As Donald Trump prepares to enter his second term as U.S. President, China braces for renewed economic uncertainties with future of Chinese trade in doll drums. His previous term left lasting imprints on global trade, technology, and U.S.-China relations. Now, with Trump’s re-election, many are wondering how his policies might further impact China, particularly its economic trajectory. From proposed steep tariffs to Taiwan-related tensions, Trump 2.0 promises to shape not only U.S.-China relations, but potentially recalibrate global economic dynamics.
The Shadow of Trade Wars and Tariffs will affect Chinese Trade:
One of Trump’s key campaign promises was a sweeping 60% tariff on all Chinese imports, aiming to address perceived imbalances in U.S.-China trade. If implemented, this tariff could strike a severe blow to Chinese Trade & Economy. With U.S. demand for Chinese goods potentially declining due to price hikes from tariffs, China’s industrial and manufacturing sectors would likely be hit hard, especially small and mid-sized enterprises already reeling from domestic economic slowdowns.
China’s economy, projected to grow by around 5% in 2024, could see that number shaved down by approximately 2.5 percentage points under these tariffs, according to an analysis by UBS. Such a downturn could worsen China’s internal struggles: high youth unemployment, mounting property debts, and a precarious real estate market. With the Chinese economy heavily reliant on exports, the 60% tariff could act as a heavy brake on its recovery from a protracted slowdown.
In 2019, Trump’s tariff campaign affected over $360 billion worth of Chinese goods, a move that eventually led to a phase one trade agreement where China pledged to increase American goods imports. However, a subsequent review showed that China had fulfilled only a fraction of its commitments. This history suggests that while tariffs may force short-term concessions, long-term trade sustainability remains a complex issue.
Technology and the Next Front in U.S.-China Relations
Beyond tariffs, Trump has frequently signalled a tough stance on technology exchanges, with concerns about national security and intellectual property theft driving these policies. China’s rapid advancements in AI, 5G, and quantum computing are often viewed as direct challenges to U.S. dominance in tech. A re-elected Trump administration could restrict technology exports to China and might even extend previous restrictions on Chinese tech firms, a move that could impede China’s technological advancements and curb Beijing’s ability to innovate in critical sectors like AI and telecommunications.
The potential tightening of tech exchanges would not only affect trade flows but could reshape global tech supply chains. In recent years, several U.S. firms, wary of escalating U.S.-China tensions, have sought to diversify their manufacturing bases away from China, eyeing countries like India and Vietnam as potential alternatives. If Trump pursues a second round of tech restrictions, the trend of shifting supply chains may accelerate, ultimately undermining China’s role as a global manufacturing hub.
Taiwan: A New Flashpoint for Tensions
Another sensitive area in U.S.-China relations is Taiwan. Trump’s past engagements with Taiwan—particularly his 2016 phone call with then-President Tsai Ing-wen—marked a deviation from decades of diplomatic protocol and stoked tensions with Beijing. Trump’s comments during the recent campaign suggest he is likely to keep Taiwan as a significant bargaining chip. Trump warned of potentially even higher tariffs, up to 150-200%, should China attempt to annex Taiwan, signaling a staunch stance on protecting Taiwanese autonomy.
Given Taiwan’s strategic role as a major supplier of semiconductors—critical components in everything from smartphones to military equipment—any increased U.S. support for Taiwan’s defense could complicate U.S.-China trade further. While Beijing consistently reiterates its commitment to peaceful unification, Trump’s hard-line rhetoric and Taiwan’s essential role in global technology may introduce new geopolitical uncertainties.
China’s Economic Resilience Tested
China’s economy, the world’s second-largest, has navigated numerous challenges over recent years, from COVID-19 impacts to a sluggish real estate sector. The potential reimposition of tariffs and restrictions under Trump 2.0 would add yet another layer of economic strain. With rising government debt and growing unemployment rates, China faces considerable internal pressures. These factors compound the possible effects of external shocks like high tariffs, with some experts predicting a prolonged period of slower growth.
The high youth unemployment rate—recently hitting over 20%—could further complicate Beijing’s efforts to stabilize its economy in the face of a trade war. An increasingly disaffected younger generation might put pressure on the government to find solutions to a problem that tariffs and geopolitical tensions only worsen.
Implications for Global Trade and South Asia
As Trump’s administration recalibrates U.S.-China relations, countries across the globe may feel the impact of this shifting economic power balance. South Asian economies, including India, could see increased interest from international investors seeking alternatives to China as a manufacturing base. India, in particular, stands to benefit from U.S. businesses seeking to diversify their supply chains, especially in sectors like electronics and pharmaceuticals. However, an intensified trade war may slow global economic growth, hurting export-reliant emerging economies.
China’s response to these potential pressures remains unclear, though it has sought to diversify its trading partners and foster stronger regional trade networks, such as the Regional Comprehensive Economic Partnership (RCEP). Beijing’s aim appears to be insulating itself from external economic shocks by building stronger ties with neighboring Asian economies and expanding its Belt and Road Initiative.
A Call for Stability Amidst the Storm
Despite the Trump administration’s adversarial stance, China may prioritize stability in U.S.-China relations. Chinese President Xi Jinping’s recent congratulatory message to Trump emphasized cooperation over confrontation, signaling Beijing’s awareness of the economic toll continued hostilities could take. History has shown that while rivalry remains a significant factor in U.S.-China relations, both countries stand to benefit from cooperation, especially in areas like climate change, public health, and global economic stability.
As Trump embarks on a second term, the world will watch closely. China, aware of the stakes, may take steps to cushion its economy from external shocks, possibly intensifying its regional and domestic economic initiatives. Yet, the path forward is fraught with potential disruptions, and how both nations navigate this complex relationship will have global consequences.
