Chinese officials are prepared for Donald Trump to deliver bad news upon his return to the US presidency: immediate 60 percent tariffs on exports that could deal serious damage to the world's second largest economy.
Instead, they got a reprieve this week. Trump ordered an investigation US-China tradeand later reiterated the risk of a 10 percent tax related to the deadly opioid fentanyl.
The threat of a 10 percent tariff, which Trump has proposed to take effect on February 1, hit Chinese stocks and currencies on Wednesday. The global CSI 300 index fell 1 percent and Hong Kong's Hang Seng shed 1.6 percent, while the offshore renminbi was the worst performing Asian currency, weakening 0.25 percent to Rmb7.29 USD.
But Trump's opening to China was less severe than the 25 percent tariffs he announced on US allies Mexico and Canada. He again said a a wide range of possible connections prices for the ownership of TikTok, the Chinese-controlled short video platform that US security hawks want to shut down.
Despite Trump's propensity for deviant statements and quick turnarounds, this softer-than-expected precedent has fueled hopes in Beijing that negotiations can be held to avoid a second trade war. Now, the question is what kind of agreement will be acceptable to both sides.
“There is a chance that the two sides can come to an agreement – you can see that there is a certain hope,” said Zhao Minghao, a professor at the Center for International Studies at Fudan University in Shanghai. “But we will have to see if there is a good match between what Trump and Beijing can offer each other.”
Trump and Chinese President Xi Jinping he was on the phone the weekend before the inauguration, their first in four years, which the US president described as “very good” and covered “Trade, Fentanyl, TikTok, and many other subjects”.
Xi also sent the highest-ranking Chinese official to attend the American ceremony, Vice President Han Zhengwho has met with US business leaders including Trump confidant Elon Musk.
During his campaign, Trump vowed to hit China with 60 percent tariffs when he took office, and later. threatened with an additional 10 percent The first day to force Beijing to reverse the flow of the former drug fentanyl.
Instead, on Monday he issued a memo that directed officials to investigate the US trade deficit and “recommend appropriate measures, such as additional global payments or other policies, to correct that deficit”.
He also asked the US Trade Representative to study Beijing's compliance with the “phase one” deal agreed during his first term as president, and to consider additional tariffs “especially regarding industrial supply chains and restrictions in third countries” – a possible step. a major influence that reaches even further into China.
Economists believe that part of China's trade with the US has been diverted to third countries to avoid tariffs since the trade war of the first Trump administration. US officials are due to report their findings by April 1.
Although Trump signed an order allowing TikTok to operate for 75 days – a change from his first quarter, where he wanted to ban it in the US – he also said that Beijing would have to allow an American entity to take over half of the company or face it. prices up to 100 percent.
A merger of TikTok ownership followed comments on Monday by Musk, who complained that while the former was allowed to work in the US, his social media site X was blocked in China.
A person familiar with the matter in China said Beijing could agree to TikTok owner ByteDance selling the platform as part of a broader deal that would cover a range of trade-related issues. However, any such discussions were still in the early stages, the person said.
Chinese officials, who have long opposed the forced sale of TikTok and would have to approve it, have in recent days appeared to show signs of giving up.
“When it comes to actions such as operating and acquiring businesses, we believe that they should be decided independently by companies in accordance with market regulations,” the foreign ministry said on Tuesday, adding that “China's laws and regulations must be respected”.
Gabriel Wildau, managing director of consultancy Teneo, wrote in an analyst note that Chinese leaders “believe that a proper solution to the TikTok issue can lay the foundation for cooperation” on other issues.
“These could include tariffs, export controls, and – in the case of a dream in Beijing – and US policy towards Taiwan and the South China Sea,” said Wildau.
However, economists have warned that it is too early to be confident that a trade conflict will be avoided. While Trump sounded more open to dealmaking, his administration was filled with Chinese hawksthey said.
“That's the catch at the moment,” said Fred Neumann, Asia economist at HSBC. “It's encouraging in some ways that we haven't seen an immediate increase in prices and maybe there is room for negotiation ahead. But I think it would be a wrong conclusion to say that China is now out of the loop. “
Besides trade, Beijing may offer Trump help on other issues, such as resolving the war in Ukraine, said Wang Chong, a foreign policy expert at Zhejiang University of International Studies.
Wang warned, however, that Beijing was fine if the relationship broke down. Even if the US starts with a small increase in tariffs, it will undermine the confidence of investors in China. “If tariffs are imposed, China must fight back,” Wang said.
Additional reporting by Arjun Neil Alim in Hong Kong