What are the potential implications of Donald Trump’s reelection for China and Sino-US relations? This Ask the Experts examines the three key areas of economic ties, security dynamics, and Taiwan relations. By exploring these interconnected realms, George Magnus, Sophia Gaston and Felix Brender 王哲謙 assess how a second Trump term could reshape US-China interactions and influence the broader geopolitical landscape.
Consequences of Trump 2.0 for the China’s economy
George Magnus
The re-election of Donald Trump, along with the red wave that swept through the nation is likely to have significant repercussions for China as Beijing purposefully tries to stabilise the economy in general, and the real estate and local government sectors in particular. To this end, the government announced a number of easing measures in September in the monetary, financial and real estate sectors, and revealed last week a 6 trillion yuan ($839 billion), 3-year, refinancing programme for some local government debt, and an option to re-allocate some 4 trillion yuan ($558 billion) of previously allocated infrastructure funds towards refinancing. Other funds would be made available or borrowed for shanty town development and to recapitalise large state banks.
These measures fall short of the kind of demand stimulus and economic model shift for which many economists inside and outside China have been calling. It is possible additional measures will be announced next month at the Central Economic Work Conference, or at the twin meetings next spring. However, the government remains committed to a mercantilist policy stance, in which it is prioritising industrial policies and exports.
New policy initiatives taken by the incoming Trump Administration, therefore, can be expected to be consequential for China.
If Washington cuts taxes to boost growth and deports many undocumented migrants, inflation and the fiscal deficit are likely to rise. This would cause the Federal Reserve to reverse monetary easing, thereby, pushing up the US dollar. The Yuan would then fall perhaps to around 7.20-7.30 to the US dollar, perversely accentuating imbalances in the economy, and boosting already strong exports and an already soaring trade surplus.
We will have to say if the restraints work: a Republican Congress might not support excessive tax cuts in an economy that is already quite robust, and could be spooked if the US bond market reacts badly to the prospect of escalating fiscal deficits and higher policy rates.
The direct China impact is via trade. During the election campaign, the Trump team advocated for 60 per cent tariffs on Chinese goods entering the United States, and for removal of China’s Most-Favoured-Nation status – given to trade partners to ensure non-discrimination vis-a-vis all nations that are WTO members. We cannot yet know how much of this was rhetoric and negotiation tactics and how much was serious intent, but the re-appointment of Trump’s former US Trade Representative, Robert Lighthizer, to this role suggests that Trump’s intent is to act.
New 60 per cent tariffs would be expected to apply to the 66 percent of goods imports from China subjected to tariffs in 2018-19, those goods tariffed by the Biden Administration earlier this year, and the rest. These could lower Chinese GDP growth by at least 0.5-0.75 per cent in 2025, assuming they came into effect in the summer or third quarter. The full year effect might be in excess of 1.5 per cent, unless Chinese exports were otherwise underpinned, as they were in the first Trump Administration, by a weakening Yuan and a recalibration of Chinese exports coming from third countries.
China could well react to any meaningful tariff initiatives by Washington differently from the tit-for-tat response that prevailed during the first Trump Administration. The simple reason, apart from the deterioration in bilateral relations since then, is that at the time, China still had US imports of goods to retaliate against. Now it barely does, whereas the United States has significantly more imports from China that it can sanction.
From an external standpoint, China might show its displeasure by allowing the Yuan to depreciate more significantly – say to around 7.60-8.00 – so as to offset part of the effect on Chinese goods shipped to the US. It could also target US firms directly with regulations or restraints, especially those that are close competitors in key sectors which China wants to lead or dominate. And it might tighten access to or ban the sale of critical raw materials, for example. The EU Commission has estimated that China accounts for over 50 per cent of production and or processing of 18 of 34 critical raw materials.
From a domestic standpoint, a new shock to growth and exports would be especially untimely, and we can imagine that the government might take new measures to stabilise the economy and commit to already uniquely substantial industrial policies and strategic emerging industries.
Whether the government would at that point change tack and finally use the opportunity to announce meaningful policies designed to boost household income and consumption is a moot point. It would be welcome, if long overdue, but it has resisted this until now and politically, it still seems a bridge too far and not in line with Xi Jinping’s agenda.
