Trump’s favorite enemy is China. Almost exactly six years after the first trade war between the two countries, the conflict is entering its second round. The US president opened with 10 percent tariffs on all Chinese goods. Now, the leadership in Beijing has retaliated – albeit with a delayed implementation and somewhat mild measures.
While Beijing signals both assertiveness and a willingness to compromise, the Chinese leadership has also taken steps in recent years to be better prepared for such conflicts. Fabian Kretschmer analyzes what these steps are and what ace the Chinese central bank could play.
Our second analysis also focuses on Trump’s threats, this time against Latin America. In the wake of Foreign Minister Marco Rubio’s recent visit, the US continues to pressure Panama. As a concession to the US, the country has even announced that it will not renew its membership of China’s New Silk Road.
Meanwhile, the People’s Republic practices restraint. Leonardo Pape writes how this could strategically benefit China’s relations with countries in the Global South.
Have a pleasant Wednesday
Almost exactly six years after the first trade war between the US and China, the conflict is entering its second round. After Donald Trump opened with 10 percent tariffs on all Chinese goods, the leadership in Beijing has responded. An additional 15 percent tariff will be imposed on coal and liquefied natural gas imports and 10 percent on oil and agricultural machinery from the US. The Ministry of Commerce has also introduced export controls on metals that are particularly important for the electronics industry.
The tariffs are more than a purely symbolic retaliatory move, but compared to Trump’s all-out attack, their scope is clearly limited. China’s crude oil imports from the US, for example, only totaled around six billion US dollars last year. Last year, China had already halved its US oil imports. US natural gas and coal imports combined were just over five billion US dollars. The antitrust investigations announced against Google, which is de facto blocked in China, are also unlikely to cause substantial damage to the US economy.
With its response, the government in Beijing projects strength, but also shows a willingness to compromise: The counter-tariffs will not enter into force from February 10. That would be enough time to reach a last-minute deal with US President Donald Trump. Much now depends on the announced telephone call between Trump and Xi Jinping.
In light of the tense economic situation, Beijing is unlikely to seek economic conflict with the United States at this time. Reactions from the Chinese media also suggest that the Communist Party leadership has no intention of escalating the conflict: Their coverage on Tuesday was strikingly restrained.
The business medium Caixin, renowned among entrepreneurs and investors, reported on the punitive tariffs as if it were just one piece of news among many. Even on Weibo, the country’s leading online platform, the topic had already vanished from the top ten news items by the evening. The government clearly did not want to stir up anti-American sentiment among the population, whose desire for revenge it would ultimately be unable to satisfy.
But even if Beijing wants to avoid conflict, it is also preparing for every scenario imaginable. In recent years, President Xi Jinping has transformed his economy at breakneck speed to prepare for Washington’s sanctions as best as possible. This includes the goal of becoming as self-sufficient as possible, particularly when it comes to future technologies. The Chinese leadership has also been trying to reduce the proportion of Chinese exports to the US.
And if push comes to shove, Beijing has various defense mechanisms at the ready. The central bank might use one of them as early as this Wednesday: It is expected to artificially devalue the renminbi to keep Chinese goods attractive in the US by offering a more favorable exchange rate. China already used this tactic in 2018 to cushion Trump’s punitive tariffs to a certain extent.
Furthermore, the one-party dictatorship has a whole array of economic sanctions at its disposal that would not be possible in a democratic state. For instance, US companies could be subtly excluded from public contracts or suddenly come into the sights of particularly meticulous supervisory authorities. The CP newspapers might also deliberately instigate boycott movements to incite Chinese consumers against US products.
Ultimately, however, it could be Donald Trump who plays into the hands of the People’s Republic of China: The more the US president offends his allies in Europe, East Asia and North America, the more actively they will seek equidistance between the US and China.
The transatlantic partnership that many Western countries sought during Joe Biden’s time in office may be over for the time being with Trump’s heavy-handed tariff policy. “It is already clear that the Trump administration is downgrading the EU as an interlocutor,” comments Noah Barkin, China expert at the German Marshall Fund. Fabian Kretschmer
The Chinese leadership would certainly have wished for a different start to the Year of the Snake. First, US President Donald Trump famously followed through with his tariff threats against the People’s Republic. Then US Secretary of State Marco Rubio traveled to Panama for his first foreign visit. He criticized China for allegedly exercising unauthorized control over the Panama Canal there.
The concern may generally be justified since China continues to expand its influence on the port infrastructure. But that Chinese soldiers are already stationed along the Canal, as Trump claims, is factually incorrect.
