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Briefing #1 | US-China relationship: It’s complicated

Even as Trump signed a flurry of executive orders, the tensely awaited tariff orders were conspicuous by their absence

Dinesh Narayanan

The first of four briefings to set context for the Masterclass series on The World in 2025, scheduled for Friday, 31st January 2025, 6:30 pm and Friday, 7th February 2025, 6:30 pm.

“A $1.1 trillion deficit. Ridiculous.” That’s how US President Donald Trump described the US-China trade. Speaking virtually at the World Economic Forum (WEF) at Davos last week, Trump said, “It’s just an unfair relationship”.

Talking about a telephonic conversation with Chinese President Xi Jinping, Trump said he likes Xi but the relationship was strained when Covid came out of Wuhan. He expressed the desire to have good relations with China and even hoped that Beijing would perhaps help broker a deal between Russia and Ukraine as it has a “great deal of power over that situation”. 

The conciliatory tone in Trump’s remarks at the WEF was a marked departure from his belligerence on the campaign trail—and his previous term as President—when he railed and ranted against China. He threatened to impose sanctions and stiff tariffs on Chinese goods, actions he started in his first term. He even vowed to punish the so-called “connector economies” that were positioned as supply chain anchors for Chinese products. 

Not so fast

Before Trump’s remarks, the world was bracing for a superpower showdown. Tariff walls were expected to be erected on the President’s first day in the Oval Office. However, even as he signed a flurry of executive orders with his beloved black Sharpie markers, most of them related to domestic affairs. To be sure, there were some foreign policy ones such as withdrawing from the Paris climate accords, the World Health Organization, and suspending US aid, but the tensely awaited tariff orders were conspicuous by their absence. 

Although he has hinted at a 10% tariff on Chinese products, there are indications that the Trump administration may not be as harsh on the Asian giant which has nearly a fifth share of the global economy. Trump has made sure the immensely popular short video app TikTok is rescued one way or another. 

The new administration’s top Pentagon official in charge of Southeast Asia is hesitant to have a hawkish defence posture against China. Deputy assistant secretary of defence John Andrew Byers prefers foreign policy restraint. “In practice, America should abandon belligerent military initiatives targeted at China,” he wrote in a September paper. 

A big section of the administration, however, believes that China is preparing to annex Taiwan by 2027 and the US should prepare to resist it. Elbridge Colby, undersecretary of defense for policy, and Pete Hegseth, a former marine who was confirmed as secretary of defence last week by the casting vote of vice-president JD Vance, want real deterrence against China, including militarily strengthening its neighbours. 

Yet, olive branches are being extended from both sides. Trump made it a point to specify to the WEF audience that it was Xi who telephoned him. There is even speculation that a recent change in the spelling of Secretary of State Marco Rubio’s name as it is written in Chinese official communications is a roundabout way to help him travel to that country skirting the tit-for-tat sanctions imposed on him. China anyway would not want to be distracted from fixing its economy, which is in a precarious situation.

Uncharted terrain 

Irrespective of what Washington does, this relationship will underpin geopolitics and geoeconomics for many years to come. China has demonstrated its capability in developing ultra-modern weapons such as a sixth-generation stealth fighter and submarine-launched drones. It is also making leaps in inventing new ways of harnessing and storing renewable energy. Its companies are at the forefront of developing and fine-tuning artificial intelligence. On January 26, the Chinese AI startup DeepSeek shook the industry with its R1 model made at a fraction of the cost and with relatively low-performance chips than that of Western companies such as OpenAI and Nvidia. Its scientists recently achieved a milestone in nuclear fusion, popularly known as creating the sun in a lab.  

The US, which has historically been a leader in tech innovation, is also surging ahead. While entrepreneurs such as Trump’s friend and financial backer Elon Musk are dreaming of colonising Mars, companies such as Google are making big strides in quantum computing. 

While the US already has extensive global relationships and offers its twin umbrellas of finance and security to many countries and multilateral institutions, China is increasingly capable of offering both at a much lower cost and conditions. The Belt and Road Initiative, despite setbacks in some countries, is snaking ahead. It recently introduced a zero-tariff policy for all imports from least developed countries. 