Consequences of Trump 2.0 for security
Sophia Gaston
The received wisdom is that President Donald Trump will govern with a laser focus on China, turbo-charging strategic competition and wielding the full force of tariffs and export controls as he pushes America towards self-sufficiency in contested industries. The US war machine will be oriented to pivot towards the Indo-Pacific, aiming to produce a massive build-up of munitions to match the astonishing pace of Chinese armament. A second Trump Presidency will expect and demand a robust security posture towards Beijing from all allies, and will make US strategic and security support conditional on these decisions.
There are also many aspects of American foreign policy towards China for which foresight will be more challenging. Not least of all, there are several structural factors that differ in the US-China relationship between Donald Trump’s first and second Presidential term, several of which are worth emphasising.
The first is that America’s allies have been persuaded, to varying degrees, of the risks posed by China and the need to move to a stronger security posture. The second is that America’s allies are no longer blind to the risks that President Trump’s prioritisation of national self-interest may lead to the diminishment of American security guarantees. The third is that climate action has taken on greater global urgency, and China has fostered new avenues of economic advantage through its supply chain dominance of vital net-zero technologies. The fourth is the event of Russia’s full-scale illegal invasion of Ukraine, and the role of China and other Western adversaries in the sustainment of its war machine. The fifth is the considerable challenges that China’s economy is experiencing and the pressure it places on President Xi to ensure his foreign policy ambitions align with economic growth objectives.
We can anticipate a greater emphasis on direct bilateral engagement between the American and Chinese leaders. While President Xi may expect openings from this personalised style of governance, he may in fact encounter a more hardened US President than in his first term, less flattered by relationship-building and more focused on short-term objectives to consolidate American power. President Trump will act first and foremost in the direct American national interest, which he conceives as entirely separate to and dominant towards the idea of a ‘higher’ global interest. In turn, President Xi may endeavour to lay traps that gift the impression of immediate victories, at the expense of structural advantage.
Both leaders are motivated to harness national capabilities in innovation and manufacturing to pursue domestic self-sufficiency and international market dependency in civilian and military technology. One possible weak spot for the Trump administration, however, lies in green innovation, which President Xi has harnessed as an economic and geopolitical instrument. Through its manufacturing dominance, Beijing has forged new incentives for both advanced and developing nations to become dependent on China in order to meet their net-zero targets. President Trump holds scant interest in climate action and therefore may not be motivated to engage in this area of competition, which would further embolden China as it consolidates global leadership of a common good.
President Xi will also be attuned to the impacts of a second Trump Presidency on allied cooperation. If Washington promotes acrimonious relationships with partners, which may find themselves in the cross-winds of its economic self-interest or without long-standing security guarantees, he could weaken America’s hand by diminishing the power of collective alignment. President Trump’s choices around the future defence of Ukraine and the pressure he chooses to exert on Beijing for its material support to Russia’s war effort, will be crucial in defining the nature of America’s new world view. Furthermore, the absence of the United States from imperfect but established international institutions would embolden China in its dual strategy of infiltrating these prestige bodies while also establishing its own rival forums.
It is President Trump’s position towards Taiwan and its independence which is most opaque. Certainly, he is not personally motivated by Taiwan’s status as a democracy or its right to self-determination in the same way as his predecessors. His desire to style himself as a President of peacetime could encourage him to conclude that the failure to defend Taiwan would lead to a fundamental degradation of the Indo-Pacific security and environment. However, the price for America maintaining its current regional posture will increase significantly for all allies. In the near term, China may choose to continue to uphold the intense pressure it has been exerting over Taiwan in order to test the early posture and intent of the Trump administration. Its posture in the years ahead will depend on how effectively the President can project deterrence in both economic and military terms.
President Trump will be tough on China, no doubt, but his tactics to strengthen America’s hand and the issues he champions will mark a clear departure from the Biden administration. This will present both distinct challenges and opportunities for Beijing, and reshape its geopolitical headroom.
