The revival of trade war under Trump’s second presidency holds full potential to deteriorate bilateral relations of the two. There are chances that this might drive the world into two quasi-opposing blocs and shift China’s policy from cooperation to strategic competition. The return of Donald Trump to the presidency of the United States has sparked discussions about a fresh trade war with China. His plan to impose a broad 60% tariff on all Chinese imports has sparked worries about how the United States and China will interact in the future. With Trump’s “America First” policy, some observers see the tariff threat as a bargaining tool, while others see it as a harbinger of a more serious push toward economic independence. The world economy is preparing for a possible confrontation in any case.

The second round of the trade war seems more ideological than the first one during Trump’s first term, which was focused on securing better trade agreements. There are many “China hawks” on Trump’s new staff who see China as a long-term geopolitical adversary. The proposed 60% tax, which many perceive as an attempt to directly halt China’s rise rather than just secure improved trade conditions, reflects this change in strategy. Trump’s strategy is influenced by four main aspects. First, he might exert pressure on China to influence adversary nations like Iran, North Korea, and Russia by using the tariffs as leverage. Second, Trump’s faith in the effectiveness of tariffs is bolstered by his perception that China, not American consumers, pay for them. Third, the outcomes of the 2020 Phase One agreement have left Trump with no other option but to avoid using the same approach. Lastly, Trump believes that by revitalizing American industry and lowering dependency on Chinese imports, the trade war will strengthen his “America First” policy.

It is anticipated that China will react to these events strategically rather than reactively. China is now more equipped to deal with U.S. tariffs than it was in 2018. Its dependence on the U.S. market has decreased; in 2023, shipments to the U.S. made up just 14.8% of overall exports, down to 19.3% in 2018. China now has a more varied export market and have a substantial expansion of its economic ties with nations participating in the Belt and Road Initiative (BRI). China’s exports to the BRI nations overtook its total exports to the US, EU, and Japan in 2023 for the first time. This change is a reflection of China’s plan to build stronger ties with the Global South and lessen its reliance on Western markets.

China’s long-term policy goes beyond retaliation. It aims to strengthen its economy and lessen its vulnerability to American pressure. In order to evade U.S. tariffs and preserve supply chain stability, Chinese businesses have increased their production abroad, particularly in Southeast Asia. China’s computer component exports to Vietnam more than doubled between 2017 and 2023, while its exports to Mexico and Thailand more than doubled as well. China is now the third-largest source of offshore direct investment (ODI) in the world, having increased its ODI by 8.7% in 2023.

Trump might view the tariffs as a political victory in spite of the dangers. His supporters frequently see his tough stance on China as proof of his ability to lead. Any immediate political advantages, meanwhile, can have long-term financial consequences. Protectionist measures may lose favor if U.S. inflation increases and wages don’t keep up. Additionally, as was the case during Trump’s first term, American businesses that depend on Chinese imports could lobby against the tariffs. Trump may be forced to loosen or change the policy by political pressure if his plan does not clearly benefit the American people.

China may view the second trade war as an opportunity to move closer to its long-term objectives of technological self-sufficiency and economic independence. China has placed a high priority on growing its semiconductor industry and lowering its need on American technology ever since the first trade war. Beijing may accelerate its “dual circulation” policy, which aims to boost domestic demand and lessen susceptibility to supply chain disruptions worldwide, as a result of the trade war. China has increased its involvement in multilateral groups such as the Shanghai Cooperation Organization (SCO), the G20, and BRICS as the United States withdraws from global commerce. China can increase its influence over global economic governance by interacting more actively with the Global South.

In the end, the second trade war has the potential to significantly alter U.S.-China ties. Trump’s tariffs may cause more separation, which might result in the emergence of two rival economic blocs. The United States may become increasingly cut off from international trade as China fortifies its position in multilateral forums and forges stronger ties with BRI nations. Economic nationalism in the United States may eventually prove unsustainable if consumers and businesses are forced to pay for higher expenses and fewer options. Although Trump’s second term is only four years old, his trade policies may have far-reaching consequences. China’s position as the world’s economic superpower may become more deeply ingrained in the world as the next U.S. president leads.