Editor's Note
- Minxin Pei
- 1 hour ago
- 3 min read
The second U.S.–China trade war is the focus of this issue. China’s retaliatory response to President Donald Trump’s “liberation day” tariffs stands out because it eventually forced Trump to accept a temporary truce, thus avoiding calamitous disruptions for both economies. Given the high stakes for the Chinese economy, President Xi Jinping made a risky bet when confronting Trump’s new tariff war. Even though it is too early to tell whether this bet will pay off in the long term, for now Xi seems to have achieved his objective of demonstrating resolve without foreclosing potential paths to a future compromise to preserve near-term Sino–American commercial ties. As Gerard DiPippo shows in his analysis of the impact of the trade war on China, the surprising resilience of the Chinese economy, despite the well-known challenges it faces, may have given Xi and his colleagues more confidence to respond to the new trade war with relative calm and firmness. Beijing’s economic policies after announcement of the “liberation day” tariffs indicate that China is willing to accept short-term pain to improve its economic security. Minxin Pei’s examination of the Chinese response to the trade war also confirms the Chinese leaders’ focus on the long game. Instead of a large fiscal and monetary stimulus package, they opted for a messaging campaign to bolster public support and private-sector sentiment. The most likely explanation for Xi’s patience is that he is conserving China’s limited fiscal resources for future contingencies. The consensus view in Beijing is that, regardless of the short-term outcomes of the new trade war, geopolitical tensions with the U.S. will lead to further decoupling. In such a case, China would be better positioned to keep its powder dry for unanticipated needs. On the diplomatic front, China played its cards skillfully. It invested in shoring up ties with its trading partners in Southeast Asia but shunned any leadership role in forging an international coalition to counter Trump’s global trade war. Another impressive diplomatic accomplishment is that China apparently has turned a crisis into an opportunity as negotiations during the trade war opened up a direct channel of communications with Trump and raised the odds of a summit that will be considered a major win for Xi. China achieved these objectives, according to Ryan Hass, primarily because it has learned the lessons from the first trade war with the U.S. For the past five-plus years, its leaders have been methodically fortifying the country’s capacity to withstand trade and strategic pressures from the U.S. under the assumption that its geopolitical rival will grow more aggressive in seeking to suppress China’s rise. When the new trade war erupted, China was far better prepared than it was in 2018, and arguably it fared much better.
However, China’s efforts to gain greater economic security are costly despite its understandable concerns that foreign nations may use technology and resources as leverage against it. In his essay for the issue, Nicholas Borst describes China “whole-of-nation” campaign to bolster self-sufficiency across multiple areas of the economy. Although the long-term payoffs of China’s securitization drive remain uncertain, its costs—in terms of investments and efficiency losses—have ballooned. China is also facing growing backlash from its trading partners. In a worst-case scenario, China might accomplish the opposite: its push for greater self-reliance may exacerbate some of the very risks it seeks to avoid.
Finally, the succession issue has become more salient as Xi, at age 72, moves toward the end of his third term. At the moment, as Jonathan Czin points out, Xi has clearly signaled his intention of serving another term. The issue is not whether he will step aside, but what he may do during a fourth term. Most likely, he will stay the course by continuing the policies of his first three terms. The only exception is Taiwan. If the Democratic Progressive Party (DPP) wins another presidential term in January 2028, Xi may escalate his pressure campaign to a new—and more dangerous—level.
