Trump returned to office last year intent on recalibrating bilateral trade ties with China: Using intense, sustained tariff pressure, he hoped to achieve a more balanced economic relationship that would pave the way for wider-ranging cooperation between Washington and Beijing. Administration officials were confident that they could make progress toward that objective in part because of the economic challenges that China was confronting then and continues to face: slowing growth, demographic decline and mounting municipal-level debt. Chinese observers, however, noted that while Trump's 2016 election had caught Beijing off guard, Chinese officials were better prepared to deal with him eight years later. A little over a year into Trump's second term, China has withstood the administration's tariff fusillade, recording its biggest-ever trade surplus in 2025. The Supreme Court's February ruling deprived Trump of his most sweeping tariff authority, and many of the “existentialists” on China who joined his administration in senior capacities have been fired, demoted or sidelined. In addition, China has secured two important concessions without, it would appear, having given any in return: Trump stated that he would allow Nvidia to sell advanced H200 semiconductors to China, and appeared to violate Washington's longstanding assurances to Taiwan by stating that he was discussing U.S. arms sales to the island with Xi. Given all of this, it is unclear that Trump has a coherent construct to guide his China policy. Xi, meanwhile, has both a powerful stick and an enticing carrot. China has demonstrated that it can harm U.S. farmers and undercut the U.S. automotive sector and defense industrial base with little effort. Less discussed but as important is the carrot: Xi could argue that the self-styled “peacemaker in chief” has a fleeting window of opportunity to reduce the prospect of a great-power war by aligning his vision of “a decent peace” in Asia with Xi's, a suggestion that would likely resonate with Trump as his peacemaking agenda flounders elsewhere. Trump's request last month to China for assistance to open the Strait of Hormuz suggests that Washington will need its principal strategic competitor to help it manage a crisis of its own making. A deteriorating security landscape could actually enable Xi to sweeten the carrot that he offers Trump: Xi might contend that Trump's decision to relocate military assets from Japan and South Korea to the Middle East will have the ancillary benefit of easing security tensions in Asia. Trump claimed last August that the United States has “much bigger and better cards” than China. At least for now, though, his bombast lags his leverage.
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