As the U.S. President-Elect Donald Trump renews his threats of imposing additional tariffs on China, Beijing is taking calculated steps to counteract and bring Washington to the negotiating table. Analysts suggest that China’s strategies aim to avert a full-blown trade war while safeguarding its fragile economy.
In recent moves, China launched an antitrust investigation into U.S. tech giant Nvidia, following its restrictions on rare mineral exports to the U.S. This signals Beijing’s intention to strengthen its position in future trade discussions.
Building Bargaining Chips
China has learned lessons from the previous trade war during Trump’s first term. It is now leveraging its dominance in key sectors like electric vehicles and green energy. While China cut its reliance on American- products such as Boeing aircraft, replacing them with Airbus and domestic alternatives like the Comac C919, it still heavily depends on U.S.-made advanced microchips and high-tech equipment. Analysts emphasize that another trade war could hurt China more than the U.S., given Washington’s ability to impose higher import duties and disrupt supply chains.
Renewing Agreements and Ensuring Supply
Beijing is keen on renewing the U.S.-China Science and Technology Agreement, which lapsed in August, before Trump’s inauguration in January. The agreement facilitates scientific collaboration between the two nations. Alicia Garcia-Herrero, Chief Economist for Asia Pacific at Natixis, highlighted the urgency, noting that while Chinese companies like Huawei are investing in chip-making technologies, their commercial viability remains uncertain.
Economic Incentives for Negotiations
China may offer increased purchases of American oil and liquefied natural gas (LNG) as bargaining tools. "The U.S. is producing more oil and gas than it consumes, and this surplus creates an opportunity for China to provide demand support," said Bo Zhengyuan, a partner at Plenum, a Shanghai-based consultancy. However, tensions persist. Some U.S. businesses report challenges in accessing the Chinese market.
Political Dimensions of Trade Tensions
Beyond economics, political issues are complicating trade relations. Donald Trump has promised more tariffs on Chinese goods to pressure Beijing into combating fentanyl trafficking into United states. These politically motivated trade restrictions, analysts warn, could make negotiations more difficult.
"Using political reasons for trade curbs mirrors China's approach of penalizing trading partners over disagreements on human rights or geopolitical issues," said George Magnus, a research associate at Oxford University’s China Centre.
Despite the challenges, both nations appear to recognize the importance of dialogue to manage their intertwined economic futures. The coming months will likely reveal whether negotiations or escalating tariffs will define the next chapter of U.S.-China trade relations.