Can China win this trade war?

Donald Trump, in his second innings as president of the United States, has emerged as a great disruptor. He has imposed high levels of tariffs and trade restrictions on rivals, enemies, allies, friends, and in one case, penguins. As laughable as it sounds, Trump’s actions are a red-carpet invitation to China to lead the future of globalisation and to shape the discourse for the world in the next few months, years, and decades.

In the short run, China will experience significant economic pain, and it will add to its woes of slow growth and low consumption as well. However, in the years to come Trump’s shenanigans play in favour of China. For starters, Xi Jinping and China are no longer seen as disruptors of the order since Trump has taken over that mantle.

Trump is destroying not on the international liberal order; he is also exacerbating people’s antidemocratic propaganda. Trump is riding the wave that somehow the world is in a conspiracy against him and the US power. It’s evident that he does not care much about leading the world order now.

This is a golden opportunity that China will grab with both hands. It is clear that Trump’s worldview is located in the 1950s and the world, now used to prosperity and stability, is looking in a direction that is driven by globalisation and increased engagements.

China has always been keen to take the leadership position in the world. Now it has got the capacity to do that, and it is evident that its recent white papers and documents. Chinese leaders have been using the vocabulary of what it calls as true multilateralism and globalisation ‘as a cure for the divided world’ which is part of its efforts to discredit the US led liberal order. Trump’s policies have already accelerated the process.

Alongside this rhetoric of true multilateralism, China has advanced its three initiatives of Global Security Initiative (GSI), Global Development Initiative (GDI), and the Global Civilization Initiative (GCI) which create an image of an alternate world order. The GSI is an expansion of China’s ideas on Asian security, which Xi elaborated on during the Conference on Interaction and Confidence-Building Measures in Asia (CICA) summit in 2014, where he proposed the notion that Asian security should be regulated by Asians themselves, calling out US as an outsider. Its first outcome was China’s brokering of diplomatic relations between Saudi Arabia and Iran.

The GDI establishes the link between the Belt and Road Initiative (BRI) and the United Nations Sustainable Development Goals (SDGs), to increase its perceived legitimacy. The GCI is set to undermine values of human rights and democracy, and that may be the one with far-reaching consequences for the world order and also something that has flown under the radar.

Trump’s politics has caused restoration in China’s ties troubled due to COVID-19 and other reasons. It led to a resumption of China-Europe economic dialogue. This was visible in 2024 as well as Europe prepared to hedge against potential election of Trump. German Chancellor Scholz has met Xi at least twice in 2024, and when he visited Beijing, he was accompanied by several business executives who have pledged even more investments in China.

India and China are normalising their bilateral relations nearly five years after the bloody clashes in Galwan. Similarly, the China, Japan, South Korea trilateral has resumed after a similar gap and Xi has gone back to his neighbourhood-focussed foreign policy strategy with which he began in 2013 after coming to power. China has also entered a major trade deal with Vietnam.

What is more worrying is that when Trump came to power in 2017, Chinese leadership or some in the Chinese leadership had begun to view it as the beginning of the decline of the West. There were several references to the term ‘profound changes not seen in a century’, which analysts treat as China’s view of world undergoing a fundamental transition of the type that saw decline of the British empire and the rise of the US during the first half of the last century.

For China it is a moment of opportunity if US abandons its leadership roles. Today, China sees itself as a rule-maker and an equal power, and more than that, it wants to be treated as a major power. This behaviour is consistent with the rising powers in the past. If China once again begins to believe that it is on the cusp of achieving unprecedented gains in relative power, its appetite for taking risks will be higher. This has been visible in its territorial and border disputes with India and other neighbours. The fact that China has nearly matched Trump’s tariffs shows its confidence at this moment and it’s a sign that its ready for the next bout, which in its mind, is bringing it closer to a definitive victory.

For India, this makes for a problematic situation where foreign policy will be an outcome of constrains rather than choices. India’s warming up to China is driven by Trump as is clearly visible. However, this opening may have to be moderated. It works for India so far that India is out of the global supply chains. However, it has impacts for India’s economic choices.

A growth strategy based on foreign direct investment is not likely to work and with imports liberalisation based on concessions to the US, domestic manufacturers will be up in arms. It makes for hard choices between foreign policy compulsions and domestic interests. For India, what Trump does to the Indo-Pacific Economic Framework for Prosperity (IPEF) and the India-Middle East-Europe Economic Corridor (IMEC) may have consequences as well.

(Avinash Godbole is Professor and Associate Academic Dean, JSLH, JGU. Views expressed are personal. X: @avingodb. )

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.