Trump Tests Xi's Appetite to Play Ball With Early Tariff Threat

Donald Trump fired an opening shot in his tariff battle with Beijing by promising an additional 10% levy on Chinese goods. The question that now confronts President Xi Jinping is how much more is coming.

(Bloomberg) — Donald Trump fired an opening shot in his tariff battle with Beijing by promising an additional 10% levy on Chinese goods. The question that now confronts President Xi Jinping is how much more is coming.

The threat by the US president-elect, made on his Truth Social network on Monday, was in retribution for what he said was China’s failure to stop “drugs pouring into our Country, mostly through Mexico.” It wasn’t clear from the post whether the 10% tariff level was an additional levy to an earlier warning of 60% or represented a climbdown.

“This is an early test of Xi’s willingness to play ball with the new Trump administration,” said Neil Thomas, a fellow for Chinese politics at the Asia Society Policy Institute’s Center for China Analysis. “Agreeing to Trump’s demands could avoid a painful tariff, but might encourage him to impose more tariffs to try and extract more concessions.”

Trump’s gambit risks setting in motion a standoff between the world’s two biggest economies following an election campaign that already brought fears over a new wave of protectionism to the forefront. In related posts, Trump said he’d slap 25% tariffs on all products from Mexico and Canada, citing concerns over drug trafficking and illegal immigration.

Liu Pengyu, spokesman for the Chinese embassy in the US, said Beijing has informed Washington of the progress made in counter-narcotics efforts and described as “mutually beneficial” economic and trade cooperation between both countries. 

“The idea of China knowingly allowing fentanyl precursors to flow into the United States runs completely counter to facts and reality,” he wrote on X. “No one will win a trade war or a tariff war.” 

Foreign Ministry spokeswoman Mao Ning told reporters during a regular press conference in Beijing on Tuesday that China would comment on Trump’s threat “later,” without elaborating.

The biggest uncertainty now centers on whether Beijing would reprise a playbook used during the first trade war started by Trump, when Xi’s government initially embraced a strategy of “strategic composure” that sought to avoid escalating disputes and generally waited for the US to act before any retaliation.

Later, it switched gears by adopting a more aggressive style of conducting international relations referred to as “Wolf Warrior Diplomacy” — an approach it’s since backed away from. 

China will likely respond cautiously at first to Trump’s threats, until it gets a better sense of the balance between Trump’s taste for confrontation and dealmaking in his second term, according to Thomas. The fragile state of China’s economy is another constraint on its leadership that may forestall escalation, he added.

For Beijing, it amounts to a confirmation of a challenge looming ahead and the near certainty that China will have to contend with 60% tariffs — at least, said Deborah Elms, head of trade policy at the Hinrich Foundation. “This latest salvo from Trump is just a reminder to take him seriously,” she said.

Trump accused China of failing to follow through on promises to institute the death penalty for traffickers of fentanyl. For China, it was a surprise he’d focus on a rare area of cooperation and where headway has been made in bilateral relations.

US-China ties have deteriorated significantly since Trump’s first term in power and through the current Biden administration. 

Facing another round of trade tensions, China needs to respond “more wisely, in asymmetrical ways,” said Zhu Junwei, a former researcher in the People’s Liberation Army who is now director of American research at Grandview Institution in Beijing. 

According to one line of thinking in China, Beijing should step up its offer of “win-win” cooperation to countries in the face of Trump’s ‘America First’ policies,” she said. Instead of a tit-for-tat response, a better option for China might be to become “more successful and make friends with others,” Zhu said. 

China has already tread carefully in recent times, refusing to be drawn on its preferred candidate during the November elections for US president for fear of being seen as interfering in domestic politics of another country and risk becoming a target itself of Trump’s ire. 

Josef Gregory Mahoney, a professor of international relations at Shanghai’s East China Normal University, said China will resist reflexive actions and real-time responses to Trump’s provocations in favor of what he called a “sober, professional” approach to international relations.

“While Beijing has demonstrated in the past that it’s willing to cooperate on fentanyl, I don’t think China will allow itself to be bullied into action by the US,” he said. “Beijing is also loathe to be held responsible for America’s drug abuse problems.”

—With assistance from Josh Xiao, James Mayger and Philip Glamann.