Donald Trump’s suggestion this week that the 145 per cent tariff on Chinese goods would come down substantially and that his team was “actively” talking to Beijing reassured anxious investors and drove a rally on Wall Street. But Beijing on Thursday dismissed the president’s assertion that talks had started as “fake news” and set out its conditions for opening negotiations.
“If the US truly wants to resolve the issue, it should heed rational voices from the international community and domestic stakeholders, completely abolish all unilateral tariffs on China, and find a solution through equal dialogue,” said commerce ministry spokesman He Yadong.
Three weeks after Trump launched his tariff war, Chinese president Xi Jinping’s refusal to offer concessions or to negotiate under duress appears to have been vindicated. Beijing’s retaliatory tariffs and other measures including export bans on rare minerals had some effect in Washington but it has been the bond markets and American business that have coerced Trump into this week’s retreat.
Trump’s tariffs are already hurting Chinese exporters and the trade war will be costly for China even if it ends within a few months. But it has also created opportunities both domestically and internationally which Beijing has been quick to exploit.
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The Chinese leadership was preparing for a trade war with the US long before Trump came to office, and even during the Biden administration it had to adapt to economic sanctions. It knew that an effective response would have to operate at three levels: hitting back hard at Washington, improving relationships with other countries and strengthening its domestic economy.
The crisis created by the tariffs has offered the Communist Party leadership the ideal excuse to accelerate an economic policy shift that puts more emphasis on domestic consumption. Every week brings a new announcement of stimulus measures and the message has gone out from Beijing to provincial and municipal leaders across the country that the priority has changed.
Beijing’s robust response to Trump’s declaration of economic war against the world has been popular in China and admired elsewhere in the world. And Xi’s decision to sit back and wait for the markets to do their work was not only more dignified than the kowtowing approach of some other world leaders but also shrewder.
An Ipsos poll this month conducted in 29 countries saw America’s reputation fall across the world, with China placed in advance of the US for the first time in terms of playing a positive role internationally. Forty-six per cent thought the US would have a positive influence over the next 10 years, down from 59 per cent in October 2024.
Some 49 per cent said China would have a positive influence, up from 39 per cent six months ago. In October 2022, just 34 per cent saw China as a positive influence.
[ China warns countries about siding with US in trade dealsOpens in new window ]
Xi has been shoring up China’s relationships with neighbours in southeast Asia, visiting Vietnam, Malaysia and Cambodia last week. He met Kenyan president William Ruto in Beijing on Thursday and other leaders from the Global South, including Brazil’s Lula, are due to visit China in the coming weeks.
Trump’s behaviour towards America’s traditional allies has caused many of them, including the European Union, to reflect on their international relationships. European Commission president Ursula von der Leyen and European Council president Antonio Costa will meet Xi in Beijing for an EU-China summit in July.
Both sides are taking steps to reduce the friction in their relationship and China has taken an important step in agreeing to drop unilaterally the sanctions it imposed on a number of MEPs in 2021. The European Commission made this a precondition for reviving the Comprehensive Agreement on Investment (CAI) that was put on ice following the sanctions.
Brussels wants to make changes to the CAI and although the commission can bring the agreement back to life by sending it to the European Parliament and the council for approval, it cannot guarantee its success. The two sides are also talking about a deal on Chinese electric vehicles, which could see a minimum price set for them in the EU.
Europe has real problems with China over trade issues such as market access, and Beijing’s support for Russia in its war against Ukraine has done much to sour the relationship. But some of the European measures taken against China in recent years, such as limiting exports of semiconductor technology and excluding Huawei from telecommunications contracts, were inspired or even coerced by Washington.
Trump’s abandonment of America’s allies has made strategic autonomy essential, not only in defence but in foreign and economic policy. This also requires fresh, independent thinking about China.
