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    Home»World Economy

    China sees room to avert trade war with Donald Trump despite tariff threat

    Team_NewsStudyBy Team_NewsStudyJanuary 22, 2025 World Economy No Comments5 Mins Read
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    Chinese language officers have been ready for Donald Trump to ship dangerous information on his return to the US presidency: instant 60 per cent tariffs on exports that would deal a critical blow to the world’s second-largest economic system. 

    What they obtained as a substitute appeared delicate. Trump first ordered an investigation into US-China trade, earlier than on Tuesday reiterating the specter of a ten per cent tariff associated to the lethal opioid fentanyl.

    That was sufficient to hit China’s shares and foreign money. The mainland’s CSI 300 index fell 1 per cent and Hong Kong’s Grasp Seng retreated 1.6 per cent on Wednesday, whereas the offshore renminbi weakened 0.25 per cent.

    Nonetheless, Trump’s opening strikes on China have been much less extreme than the 25 per cent tariffs he introduced on US allies Mexico and Canada. He additionally hinted at a potential broader deal linking tariffs to possession of TikTok, the Chinese language-controlled short-video platform that US safety hawks need to shut down.

    Regardless of Trump’s tendency for erratic statements and fast modifications in fact, this softer than anticipated prelude has rekindled hope in Beijing that negotiations could be doable to avert a second commerce battle. Now, the query is what sort of deal could be acceptable to either side. 

    “There’s a chance that the 2 sides can strike a deal — you’ll be able to sense there may be cautious optimism,” stated Zhao Minghao, professor on the Institute of Worldwide Research at Fudan College in Shanghai. “However we might want to see if there’s a good match between what Trump and Beijing can provide one another.”

    TikTok chief government Shou Zi Chew attended Donald’s Trump’s inauguration in Washington © Julia Demaree Nikhinson/Pool/Reuters
    The three men in suits looking to their right
    China’s vice-president Han Zheng, left, with Chinese language ambassador to the US Xie Feng and Rupert Murdoch on the inauguration © Chip Somodevilla/Pool/AP

    Trump and China’s President Xi Jinping held a phone call the weekend earlier than the inauguration, their first in 4 years, which the US president described as “excellent” and coated “Commerce, Fentanyl, TikTok, and lots of different topics”.

    Xi additionally dispatched essentially the most senior Chinese language official to ever attend a US inauguration, vice-president Han Zheng, who additionally met US enterprise leaders together with Trump confidant Elon Musk.

    Throughout his marketing campaign, Trump had vowed to hit China with 60 per cent tariffs upon taking workplace, and later threatened an additional 10 per cent on day one to compel Beijing to crack down on flows of precursor medicine for fentanyl.

    As a substitute, on Monday he issued a memo directing officers to research the US commerce deficit and “suggest acceptable measures, equivalent to a world supplemental tariff or different insurance policies, to treatment such deficits”. 

    He additionally requested the US Commerce Consultant to review Beijing’s compliance with the “section one” deal agreed throughout his first time period as president, and to think about extra tariffs “significantly with respect to industrial provide chains and circumvention by third international locations” — a transfer with doubtlessly a lot further-reaching implications for China.

    Economists consider a part of China’s commerce with the US has been diverted by third international locations to keep away from tariffs for the reason that commerce battle of Trump’s first administration. The US officers are resulting from report their findings on April 1. 

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    Though Trump signed an order permitting TikTok to function for 75 days — a turnaround from his first time period, the place he had sought to ban it from the US — he additionally stated Beijing would wish to permit a US entity to take half of the corporate or face tariffs of as much as 100 per cent. 

    The linking of tariffs to TikTok’s possession adopted quixotic remarks on Monday by Musk, who complained that whereas the previous was allowed to function within the US, his social media website X was blocked in China. 

    One particular person conversant in the matter in China stated Beijing may comply with TikTok’s proprietor ByteDance promoting the platform as a part of a broader deal that may cowl a variety of points together with commerce. Nevertheless, any such discussions have been at an early stage, the particular person stated. 

    Chinese language officers, who’ve lengthy opposed a compelled sale of TikTok and would wish to approve it, have in latest days appeared to sign a extra hands-off strategy.

    “On the subject of actions such because the operation and acquisition of companies, we consider it ought to be independently determined by corporations in accordance with market rules,” the overseas ministry stated on Tuesday, including that “China’s legal guidelines and laws ought to be noticed”.

    Line chart of CSI 300 showing Chinese stocks fell after Trump’s inauguration

    Gabriel Wildau, managing director at consultancy Teneo, wrote in an analyst observe that Chinese language leaders may “consider that an amicable decision of the TikTok subject may lay groundwork for co-operation” on different points.

    “These may embody tariffs, export controls, and — in a dream situation for Beijing — even US coverage in direction of Taiwan and the South China Sea,” Wildau stated.

    Nevertheless, economists warned that it was too early to be assured that commerce battle may very well be averted. Whereas Trump sounded extra open to dealmaking, his administration was filled with China hawks, they stated.

    Really useful

    President Donald Trump and China’s President Xi Jinping wave to a crowd from a stage with a US and a Chinese flag

    “That is extra of a holding sample for now,” stated Fred Neumann, chief Asia economist at HSBC. “It’s considerably encouraging that we didn’t see a direct rise and tariffs and that perhaps there may be some room for discussions beforehand. However I feel it could be the unsuitable conclusion to say that China is now fully off the hook.”

    Other than commerce, Beijing may provide Trump assistance on different points, equivalent to resolving the Ukraine battle, stated Wang Chong, a overseas coverage skilled at Zhejiang Worldwide Research College.

    Wang warned, nonetheless, that Beijing was ready if relations broke down. Even when the US began with small tariff will increase, it could undermine investor confidence in China. “If tariffs are imposed, China ought to struggle,” Wang stated.

    Extra reporting by Arjun Neil Alim in Hong Kong



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