Dealing With China

Beijing Seeks to Avoid Escalation

Beijing is preparing an initial proposal aimed at preventing further tariff hikes and technology restrictions from the Trump administration. The move signals China's willingness to restart trade negotiations, though the offer is expected to reignite debates in Washington over how to engage with Beijing.

The proposal, according to sources familiar with Beijing’s strategy, largely focuses on revisiting a previous trade agreement that was never fully realized. This approach is likely to divide opinions among U.S. policymakers on the best way forward.
Despite the White House imposing a 10% tariff on Chinese goods in response to Beijing’s failure to curb the flow of fentanyl precursors, both sides appear reluctant to escalate tensions into a full-blown trade war.
Chinese officials view these tariffs as a pressure tactic rather than an unbearable measure, as President Trump has previously threatened tariffs as high as 60%.

China’s Ministry of Commerce responded cautiously, stating that it would challenge the tariffs at the World Trade Organization, despite the organization’s dispute-resolution mechanism remaining largely ineffective. A call for “frank dialogue” was also issued, with the Chinese Embassy in Washington urging the U.S. to “correct its wrongdoings.”

Increased U.S. Purchases and Investments

Beijing is preparing to increase purchases of U.S. goods, a key sticking point in previous negotiations. Other potential concessions include:

New investments in the U.S., particularly in the electric vehicle battery sector.
A pledge not to devalue the yuan to gain a competitive advantage.
Commitments to reducing fentanyl precursor exports.
Chinese officials have also indicated they will treat TikTok as a commercial issue, staying out of negotiations between ByteDance and U.S. investors.
However, concerns remain over whether Beijing will relinquish control of TikTok’s algorithm, a crucial aspect now listed under China’s export controls.
President Xi Jinping is eager to engage Trump in a trade discussion, particularly as China grapples with economic stress. However, Beijing is simultaneously reinforcing its central control and building a retaliatory toolkit to counterbalance U.S. pressure.

A key element of China’s proposal revolves around reinstating the Phase One trade deal, originally signed in 2020, which required China to increase U.S. imports by $200 billion over two years. Though Trump has praised the agreement as a great deal, analysts argue that the targets were unrealistic from the outset.

Tariffs and Geopolitical Leverage

Since taking office, Trump has used tariffs as a primary bargaining tool against China. He has repeatedly emphasized reducing China’s massive trade surplus with the U.S. and has suggested leveraging trade negotiations to pressure China on geopolitical issues, including Russia’s war in Ukraine.

With federal agencies now reviewing U.S.-China economic relations and expected to present recommendations by April, Trump’s administration could soon propose higher tariffs and broader tech restrictions targeting China.
Xi’s approach is being met with differing views within the Trump administration. Treasury Secretary Scott Bessent has suggested he is open to enforcing Phase One guarantees and negotiating a potential “catch-up” provision for past unfulfilled commitments.
Conversely, national-security officials and trade hardliners, including Peter Navarro, are advocating a more aggressive stance, focusing on broader security concerns. Commerce Secretary nominee Howard Lutnick has signaled strong action against Chinese firms circumventing U.S. chip export controls, vowing “a very strong response.”

While Trump’s perspective on China remains fluid, Beijing is closely watching whether he will be receptive to negotiations. Analysts believe that while Trump does not view China as an existential military threat, his advisers may push for a more confrontational approach.

Bob Davis, co-author of Superpower Showdown observed that Trump doesn’t see China as a military existential threat to the U.S. as many of his advisers do, and he should be open to a deal. However, he also noted that any agreement would face strong domestic opposition.

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