in the already strained relations between the two superpowers.

However, Trump’s protectionist trade policies and transactional foreign policy approach might also undermine U.S. alliances and its global leadership role, creating opportunities for China to capitalize on America’s withdrawal and influence the development of an alternative global order.

Shen Dingli, a foreign policy analyst based in Shanghai, remarked, “Trump’s return to power will undoubtedly present both increased opportunities and heightened risks for China. The ultimate outcome—whether it results in more risks or opportunities—will hinge on the nature of interactions between the two nations.”

Officially, China has aimed to maintain a neutral position regarding Trump’s victory. The Foreign Ministry stated on Wednesday that it “respected” the decision made by the American electorate.

On Thursday, Chinese leader Xi Jinping extended his congratulations to Trump. Despite the deterioration of US-China relations during Trump’s previous term, he has consistently expressed admiration for Xi, referring to him as “a very good friend.”

According to a statement from the Chinese Foreign Ministry, Xi conveyed to the president-elect that China and the United States can “discover the right way” to “cooperate in the new era.”

However, beneath this composed exterior, Beijing is likely preparing for potential challenges and uncertainties.

Liu Dongshu, an assistant professor of international affairs at the City University of Hong Kong, noted, “Trump is an unpredictable individual. It remains unclear how he will execute, and to what degree, the policies he advocated during his campaign, and whether he will adhere to his agenda from his first term.”

High Tariffs

During Trump’s initial term, the outspoken populist, who vowed to restore America’s greatness, initiated a contentious trade conflict with China. He placed Huawei, a major Chinese telecommunications company, on a blacklist citing national security concerns and held Beijing accountable for the Covid-19 outbreak. By the conclusion of his first term, the relationship between the two nations had deteriorated to its lowest level in decades.

In his current campaign, Trump has threatened to impose tariffs of 60% on all Chinese-made products and to revoke China’s “permanent normal trade relations” status, which has afforded the country the most favorable trade conditions with the United States for over twenty years.

If implemented, this severe action could significantly harm an economy already struggling with a property crisis, declining consumer demand, decreasing prices, and increasing local government debt.

Investment bank Macquarie projects that at the extreme 60% tariff rate, China’s growth could be reduced by two percentage points, nearly half of the anticipated full-year economic growth rate of 5%.

Larry Hu, chief China economist at Macquarie, noted in a research report on Wednesday that a potential Trade War 2.0 could disrupt China’s current growth model, which heavily relies on exports and manufacturing as its primary growth engines.

This forecast seemed to resonate with investors, as Trump’s lead over Vice President Kamala Harris expanded on Wednesday, leading to a significant decline in both Chinese stocks and the yuan.

Tariffs function as a tax on imports, negatively impacting consumers in the imposing country and businesses that depend on imported raw materials and intermediate goods for their production processes. A major escalation in global trade tensions is expected to cause difficulties not only for China and the United States but also for other nations engaged in global supply chains.

In contrast to his Republican predecessors who were more traditional in their approach, Trump employs an unpredictable and unconventional policy-making style, which heightens Beijing’s uncertainty.

“Trump started his first term as a strong supporter of Xi Jinping, but later imposed tariffs and criticized Beijing during the pandemic,” remarked Daniel Russel, vice president of international security and diplomacy at the Asia Society Policy Institute.

“Consequently, Beijing is likely to approach the President-elect with caution, seeking to understand which version of Trump they will encounter and identifying potential opportunities,” added Russel, who previously served as the chief Asia advisor to former President Barack Obama.

Challenges and Opportunities

Experts suggest that Trump’s “America First” agenda and his transactional approach may inadvertently benefit Beijing.

“While Beijing is genuinely worried about the unpredictability of Trump’s policies towards China, it also recognizes that challenges can present opportunities,” stated Tong Zhao, a senior fellow at the Carnegie Endowment for International Peace.

“Even with concerns about a potential trade war, Beijing is confident that Trump’s stringent tariff measures will face significant backlash in Europe, allowing China to enhance its economic relationships with European nations and counteract U.S. efforts to further decouple technology and supply chains between China and the West,” he explained.

Trump’s long-standing skepticism towards NATO—having stated in February that he would not defend NATO allies who do not meet defense spending commitments against a potential Russian attack—along with his general disregard for international alliances and institutions, poses a risk to the American partnerships that President Joe Biden has diligently worked to strengthen in response to the challenges posed by a rising China.

This situation could provide Beijing with a timely advantage, as it grows increasingly frustrated with what it perceives as Washington’s strategy to encircle and contain China through an “Asian NATO.”

Furthermore, America’s potential shift towards isolationism under Trump may be seen as favorable by Xi, who has intensified his efforts to assert leadership in the Global South and to establish a new world order that is less influenced by Western powers.

Taiwan and Its Relations with Russia

Beijing may be exploring ways to leverage Trump’s affinity for negotiation, particularly regarding Taiwan. The Chinese Communist Party asserts sovereignty over the island, despite never having exercised control over it.

During the previous Trump administration, characterized by a strong stance against China, the United States enhanced its support for Taiwan through increased arms sales and diplomatic engagements. However, recent statements from Trump have raised doubts about the U.S. commitment to this democratic entity.

While campaigning, Trump accused Taiwan of “stealing” the semiconductor industry from the United States, suggesting that the self-governing democracy should compensate the U.S. for its defense.

Experts in the industry argue that Taiwan developed its semiconductor sector through a combination of strategic foresight, diligent effort, and significant investment. Additionally, the island has acquired the majority of its military equipment from U.S. manufacturers over the past few decades. Nevertheless, Trump’s campaign rhetoric has indicated a shift towards a more transactional perspective on Taiwan.

In an interview with the Wall Street Journal, Trump was asked whether he would resort to military action against a potential Chinese blockade of Taiwan. He responded that such a scenario was unlikely, as he believes Xi respects him and perceives him as “crazy.” Instead, Trump proposed imposing tariffs on Beijing ranging from 150% to 200%.

Zhao noted that Trump’s comparatively less vigorous stance on defending Taiwan might encourage Beijing to seek more concessions from Washington regarding the Taiwan issue. He suggested that China could employ both positive incentives and coercive tactics to persuade the United States to lessen its military and political backing for Taiwan.

Trump, who has often highlighted his favorable relationship with Russian President Vladimir Putin, has hinted that the US might push Ukraine towards a difficult peace agreement with Russia.

Ending the protracted conflict in Ukraine could alleviate a significant point of contention in China-Europe relations, but it might also complicate the growing alignment between Moscow and Beijing since Russia’s invasion, according to Liu from the City University of Hong Kong.

Liu stated that if US-Russia relations improve, it could create a rift between Russia and China, effectively driving them apart. He emphasized that Trump clearly views China, rather than Russia, as the primary adversary.

On Thursday, Putin congratulated Trump on his electoral victory and expressed his willingness to engage with the United States.

During a policy forum in Sochi, Russia, Putin remarked that Trump’s campaign statements regarding the resolution of the Ukraine conflict and the restoration of US-Russia relations “merit at least some attention.”

When asked if he was open to discussions with Trump, Putin replied affirmatively, stating, “Yes we are. We’re ready.”