China's response to hardening US foreign policy

The US-China trade war remains a central geopolitical risk

• Since beginning his second term in office, US President Trump has issued a barrage of Executive Orders that, inspired by his ‘America First’ doctrine, seek to radically reorient the US’s international presence. In so doing, the Trump administration will further accelerate the upending of the post-WW2 global order that the US has been so instrumental in crafting, upholding, and benefiting from (a fact that belies claims from President Trump that the US is being taken advantage of by its global economic and political partners). As we have commented on in prior reports in this series, the US’s retreat from its role in upholding the prior global order is creating profound geopolitical uncertainty, and fluidity. A new era, shaped by new rules and new balances of power, is emerging. And, while President Trump is not responsible for the underlying forces that are driving this shift, his tenure will undeniably accelerate its formation.
• The US-China trade war remains the central geopolitical risk. Much of the geopolitical focus thus far this year has fallen on President Trump’s approach towards wars in Ukraine and the Middle East, as well as his adversarial approach towards Europe, Canada, Mexico, and even South Africa. However, we maintain (as we argued here) that the central geopolitical rivalry that is shaping this new era is the contest between the US and China. And, at the heart of this dispute is the US-China trade war, which shows no sign of abating. Indeed, this trade war is a not merely a transient dispute; it stems from deep-seated structural differences in the economic frameworks and foreign policies of both nations, as well as the ongoing competition for global dominance. The implications of this rivalry extend beyond bilateral relations, casting a shadow over international trade flows, market conditions, and the economic stability of emerging markets caught in the crossfire.
• A more assertive China. Under the leadership of the Communist Party (CPC), China has strategically prepared for a more adversarial relationship with the West, proactively developing the regulatory tools and policy frameworks necessary to safeguard its national interests. Central to this evolving dynamic is China's increasing assertiveness and a clear rejection of external criticisms, reflecting a robust commitment to its version of global leadership. President Xi Jinping has been instrumental in driving these changes, by (for instance) renewing confidence in the Party-led governance model in China and shifting the foreign policy approach to one of “Major Power Diplomacy with Chinese Characteristics”. As the US adopts a more confrontational stance, highlighted by the recent imposition of tariffs on various imports, the risks of miscalculations and misunderstandings are growing, further compounding global volatility.
• In this context, an in-depth analysis of China's actions and strategies becomes essential—not only to decipher its intentions but also to understand the broader implications for other nations and markets worldwide. As the US and China navigate this tumultuous relationship, emerging economies must carefully assess their positions and potential reactions within a reshaping global order fraught with uncertainty and opportunity. This report delves into the evolving nature of Sino-American relations, the challenges posed by the trade war, China's efforts at fostering essential partnerships, particularly in the Global South, and the implications of this on how China uses the tools at its disposal in executing its foreign policy.