However, despite all the factual and rhetorical escalation from the US side, the party leadership in Beijing has been remarkably restrained towards Trump so far. This is not only evident in the relatively moderate reaction to the tariffs against China. The People’s Republic generally holds back from overly harsh criticism of the US.
Although China firmly distanced itself from direct responsibility for the fentanyl epidemic in the United States, it also signaled its willingness to negotiate and referred to possible alternative solutions to the tariffs. And so far, Beijing has not reacted at all to Panama’s announcement that it will not be renewing its membership of China’s Silk Road Initiative in 2026. Panama’s decision is seen as a mere concession to US interests.
During Rubio’s visit, Panama’s President Raúl Mulino reaffirmed his country’s sovereign rights over the Canal. However, he approached the USA in many other areas – including the end of the Silk Road involvement. Panama only opened diplomatic relations with the People’s Republic in 2017 and was the first country in Latin America to join the Silk Road Initiative.
Most countries in the Global South therefore want to preserve their strategic leeway when dealing with China, the USA and other powers. In Panama’s case, Jorge Heine, former Chilean ambassador to China and professor at Boston University, believes this is precisely where the Trump administration has made the mistake of aggressively attempting to force the country into its camp. This brings back bad memories in the region, which had long suffered under the imperial influence of the US. And even if the strategy sometimes works, Trump cannot stop Latin American countries from doing business with China, Heine said.
For the US, Panama’s announcement sounds like a political victory against China. However, Heine believes it could cost the country dearly. “What the Trump administration is doing will only bring the countries of Latin America closer to China, because it is not a policy of cooperation, but a policy of confrontation,” Heine told Table.Briefings. He sees no evidence that China poses a concrete threat to the neutrality of the waterway simply because the Hong Kong company CK Hutchison is active at the Panama Canal. Therefore, Trump’s questioning of Panamanian sovereignty over the Canal provokes all the more “fierce resistance” across the entire region.
From a Chinese perspective, Heine certainly sees this as a strategic advantage. Contrary to expectations, the United States currently does not primarily direct its tariffs and threats against the People’s Republic, but also against supposed partners such as Canada, Mexico, Panama or the EU. China benefits from these divisions. As far as the leadership in Beijing is concerned, the motto now is: “If your opponent makes mistakes, you shouldn’t stop them.”
In addition, the Chinese government seems to be trying to provide a contrast with its own behavior without drawing direct comparisons with the US. This may be particularly to its benefit outside the West. For example, while Trump openly considered taking over the Panama Canal and Greenland in January before the start of his presidency, Foreign Minister Wang Yi traveled across Africa and presented China as a reliable partner of the Global South. Later, Vice Premier Ding Xuexiang campaigned for free trade at the World Economic Forum in Davos, again without confronting the United States.
In response to the US tariffs, China announced it would bring the matter before the World Trade Organization. By doing so, it also assumes the role of an actor who respects global institutions and advocates the acceptance of an international regulatory framework.
One thing is sure: Self-promotion can’t hurt China, especially in the Global South. After all, the Trump administration is relatively popular there. In several polls before and after the US elections, Trump was positively viewed in key emerging markets such as Brazil, Indonesia and South Africa. The European Council of Foreign Relations (ECFR) partly explains this with Trump’s promises of peace, for example, in Russia’s war against Ukraine.
But even if Panama withdraws from the New Silk Road and Trump presents himself as an angel of peace, Beijing could benefit from his presidency in the Global South. After all, Trump reinforces the impression that the US, like other nations, is ultimately only looking out for its own interests, the ECFR argues. For countries outside the political West, this creates the perception of a “world à la carte” without clear alliances. The USA and China are increasingly considered interchangeable options for changing political and economic partnerships.
In Latin America and the Caribbean, 22 countries are currently members of the New Silk Road. China’s trade with Latin America has grown from around 18 billion US dollars in 2002 to over 450 billion US dollars in 2022. China has now replaced the US as the largest trading partner for most South American countries.
Towards the end of his first term in office, Trump had already tried to break up this growing entanglement between China and Latin America. His government deliberately pressured countries in the region to cancel development projects under the New Silk Road – with limited success. Most recently, the Chinese state-owned company Cosco opened a new mega port in Peru in November 2024 on the sidelines of the APEC economic summit.
Sinolytics is a research-based business consultancy entirely focused on China. It advises European companies on their strategic orientation and specific business activities in the People’s Republic.
Another effect of China’s growing car market: More and more families are traveling by car for the Spring Festival. But regardless of whether they are traveling by plane, train or car: On the last day of the Festival, Chinese travelers are automatically part of a veritable mass migration. Like here at the toll station of the Hefei-Nanjing Expressway near Chuzhou, Anhui. The motto here is: Keep your nerve – and pack a few tasty snacks.