China is also increasingly involving itself in international issues with positive results. For instance, it brokered a deal between rivals Iran and Saudi Arabia. It has been instrumental in expanding the BRICS forum, a counterweight to the G7 and which the US perceives as a threat to the dollar’s global influence. Adding a security element to it may only be a step away and could be a threat to multiple US-led groupings such as Nato, QUAD and I2U2.  

It is, therefore, important how these two powers manage their rivalry in almost all fields, which will determine the fate of international markets, futuristic technology, the global economy, and world peace.

Dig Deeper

“China’s technological rise will not be stymied, and might not even be slowed, by US restrictions,” said Adam Posen, president of the Washington-based Peterson Institute for International Economics, who has conducted research for governments and central banks around the world. “Except those draconian ones that simultaneously slow the pace of innovation in the US and globally.”

Draghi was right: we must try to learn from the US. But, today, those who cherish ideals of a law-governed democracy must also worry for it.

In recent years the Chinese government has been strengthening its toolbox to push back against US sanctions and trade controls, creating the “Unreliable Entity List” and “Export Control Law” in 2020 and the “Anti-Foreign Sanctions Law” in 2021. It also passed a National Security Law for Hong Kong which claimed jurisdiction over acts committed outside China’s territories. That’s from the story on Chinese ban on exports to the US

Tomorrow: Briefing #2: In 2025, the risks from war still raise the spectre of uncertainty.

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About the author

Dinesh Narayanan
Dinesh Narayanan

Independent journalist

Author of The RSS and The Making of The Deep Nation

Journalists are required to have three fundamental qualities—integrity, credibility and objectivity. There is no ambiguity about the first two qualifications. But objectivity is something of a wildcard. What appears objective to one person often is biassed to another. Realistically, a journalist can only offer a perspective, minted from his own experience and study.

Mine has been shaped by 20 years of practice as a journalist, living in four rapidly growing metros during some wildly transformative years of modern India and meeting some of the most interesting individuals fast at work behind the scenes and up front. I am fascinated by change and curious about its origins and impact.

I was a mere student of journalism when Manmohan Singh was reading Victor Hugo in Parliament and Harshad Mehta was driving his Lexus; one the creator of opportunities, the other a pioneer of exploiting them.

I began my career as a sub-editor in Hyderabad in that tumultuous year of Chandrababu Naidu’s political coup over NT Rama Rao, an event that eventually deeply impacted national politics and policymaking.

The next year I joined the Hindu Business Line and moved to Madras, a few months before it became Chennai, and just as the city was positioning itself, along with Bangalore and Hyderabad, at the forefront of the IT revolution. In the next five years I witnessed the city change from a laid back oasis to a metropolis open for business.

I worked with the Hindu Business Line for nearly five more years, in Mumbai, before moving on to Mumbai Mirror, The Times of India and Businessworld. Mumbai taught me professionalism and also showed me how businesses and markets function.

Those lessons helped me in understanding the world better when I moved to Delhi as Forbes India’s economy and policy editor in 2008. While being stationed in the national capital offered a riveting view of policymaking, travels to various parts of the country helped me understand the social, political and economic ripples they created.

In 2013, I won the First IE Business School Prize for Economic Journalism in Asia in 2013 instituted by the Madrid-based IE Business School. A year later, cover stories in The Caravan magazine won me twin Mumbai Press Club’s RedInk awards for best political feature and the best business feature. 

I joined The Economic Times in 2015, where I wrote on policy, public finance and national politics. In 2020, I wrote The RSS and The Making of The Deep Nation, a book on the Rashtriya Swayamsevak Sangh, the ideological mothership of the Bharatiya Janata Party and what is generally known as the Sangh Parivar. 

The entrepreneurial bug bit me the next year which led to co-founding a newsletter and podcast company. Its flagship daily, The Signal, a curated newsletter focussed on business, economics and technology, and two weekly products had a loyal subscriber base of over 100,000 at the time of my leaving in June 2024.

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