Consequences of Trump 2.0 for Taiwan relations
Felix Brender 王哲謙
Trump is not just China’s less preferred candidate, but Beijing’s worst nightmare, largely due to his erratic decision-making. Such, at least, is the assessment of many Taiwanese commentators. While Washington’s purported China-sceptic consensus may have ensured that Biden’s and Trump 1.0’s decoupling policies ultimately hardly differed in substance, Biden was sure to deliver them in a more consistent manner and measured tone. A Harris administration would have symbolised continuation of approachable yet firm diplomacy shrouded in velvet when engaging with Beijing. Chinese analysts broadly align with their Taiwanese counterparts, including in the context of UstaS-Taiwan policy (unlike a large share of Chinese netizens who appear to relish the subversiveness of electing him and the prospect of four more years of headline-grabbing antics). Most fatalistically, perhaps, Peking University’s Jia Qingguo 贾庆国 and Wang Dong 王栋 anticipate a more confrontational and provocative US stance, providing Taiwan with greater military and other support and potentially hollowing out or even abandoning the One China policy. Others, such as Fudan University’s Wu Xin 吴心 and Tsinghua’s Yan Xuetong 阎学通 argue Beijing is better prepared for Trump’s second term. At any rate, speculation that any one misstep by Trump could provoke a definitive Chinese response is reminiscent of overblown claims about Putin’s red lines in Ukraine.
Against this backdrop, particularly boisterous voices that any one misstep by Trump or provocation of Xi Jinping—himself hardly a stranger to provocative moves—should equally be appraised with caution lest they inspire undue premature, undue compliance. In consequence, many Taiwanese hope Trump’s toughness on China will bring greater benefits to Taiwan, though his popularity there has waned since 2020.
But “being tough on China” does not guarantee gains for Taipei.
Trump’s transactional decision-making, coupled with a willingness to court autocrats renders him a tricky partner for Taiwan, too: In a world where striking ad hoc deals is paramount, there is little space for long-term strategic propositions, left alone ideological (or ideologically framed) commitment to an imagined community of democratic allies. Any sense of moral imperative or principle (or antipathy against “Communist China”) which might have informed US support for Taiwan to date are unlikely to feature in Trump 2.0, particularly with Republican pro-Taiwan figures such as Mike Pompeo and John Bolton absent from his inner circle. Trump’s capricious nature and populist urge to achieve camera-ready agreements make him equally likely to one day claim he would “bomb Beijing” (or, as he asserted more recently, raise import tariffs on Chinese products to 200%) were Zhongnanhai to give the green light for an invasion, and then the following day decide to squeeze Taiwan’s semiconductor industry.
Taiwanese policymakers, recognising the transactional shift in US relations, have been proactive in cultivating ties across Washington’s political spectrum, including with Trump’s camp—something few traditional US allies have done. Arms sales and economic competition—particularly in chips—are likely flashpoints going forward, as Trump himself indicated in an interview with Joe Rogan. Taipei has already pledged to boost arms purchases reported to be at a staggering US$15b in 2025 to meet Trump’s demand for a “protection fee,” but refuting baseless accusations about Taiwan pilfering the US chip industry may prove a more difficult task.
Ultimately, Taiwanese citizens are keenly aware that they may (continue to) be a pawn in the geopolitical rivalry between Beijing and Washington. Yet, as one passerby aptly noted in a series of BBC street interviews, it may be better to be a pawn than to be of no value—and therefore have no bargaining power at all. Factually, uncertainty vis-à-vis China has very much been a daily constant in Taiwan for decades, as has the question of how much international support Taiwan can rely on in case of an invasion. What has changed is the increasing global attention on Taiwan.
Still, it remains uncertain whether this will be enough to deter Trump from “selling Taiwan” to Beijing if the price is right—something John Bolton, widely respected in Taiwan for his book on his time in the Trump administration, suggested in a popular Taiwanese podcast could indeed happen. And then there is another wild card: Trump’s unquenchable need for popularity. For Taiwan, investing further in public diplomacy aimed at the American people could be a wise strategic move. Trump feeling his blasé attitude towards Taiwan might make him “look bad,” and being “friends” with Taiwan is preferable could have more impact on Taiwan’s future than many a chip deal.
This article gives the views of the authors, and not the position of the China Foresight Forum, LSE IDEAS, nor The London School of Economics and Political Science. The blog image, President Trump at the G20 by Trump White House Archived is in the public domain.
