Trade war with the US: an opportunity for Beijing – a risk for Trump

The trade war between the United States and China shows no sign of easing. However, Beijing is strategically seizing the moment: strengthening its domestic economy, courting new allies, and investing in measures to boost consumption. Meanwhile, Donald Trump faces growing political pressure at home, and time may ultimately work in China’s favour.

Tariffs, counter-tariffs and an entrenched stalemate with little prospects of easing any time soon – this is the current state of US-China relations. President Trump has rattled markets, but how much real damage has been done? At least for China, not as much as some might assume. Despite several countries signalling a willingness to enter talks with the US, Beijing appears to have little interest in negotiating.

There are two main reasons for this. One – often underestimated – is the potential loss of face. Yielding to US pressure would be seen domestically and internationally as a setback in China’s quest for global influence. Even just sitting down at the negotiating table could be interpreted as weakness. But there’s also a more pragmatic motivation behind China’s reluctance: While the US has a great deal to lose, China stands to gain. After all, exports to the US now make up just 15 percent of Chinese exports.

China also sees opportunity where the US turns its back. Xi Jinping’s government is stepping up diplomatic and economic engagement with countries like Vietnam, Thailand and Malaysia, as well as with long-time rivals Japan and South Korea. This is a rare chance to forge new alliances and claim market share. Talks with the European Union are also on the table, focusing on deeper trade, investment and industrial cooperation. Even the EU’s stance on tariffs for Chinese electric vehicles could soften, with Brussels reportedly considering minimum pricing instead.

Homegrown growth becomes priority
At home, Beijing is laying the groundwork for a more resilient economy. A stimulus package centred on infrastructure and consumer spending is being discussed, along with potential tax breaks.

China may use this moment to accelerate a shift towards a consumption-driven growth model. The timing works in the government’s favour: Fiscal intervention can be framed not as a response to domestic policy failures, but as a defence against external threats.

The key principle, as echoed in Chinese state media, is to “invest in people to boost consumption”. Hopes rest on expanding the services sector and other labour-intensive industries. Education is also high on the agenda, with the aim of cultivating a deeper domestic talent pool. Increased internal demand could help address industrial overcapacity – alongside a potentially deliberate depreciation of the yuan.

And Chinese exports remain competitive. The automotive industry is capable of producing quality vehicles at attractive prices, and tech startups like DeepSeek are gaining attention. There’s already been a modest win for China: The US government, under pressure from firms like Apple and Nvidia, has exempted key electronic products from new tariffs on imports from China and other countries.

Xi can wait. Trump cannot.
China’s President Xi Jinping enjoys a crucial advantage: He doesn’t have to worry about re-election. In contrast, Trump faces midterm elections, with 435 seats in the House of Representatives and 33 Senate seats up for grabs in November 2026.

Trump, too, has promised tax cuts that could bolster his popularity. But these take time to implement – and if his hardline trade policies don’t deliver visible results by the time voters go to the polls, he risks becoming a lame duck, with little support in Congress. By contrast, if China can make progress on its domestic agenda – stimulating consumption, building alliances, weakening the yuan – it may secure a significant strategic win. Still, China doesn’t have to wait for an electoral upset to benefit. A defeat for Trump in the midterms alone would be seen as an advantage.

For investors, China remains an appealing, if turbulent, prospect. Disruption is likely to persist – perhaps even intensify – but China has demonstrated its resilience before. A trade war may be uncomfortable, but it won’t bring Beijing to its knees.