Trump’s favorite enemy is China. Almost exactly six years after the first trade war between the two countries, the conflict is entering its second round. The US president opened with 10 percent tariffs on all Chinese goods. Now, the leadership in Beijing has retaliated – albeit with a delayed implementation and somewhat mild measures.
While Beijing signals both assertiveness and a willingness to compromise, the Chinese leadership has also taken steps in recent years to be better prepared for such conflicts. Fabian Kretschmer analyzes what these steps are and what ace the Chinese central bank could play.
Our second analysis also focuses on Trump’s threats, this time against Latin America. In the wake of Foreign Minister Marco Rubio’s recent visit, the US continues to pressure Panama. As a concession to the US, the country has even announced that it will not renew its membership of China’s New Silk Road.
Meanwhile, the People’s Republic practices restraint. Leonardo Pape writes how this could strategically benefit China’s relations with countries in the Global South.
Have a pleasant Wednesday
Almost exactly six years after the first trade war between the US and China, the conflict is entering its second round. After Donald Trump opened with 10 percent tariffs on all Chinese goods, the leadership in Beijing has responded. An additional 15 percent tariff will be imposed on coal and liquefied natural gas imports and 10 percent on oil and agricultural machinery from the US. The Ministry of Commerce has also introduced export controls on metals that are particularly important for the electronics industry.
The tariffs are more than a purely symbolic retaliatory move, but compared to Trump’s all-out attack, their scope is clearly limited. China’s crude oil imports from the US, for example, only totaled around six billion US dollars last year. Last year, China had already halved its US oil imports. US natural gas and coal imports combined were just over five billion US dollars. The antitrust investigations announced against Google, which is de facto blocked in China, are also unlikely to cause substantial damage to the US economy.
With its response, the government in Beijing projects strength, but also shows a willingness to compromise: The counter-tariffs will not enter into force from February 10. That would be enough time to reach a last-minute deal with US President Donald Trump. Much now depends on the announced telephone call between Trump and Xi Jinping.
In light of the tense economic situation, Beijing is unlikely to seek economic conflict with the United States at this time. Reactions from the Chinese media also suggest that the Communist Party leadership has no intention of escalating the conflict: Their coverage on Tuesday was strikingly restrained.
The business medium Caixin, renowned among entrepreneurs and investors, reported on the punitive tariffs as if it were just one piece of news among many. Even on Weibo, the country’s leading online platform, the topic had already vanished from the top ten news items by the evening. The government clearly did not want to stir up anti-American sentiment among the population, whose desire for revenge it would ultimately be unable to satisfy.
But even if Beijing wants to avoid conflict, it is also preparing for every scenario imaginable. In recent years, President Xi Jinping has transformed his economy at breakneck speed to prepare for Washington’s sanctions as best as possible. This includes the goal of becoming as self-sufficient as possible, particularly when it comes to future technologies. The Chinese leadership has also been trying to reduce the proportion of Chinese exports to the US.
And if push comes to shove, Beijing has various defense mechanisms at the ready. The central bank might use one of them as early as this Wednesday: It is expected to artificially devalue the renminbi to keep Chinese goods attractive in the US by offering a more favorable exchange rate. China already used this tactic in 2018 to cushion Trump’s punitive tariffs to a certain extent.
Furthermore, the one-party dictatorship has a whole array of economic sanctions at its disposal that would not be possible in a democratic state. For instance, US companies could be subtly excluded from public contracts or suddenly come into the sights of particularly meticulous supervisory authorities. The CP newspapers might also deliberately instigate boycott movements to incite Chinese consumers against US products.
Ultimately, however, it could be Donald Trump who plays into the hands of the People’s Republic of China: The more the US president offends his allies in Europe, East Asia and North America, the more actively they will seek equidistance between the US and China.
The transatlantic partnership that many Western countries sought during Joe Biden’s time in office may be over for the time being with Trump’s heavy-handed tariff policy. “It is already clear that the Trump administration is downgrading the EU as an interlocutor,” comments Noah Barkin, China expert at the German Marshall Fund. Fabian Kretschmer
The Chinese leadership would certainly have wished for a different start to the Year of the Snake. First, US President Donald Trump famously followed through with his tariff threats against the People’s Republic. Then US Secretary of State Marco Rubio traveled to Panama for his first foreign visit. He criticized China for allegedly exercising unauthorized control over the Panama Canal there.
The concern may generally be justified since China continues to expand its influence on the port infrastructure. But that Chinese soldiers are already stationed along the Canal, as Trump claims, is factually incorrect.
