Xi has a plan for retaliating against Trump’s gamesmanship

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The author is a professor at Georgetown University and a senior advisor to the Asia Group. He served on the staff of the US National Security Council from 2009-2015

If Donald Trump’s China policy is defined uncertainty and conflictXi Jinping’s strategy is defined by clarity and determination. The Chinese president’s view of the US president-elect is no secret. Since the election, Beijing has been very clear about its views and possible responses.

Xi plans to take advantage of Trump’s move, not just to respond. In Trump’s first term, Beijing scrambled to respond. Determined not to repeat it. Xi is in the midst of his preparations and has hinted that.

Most Chinese analysts were not surprised by Trump’s election, linking his return to a global tide of populism and nationalism. Beijing believes it now understands Trump’s gamesmanship and can manipulate his administration. China’s confidence is based on the conclusion – correct or not – that the China of 2025 is different from that of 2017, and so is the US and the world.

Many Chinese argue that Xi is politically stronger and that the economy is more self-reliant and resilient despite recent challenges. Chinese analysts see the US economy as more fragile and American politics as deeply divided. Geopolitically, Beijing is eroding US influence across the global South and Asia – and growing support for China’s views.

Xi has already indicated that he will treat his relationship with Trump as purely business, albeit Don Corleone style. He won’t embrace Trump personally and will retaliate early and hard to build leverage. Beijing effectively declined Trump’s invitation to Xi to attend the inauguration.

But Beijing is signaling it wants dialogue and is open to a deal to avoid new tariffs. However, the Chinese, who prefer to use back channels, are struggling to find the right one to understand what Trump “really” wants. Beijing’s main assumption is that Washington and its allies will remain hostile to China for the foreseeable future. Thus, Xi is open to negotiations as he wants some breathing space on the economic front, so that China can marshal its forces for long-term competitiveness.

Beijing remains concerned that Trump’s team will focus on deeper economic isolation, regime change in China and support for Taiwan independence, as ways to contain and destabilize China. Hence the four “red lines” of the head. In a November meeting with President Joe Biden Peru in a clear message to the incoming administration.

Beijing’s planned response to Trump falls into three baskets: retaliation, adaptation, and diversification. Mirroring US policy, Beijing has in recent years enacted a range of export controls, investment restrictions and regulatory investigations capable of hitting US companies. Beijing is unable to match tariffs for tariffs, so it will seek to impose costs in ways that inflict maximum pain. For China, failure to retaliate would signal weakness domestically and only embolden Trump.

It has already started. By the end of 2024, Beijing halted exports to the US of key minerals used for chipmaking, straining supply chains for US-made drones, a high-profile US outfit. threatened to blacklist the company and launched an antitrust investigation into Nvidia. By taking such steps, Beijing is previewing its power and building future bargaining chips.

China’s second strategy is adaptation. From autumn 2023, Beijing has launched a vigorous fiscal and monetary stimulus to help businesses and now consumers. These policy changes are producing some positive, albeit uneven, effects. It was certainly badly needed, but its scope and nature were also designed with a potential trade war in mind.

Beijing’s third strategy involves expanding its economic ties. It is debating unilateral tariff cuts on imports from non-US partners. During his visit to Peru, Xi inaugurated a deep-water port that could reshape China’s trade with Latin America, a major non-US source of food, energy and minerals. In late 2024, Xi attended the meeting with the heads of 10 major international economic organizations for the first time. His message was clear: China will be a leading force for global economic stability, prosperity and openness, and oppose all forms of protectionism.

A lot can go wrong. Trump’s team has also gained the trust of Beijing. Both sides believe they have the upper hand, can impose more costs and endure more pain. The stage is set for a complex, volatile dynamic that culminates in a truce at best. And it’s not just about economic issues, Taiwan, the South China Sea, technology competition or nuclear power modernization. The Cold War is beginning to look strange in comparison.