Xi Jinping and Donald Trump’s bromance could be rekindled in 2025, if both sides play their cards right. This is positive and would help create the right environment for an improvement in ties between the two superpowers, but timing and tone are everything. The rivals will need to give and take to prevent the relationship from getting worse.
There are potential signs of a rapprochement. It was a smart move by the US president-elect to invite Xi to his inauguration in January (the Chinese leader reportedly turned it down), but future attempts need to be more than just empty gestures to make a real difference.
A face-to-face meeting soon is essential to set the tone of the bilateral relationship over the next four years. The alternative is continued misunderstanding, which in the worst-case scenario, could lead to actual conflict.
During Trump’s first term, he talked up his warm ties with Xi, going so far as to say the two leaders “love each other.” Still, that didn’t stop the then-US president from imposing harsh trade tariffs on Beijing, the start of a big shift in US-China relations that solidified under the Biden administration.
Next year looks set to be another challenging one for Xi. China faces a continued loss of investor confidence, a deepening real estate crisis, ballooning local government debt, a volatile stock market, deflationary pressures and increasing popular discontent. Improving relations with the US could go a long way toward lifting sentiment at home.
To do that, Xi will have to find some common ground with Trump. It won’t be easy. During his campaign, Trump floated revoking Beijing’s most-favoured-nation status. He also said he would slap tariffs of as much as 60% on all imports from China.
Bloomberg Economics says this would manifest itself in three waves of tariff hikes, starting in summer 2025, with levies on China tripling by the end of 2026. Further analysis indicates China could say goodbye to 83% of its sales to the US, a huge pressure on exports which are already suffering.
A Trump presidency is forcing China out of its economic policy inertia. Last week’s annual economic work conference made “boosting consumption” its top priority, with the readout calling for measures such as raising government-sponsored pension and medical insurance payments.
The US president-elect is using tariffs as leverage. He has a potential cabinet lined up with China hawks who could revive hardline trade policies. The Chinese leader is well aware of the impending threats. After Trump’s election, he reached out with a congratulatory message stating that “both China and the United States stand to gain from cooperation and lose from confrontation.” But this relationship has to work on Beijing’s terms, too.
It is clear what Xi’s boundaries are. During last month’s APEC meeting with President Joe Biden, he emphasized the “four red lines” that Washington should not cross: Taiwan, democracy and human rights, the Chinese political system and Beijing’s right to development. It was a warning to the Trump administration that breaching them could heighten tensions.
Some form of formal communication channels should be established before any further tariffs are imposed by Washington, to prevent a cycle of retaliation from Beijing. If that doesn’t happen, it will take months or even longer to get both sides back to the negotiating table.
There is a potential template that currently exists for talks: The strategic channel between National Security Advisor Jake Sullivan and Foreign Minister Wang Yi that has helped stabilize relations since 2022.
There have been rare moments of coming together. Most recently, the countries signed an agreement extending bilateral government-to-government scientific cooperation for another five years. It allows for science and tech cooperation but minimizes national security risks and keeps the development of critical and emerging technologies off-limits to Beijing.
On China’s side, rebuilding relations will depend on its perception of Trump’s new national security team and whether there will be any room to create back channels for future negotiations. The new Washington administration could adopt a more transactional approach that could leave Taiwan’s security as a bargaining chip.
Last week’s naval exercises around the Taiwan Strait were among Beijing’s largest in 30 years, according to Taiwanese officials, a reminder that China sees the self-ruled island as its own, and it wants the US to stay out of its way.
The most we can hope for is a renewed cordiality between Donald Trump and Xi Jinping. The nature of the US-China relationship will be defined by strategic competition. Preventing further deterioration would be crucial. ©Bloomberg
