President Donald Trump meets with China’s President Xi Jinping at the start of their bilateral meeting at the G20 leaders summit in Osaka, Japan, June 29, 2019.
- Trump's approach to China could quickly shift away from diplomacy seen in the latter stages of the Biden administration, when the Treasury and Commerce departments managed economic discussions through working groups focused on macroeconomic stability and regulatory cooperation.
- Use of intermediaries to manage this relationship has a precedent, and China might look to alternative channels, most notably Elon Musk, whose deep investments in China, particularly with Tesla, make him a natural link.
- Autonomous vehicles and AI are technology and national security issues where the Trump administration's approach may be even stricter than current policy.
With Donald Trump's return to the White House, the U.S.-China relationship is heading straight into turbulent waters. Chinese President Xi Jinping sent a note of congratulations to Trump on Thursday, emphasizing cooperation over confrontation, shortly after China's Foreign Ministry offered a cautious response to Trump's victory, with spokeswoman Mao Ning emphasizing "mutual respect, peaceful coexistence, and win-win cooperation."
These statements hint that, for now, Beijing is holding out hope for maintaining some dialogue and stability. Yet beneath this diplomatic language, there's a strong undercurrent of apprehension in Beijing, as Trump's mercurial style and "shoot-from-the-hip" approach could upend the delicate balance carefully nurtured by his predecessor.
Trump's first 100 days are likely to be a rollercoaster, especially given his affinity for headline-grabbing moves. Experts predict a shift away from the structured, methodical diplomacy seen in the latter stages of the Biden administration. Under Biden, the Treasury and Commerce departments managed economic discussions with China through working groups, focused on macroeconomic stability and regulatory cooperation. These structured channels helped ensure open dialogue on issues like tariffs, technology restrictions, and financial stability. However, Trump's past preference for personal diplomacy over institutionalized mechanisms signals that we may soon witness a dismantling of these channels. This could leave the relationship dangerously prone to misunderstandings and overreactions, making early-phase instability almost a certainty.
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A potential role for Elon Musk as a geopolitical go-between
China might look to alternative channels to manage relations with Trump's administration. One potential intermediary is Elon Musk, whose deep investments in China, particularly with Tesla, make him a natural link. Musk is not just any businessman; he's a high-profile figure in the tech and space sectors, and he has significant influence over emerging technologies that are critical to both U.S. and Chinese national interests. Beijing might view him as a "mercurial messenger" who could help grease the wheels, but they're aware of the risk.
The use of intermediaries in U.S.-China relations has precedent, but it hasn't always paid off.
During Trump's first term, China experimented with influential American intermediaries like casino mogul Steve Wynn. These informal channels ended up being more trouble than they were worth, exposing intermediaries to political scrutiny without yielding much diplomatic progress. Musk's visibility and reputation mean that if he becomes entangled in diplomacy, he could face backlash from both Washington and Beijing. His high-profile involvement in sensitive industries, including autonomous vehicles and satellite technology, raises red flags in Washington's security community, especially concerning Starlink's influence in Taiwan. Musk could find himself under fire from U.S. officials if he appears to cater to Beijing's interests in these areas.
Trade wars and tariffs: What we've seen and what's coming
Trump has already hinted at his desire to ramp up tariffs on Chinese goods, with some aides suggesting an across-the-board 10% import tax and possible increases of up to 60% on Chinese imports. These numbers spell a stark departure from Biden's more targeted tariffs aimed at key sectors. The short-term economic impacts could be jarring. Expect companies to flood ports, racing to import goods before tariffs take effect, which could skyrocket shipping and warehousing costs. As these costs trickle down, American households, particularly lower-income ones, could see prices jump on everyday goods.
Beyond immediate price increases, the strain on supply chains is a serious concern. U.S. ports and customs systems, already running on tight budgets and stretched resources, would be overwhelmed, leading to backlogs and supply disruptions. The knock-on effects would ripple through industries dependent on global supply chains — from electronics to automotive manufacturing — and could send shockwaves through the U.S. economy.
Trump's proposed tariffs could do more than just disrupt the American economy; they could incite global retaliation. Beijing would undoubtedly hit back with tariffs of its own, but the fallout wouldn't stop there. Key allies like the European Union, Japan, and South Korea, already wary of the Trump administration's economic policies, could also respond with tariffs on American goods. This move could kick off a broader trade war that isolates the U.S., disrupts alliances, and damages America's economic influence.
Moreover, retaliatory tariffs would hurt American businesses, particularly those dependent on foreign markets. Job losses and economic slowdowns in export-heavy sectors would be likely, as American products face barriers in foreign markets. The cost of Trump's aggressive tariff strategy could be felt across the U.S. economy, with long-lasting consequences for American workers.
National security and AI, autonomous vehicles
National security considerations will also be front and center in Trump's early China policy, especially regarding technology restrictions. The Biden administration already laid the groundwork with extensive export controls on advanced technologies critical to AI and semiconductors. Trump is expected to retain these restrictions and may even expand them to further restrict China's access to cutting-edge technology.
One particularly thorny issue is the role of autonomous and connected vehicle technology. With recent national security regulations tightening, Trump will need to decide whether he wants to maintain or escalate restrictions on Chinese access to these technologies. The security establishment in Washington will push for tighter controls, particularly in light of rising tensions over Taiwan and concerns about Chinese espionage.
Trump's approach to outbound investment screening will also be critical. New rules to curb U.S. capital and expertise from bolstering Chinese tech are set to take effect, adding a new layer of complexity to the relationship. Trump could choose to keep these rules intact, expand them, or scale them back. Most observers expect him to lean toward decoupling, despite pressure from business interests, including those of Musk, to ease restrictions.
Trump's return to the White House could catapult U.S.-China relations into uncharted waters. His leadership style — often impulsive and reactionary — suggests we're in for a rocky start. Systemic chaos, erratic social media posts, and abrupt policy shifts will likely dominate the early days, creating a climate of uncertainty for allies, businesses, and markets. While Trump's shoot-from-the-hip approach may resonate with his base, it also risks intensifying economic friction, frustrating alliances, and destabilizing an already fragile global economic landscape.
If Trump follows through on hard line China policies, we could see an era of heightened confrontation and diminished multilateral cooperation, with the U.S.-China relationship poised for a dramatic — and potentially explosive — transformation. Whether the administration can navigate these challenges without triggering a full-blown economic crisis remains to be seen. Expect tariffs, technology restrictions, and Trump's unique brand of diplomacy to push the relationship to its limits.
—By Dewardric McNeal, managing director and senior policy analyst at Longview Global, who served as an Asia policy specialist at the Defense Department during the Obama administration, and is a CNBC contributor.