However, despite all the factual and rhetorical escalation from the US side, the party leadership in Beijing has been remarkably restrained towards Trump so far. This is not only evident in the relatively moderate reaction to the tariffs against China. The People’s Republic generally holds back from overly harsh criticism of the US.
Although China firmly distanced itself from direct responsibility for the fentanyl epidemic in the United States, it also signaled its willingness to negotiate and referred to possible alternative solutions to the tariffs. And so far, Beijing has not reacted at all to Panama’s announcement that it will not be renewing its membership of China’s Silk Road Initiative in 2026. Panama’s decision is seen as a mere concession to US interests.
During Rubio’s visit, Panama’s President Raúl Mulino reaffirmed his country’s sovereign rights over the Canal. However, he approached the USA in many other areas – including the end of the Silk Road involvement. Panama only opened diplomatic relations with the People’s Republic in 2017 and was the first country in Latin America to join the Silk Road Initiative.
Most countries in the Global South therefore want to preserve their strategic leeway when dealing with China, the USA and other powers. In Panama’s case, Jorge Heine, former Chilean ambassador to China and professor at Boston University, believes this is precisely where the Trump administration has made the mistake of aggressively attempting to force the country into its camp. This brings back bad memories in the region, which had long suffered under the imperial influence of the US. And even if the strategy sometimes works, Trump cannot stop Latin American countries from doing business with China, Heine said.
For the US, Panama’s announcement sounds like a political victory against China. However, Heine believes it could cost the country dearly. “What the Trump administration is doing will only bring the countries of Latin America closer to China, because it is not a policy of cooperation, but a policy of confrontation,” Heine told Table.Briefings. He sees no evidence that China poses a concrete threat to the neutrality of the waterway simply because the Hong Kong company CK Hutchison is active at the Panama Canal. Therefore, Trump’s questioning of Panamanian sovereignty over the Canal provokes all the more “fierce resistance” across the entire region.
From a Chinese perspective, Heine certainly sees this as a strategic advantage. Contrary to expectations, the United States currently does not primarily direct its tariffs and threats against the People’s Republic, but also against supposed partners such as Canada, Mexico, Panama or the EU. China benefits from these divisions. As far as the leadership in Beijing is concerned, the motto now is: “If your opponent makes mistakes, you shouldn’t stop them.”
In addition, the Chinese government seems to be trying to provide a contrast with its own behavior without drawing direct comparisons with the US. This may be particularly to its benefit outside the West. For example, while Trump openly considered taking over the Panama Canal and Greenland in January before the start of his presidency, Foreign Minister Wang Yi traveled across Africa and presented China as a reliable partner of the Global South. Later, Vice Premier Ding Xuexiang campaigned for free trade at the World Economic Forum in Davos, again without confronting the United States.
In response to the US tariffs, China announced it would bring the matter before the World Trade Organization. By doing so, it also assumes the role of an actor who respects global institutions and advocates the acceptance of an international regulatory framework.
One thing is sure: Self-promotion can’t hurt China, especially in the Global South. After all, the Trump administration is relatively popular there. In several polls before and after the US elections, Trump was positively viewed in key emerging markets such as Brazil, Indonesia and South Africa. The European Council of Foreign Relations (ECFR) partly explains this with Trump’s promises of peace, for example, in Russia’s war against Ukraine.
But even if Panama withdraws from the New Silk Road and Trump presents himself as an angel of peace, Beijing could benefit from his presidency in the Global South. After all, Trump reinforces the impression that the US, like other nations, is ultimately only looking out for its own interests, the ECFR argues. For countries outside the political West, this creates the perception of a “world à la carte” without clear alliances. The USA and China are increasingly considered interchangeable options for changing political and economic partnerships.
In Latin America and the Caribbean, 22 countries are currently members of the New Silk Road. China’s trade with Latin America has grown from around 18 billion US dollars in 2002 to over 450 billion US dollars in 2022. China has now replaced the US as the largest trading partner for most South American countries.
Towards the end of his first term in office, Trump had already tried to break up this growing entanglement between China and Latin America. His government deliberately pressured countries in the region to cancel development projects under the New Silk Road – with limited success. Most recently, the Chinese state-owned company Cosco opened a new mega port in Peru in November 2024 on the sidelines of the APEC economic summit.
Sinolytics is a research-based business consultancy entirely focused on China. It advises European companies on their strategic orientation and specific business activities in the People’s Republic.
Another effect of China’s growing car market: More and more families are traveling by car for the Spring Festival. But regardless of whether they are traveling by plane, train or car: On the last day of the Festival, Chinese travelers are automatically part of a veritable mass migration. Like here at the toll station of the Hefei-Nanjing Expressway near Chuzhou, Anhui. The motto here is: Keep your nerve – and pack a few tasty snacks.
