China’s hopes grow for deal to avert trade war with Donald Trump

Chinese officials were prepared to deliver bad news to Donald Trump’s return to the US presidency: an immediate 60 percent tariff on exports that could hit the world’s second-largest economy.

Instead, they found an apparent remedy this week. Trump has ordered an investigation US-China tradeAnd later repeated the threat of a 10 percent tariff on the deadly opioid fentanyl.

The threat of 10 percent tariffs, which Trump has proposed could be implemented on February 1, hit Chinese stocks and currencies on Wednesday. The mainland’s CSI 300 index fell 1 percent and Hong Kong’s Hang Seng retreated 1.6 percent, while the offshore renminbi was the worst-performing major Asian currency, weakening 0.25 percent to Rmb7.29 per dollar.

But Trump’s initial moves on China paled in comparison to the 25 percent tariffs he announced on US allies Mexico and Canada. He also indicated a Potentially extensive contract linking Tariffs on the ownership of TikTok, the Chinese-controlled short-video platform that US security hawks want to stop.

Despite Trump’s penchant for misstatements and, of course, quick turnarounds, the softer-than-expected proposal has revived hopes in Beijing that negotiations could avert a second trade war. Now the question is what kind of agreement will be acceptable to both parties.

“There is a possibility that there will be an agreement between the two sides – you understand there is cautious optimism,” said Zhao Minhao, a professor at the Institute of International Studies at Fudan University in Shanghai. “But we have to see if there is a good match between what Trump and Beijing can offer each other.”

Trump and Chinese President Xi Jinping Place a phone call The weekend before the inauguration, their first in four years, was described by the US president as “very good” and covered “trade, fentanyl, TikTok and many other issues”.

Xi also sent the most senior Chinese official to attend the US inauguration. Vice President Han Zhengwho also met with US business leaders including Trump confidant Elon Musk.

During his campaign, Trump promised to hit China with 60 percent tariffs and that too An additional 10 percent threat Forcing Beijing to stop the flow of the drug precursor to fentanyl.

Instead, on Monday he issued a memo directing officials to investigate the US trade deficit and “recommend appropriate actions, such as global supplementary tariffs or other policies to remedy such deficits”.

He asked the US trade representative to study Beijing’s compliance with the “phase one” deal agreed in his first term as president and to consider additional tariffs “particularly in industrial supply chains and rigging through third countries” — a move that could have far-reaching implications for China. .

Economists believe that since the Trump administration’s first trade war, a portion of China’s trade with the United States has been diverted through third countries to avoid tariffs. US officials are scheduled to report their findings on April 1.

Although Trump signed an order allowing TikTok to operate for 75 days — a reversal from his first term, in which he tried to ban it from the United States — he also said Beijing would have to allow a U.S. entity to take half or 100 percent of the company. duty up to

Linking of tariffs to TikTok’s ownership followed Funny comment On Monday Musk, who complained that the former was allowed to work in the US, had his social media site X blocked in China.

A person familiar with the matter in China said Beijing could agree to sell the platform to TikTok owner ByteDance as part of a broader deal that would cover a range of issues, including trade. However, any such discussions were at an early stage, the person said.

Chinese officials, who have long opposed a forced sale of TikTok and would require approval, have hinted at a more hands-off approach in recent days.

“When it comes to actions such as business management and acquisitions, we believe that these should be decided independently by companies according to market principles,” the foreign ministry said on Tuesday, adding that “China’s laws and regulations should be observed”.

Gabriel Wildau, managing director of consultancy Tenio, wrote in an analyst note that Chinese leaders “may believe that an amicable solution to the TikTok issue can lay the foundation for cooperation on other issues”.

“These could include tariffs, export controls and — in Beijing’s dream scenario — even U.S. policy toward Taiwan and the South China Sea,” Wildau said.

However, economists caution that it is too early to be confident that a trade conflict can be avoided. While Trump seemed more open to deal-making, his administration was China is full of hawksThey said.

“It’s more of a holding pattern for now,” said HSBC chief Asia economist Fred Newman. “It is somewhat encouraging that we don’t see immediate increases and tariffs and that there is some room for negotiation already. But I think it would be the wrong conclusion to say that China is completely off the hook now.

Wang Chong, a foreign policy expert at Zhejiang International Studies University, said that in addition to trade, Beijing could offer Trump support on other issues, such as resolving the Ukraine war.

Wang, however, cautioned Beijing was prepared if relations broke down. Even if the US starts with small tariff increases, it will undermine investor confidence in China. “If tariffs are imposed, China should fight,” Wang said.

Additional reporting by Arjun Neil Alim in Hong Kong