Beijing may claim to be indifferent to both Vice President Kamala Harris and former President Donald Trump in the upcoming U.S. presidential election, but don’t be fooled. While China may not endorse a candidate, the approach it takes to relations between the world’s two most powerful countries will look very different depending on who is sworn in come January.
If Harris wins, she is likely to carry on the Biden administration’s strategy toward Beijing, at least initially. That means investing in priority technology sectors, aligning with allies and like-minded countries, and imposing technology restrictions on China, while also seeking to build guardrails to keep the competition from devolving into outright conflict. Although China’s leaders do not accept the United States’ view of relations as being defined by “strategic competition,” they still aim to prevent a further decline in ties. This allows them to focus on technological self-reliance, strengthen global south alliances, and wait for a favorable power shift.
Beijing may claim to be indifferent to both Vice President Kamala Harris and former President Donald Trump in the upcoming U.S. presidential election, but don’t be fooled. While China may not endorse a candidate, the approach it takes to relations between the world’s two most powerful countries will look very different depending on who is sworn in come January.
If Harris wins, she is likely to carry on the Biden administration’s strategy toward Beijing, at least initially. That means investing in priority technology sectors, aligning with allies and like-minded countries, and imposing technology restrictions on China, while also seeking to build guardrails to keep the competition from devolving into outright conflict. Although China’s leaders do not accept the United States’ view of relations as being defined by “strategic competition,” they still aim to prevent a further decline in ties. This allows them to focus on technological self-reliance, strengthen global south alliances, and wait for a favorable power shift.
If Trump is reelected, from what he and his campaign have said, his administration is likely to quickly impose massive tariffs on China. These could be 60 percent across the board or even higher in the event that he eliminates China’s Most Favored Nation (MFN) status. Beijing’s response to the first round of tariffs under Trump was relatively mild. But this time, the response is likely to differ dramatically, and markets are underpricing the possibility of a blowup in relations and an escalatory spiral as a result.
In early 2018, the Trump administration concluded its investigation into Chinese intellectual property rights and announced it would impose tariffs on China if it did not immediately make concessions. Chinese observers, including officials I spoke to at the time, did not believe the United States would follow through, because of the obvious negative effects on American exports and the dislocation in confidence that would result. Yet Trump did, in fact, impose tariffs a few months later and on several further occasions. Those expecting an 11th-hour deal were wrong—because they underestimated the president’s willingness to accept risk in order to build leverage and reset the terms of the relationship.
If Trump is reelected, the world may in January reach a similar intersection, this time with the roles reversed. The world shouldn’t underestimate Beijing’s willingness to absorb some economic pain to achieve the strategic goal of regaining the upper hand in the relationship.
The first time around, China responded with proportionate tariff increases and did not directly counter any of the U.S. technology restrictions. The next time, China may very well call Trump’s bluff in the belief that he is a paper tiger. That’s because it likely would interpret sky-high tariffs, which could be combined with a more comprehensive technology boycott, as equivalent to starting an outright economic war. Chinese officials and analysts I’ve spoken to are tired of being the United States’ piñata. More confident about China’s economy than many international observers because of its progress in a range of technologies, and with significant fiscal and monetary space to provide support, they believe the country can weather any fallout if ties take a hit. Chinese leaders also likely believe such drastic steps are needed to keep the global economy from fully fragmenting, a position they could find sympathy for even among some of the United States’ staunchest allies.
Last time China faced U.S. tariffs, President Xi Jinping appointed Vice Premier Liu He to negotiate, but this time Xi might well authorize a disproportionate response. The first step would be to massively penalize a few Fortune 500 U.S. companies; most vulnerable are those in sectors with capable Chinese alternatives. China could expand restrictions on exports of critical minerals and move forward with other export controls. It also could sell off $100 billion or more of its $775 billion in U.S. Treasurys. And one might expect Beijing to act even more aggressively in the South China Sea and around Taiwan, raising anxieties about the prospects of a kinetic conflict.
Its biggest weapon, however, may be to allow its currency, the yuan, to fall from its current peg of 7.1 to the dollar to 10, 11, or 12 to the dollar, and if markets don’t cooperate, engineer a downward devaluation. Such a move would directly undercut the imposed tariffs and make it much harder for the Trump administration to pursue a weak-dollar strategy itself, something Trump’s team believes is central to reducing the United States’ global trade deficit and expanding manufacturing employment.
If China took these steps, its aim would be to tank U.S. markets and generate a sense of panic, which in turn could lead some of Trump’s business allies to fly to Washington and implore him to back down, stabilize ties with Beijing, and restore confidence in the U.S. economy. Of course, that would be easier said than done, especially by a president who prefers to play the role of bully.
If Trump does take back the White House, the incoming administration should be aware of how possible this scenario is and consider alternatives to massive tariffs as its opening pitch. It should instead explore targeted economic measures that put pressure on Beijing and avoid collateral damage to U.S. industries and consumers. Building stronger alliances with both advanced economies and the global south, enforcing strategic export controls, and enhancing technology partnerships would be far more effective than an all-out economic war. By focusing on precision rather than broad strokes, the United States could strengthen its position while minimizing self-inflicted costs.
Regardless of who takes the reins in January, the United States should keep its eyes focused on key metrics of success: advancing its technological capabilities and strengthening the rules-based liberal international order. If it chooses a back-alley brawl, the world should be prepared for an extended period of extreme instability, one that likely would not work in the United States’ favor.
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