Trump’s First Month: Navigating the Turmoil of China-US Relations

China-US Relations 2.0

In his first month in the White House, US President Donald Trump reignited tariff wars, targeting China, Mexico, and Canada based on border security and fentanyl allegations. While Mexico and Canada received a 30-day buffer after last-minute negotiations, China faced immediate tariffs on USD 450 billion worth of Chinese goods. On February 4, the 10% duty on all Chinese imports to the US—including those from Hong Kong—took effect.

China was prepared with strategic and multifaceted countermeasures, combining tariff and non-trade measures:

• Tariffs on US Goods: China imposed tariffs of 10–15% on approximately USD 20 billion worth of American goods, including a 15% tariff on coal and liquified natural gas (LNG), and a 10% tariff on crude oil, agricultural machinery, and certain vehicles.
• WTO Lawsuit: China filed a lawsuit against the US with the World Trade Organization (WTO) to challenge the new tariffs, a move that also serves to defend the multilateral platform even as the US is withdrawing.
• Export Controls: China increased export controls on several rare minerals such as tungsten, tellurium, bismuth, molybdenum, and indium, which are crucial for manufacturing chips, clean energy, and military equipment.
• Unreliable Entity List: China added US fashion retailer PVH Corp—parent company of Calvin Klein and Tommy Hilfiger—and biotech company Illumina to its Unreliable Entity List for different reasons, potentially restricting their investment and operations in China.
• Anti-trust Investigations: China initiated an anti-trust probe into Google and is reportedly considering investigations into Apple’s App Store and Intel. Nvidia is already being investigated as of last December. These actions are likely a response to the US’ increasing technology restrictions on China, the potential TikTok ban, and Trump’s proposal of a 50% ownership stake in the company.

China’s swift and targeted countermeasures indicate its improved readiness for a second trade war with the US. For example, its countermeasures targeted the US energy sector, which had a USD 156 billion surplus with China in 2024, to maximize impact. China’s approach suggests its commitment to retaliation while maintaining flexibility for negotiations.

Washington’s tariffs and Beijing’s countermeasures mark the beginning of a new phase in the trade war—one about more than just economic interests and instead driven by strategic competition between major powers in a complex international landscape. 

What's Next?

Competing Pressures on Trump’s China Policy: From trade hawks, pragmatists, business leaders, and national security officials, some push for tougher tariffs and tech restrictions while others warn of economic fallout. Congress remains divided, with hardliners advocating confrontation and moderates urging stability ahead of the 2026 midterms.

Recently, Trump has suggested striking a high-profile trade deal with Xi, but escalating tensions are still a strong possibility through further tariffs and restrictions. However, other global challenges—the Russia-Ukraine war, the Israel-Hamas conflict, and domestic issues—may shift his focus. Judging from Trump’s “Fair and Reciprocal Plan,” China is not being singled out by the administration. Regardless, US-China tensions will remain high in the months ahead.

Beijing is Recalibrating Strategy: Beijing is expected to continuously review and adjust its negotiation strategy with Washington, particularly as new global dynamics unfold. The recent Trump-Putin conversation, which suggested a possible thaw in US-Russia relations, presents an additional variable for China. While Beijing remains confident in its close ties with Moscow, it will closely monitor how shifts in US-Russia relations impact the global balance of power—particularly in areas such as China’s strategic influence, military and diplomatic priorities, and trade links.

China is reassessing its multilateral engagement strategy to maintain diplomatic flexibility and regional influence, particularly in Central Asia, Eastern Europe, and the Indo-Pacific, where the US continues to expand its presence. If Washington’s posture toward Russia softens, Beijing may adjust its engagement policies accordingly to ensure continued leverage in both its bilateral and multilateral engagements.

Xi-Trump Meeting: Symbolic or Substantive? Trump has indicated a future meeting with Xi within his first 100 days, a prospect that Beijing has cautiously welcomed. However, the timing and likelihood of such a meeting remain uncertain. If a Xi-Trump summit does take place, it could serve as a forum for selective de-escalation—particularly on trade and investment barriers—but is unlikely to result in a broad reset of relations. Instead, any agreements will likely be narrow and transactional, reflecting the current competitive nature of the relationship.

Tariff Hikes and Trade Diversification: While Trump has so far implemented a 10% tariff on Chinese imports—far below the 60% he threatened during his campaign—additional hikes may be considered if trade negotiations fail to deliver favorable outcomes for Washington. Trump's plan to impose a 25% tariff on all imported steel and aluminum products (effective March 12) and to implement reciprocal tariffs on all countries after April 1, prioritizing those with the largest trade surpluses with the US and the highest tariff rates, will also have additional impacts on China.

In the short term, China’s current tariff exemption period for US goods will expire in February, and Beijing may use further exemptions or retaliatory tariffs as bargaining tools in ongoing trade disputes.

In the middle-to-long term, China will likely double down on its trade diversification agenda with politically stable partners—particularly in ASEAN, Latin America, and Belt and Road Initiative (BRI) countries—to mitigate reliance on US markets and strengthen alternative markets.

China has increased investment in Kazakhstan, the Middle East, Africa, and Europe, focusing on oil, gas, clean energy, and key manufacturing sectors to reduce dependence on US trade flows. While US LNG exports to China remain competitive, they still face pricing disadvantages against pipeline gas from Central Asia, further incentivizing China to seek alternative energy sources. 

Implications and Recommendations for Businesses 

The 10% additional tariffs on Chinese goods have sparked widespread concern across the globe. Financial markets reacted quickly, with stock prices taking a noticeable hit. Both Chinese and American businesses dependent on bilateral trade are on high alert.

For multinational corporations operating in China:

Despite the resilience of China-US economic and trade relations, the current high level of uncertainty and the complex international landscape have amplified market concerns. To better navigate the challenges and potential risks, foreign businesses operating in China, especially US companies, are advised to prepare for changes and unpredictability, be intentional in making informed decisions, and maintain close communication with stakeholders.

• Stay agile and adapt. Secure accurate on-the-ground insights to enable the business to recalibrate strategies as needed. This might involve diversifying markets, exploring new business models, or shifting production locations to mitigate potential adverse effects.
• Make informed decisions and build trust with stakeholders. Businesses should make informed business decisions, not rushed ones. Rebuilding trust with key stakeholders can be a catalyst for progress. Businesses should consider increasing strategic engagement and cooperation with key stakeholders, including government, business partners, industry associations, and media, rather than cutting back.
• Ensure trade and supply chain compliance and diversification. Ensure strict adherence to trade regulations and compliance standards. This includes understanding and complying with customs duties, export controls, and other relevant laws to avoid legal issues and penalties. Reduce reliance on a single supplier or country by sourcing materials and products from multiple regions. This can help buffer against disruptions and price increases due to tariffs.

For Chinese companies operating in the US:

Chinese companies in the US must navigate regulatory risks, trade barriers, and increased political scrutiny. Staying compliant, diversifying supply chains, and investing locally can protect market access, while strong government relations and transparent practices help build resilience. Adapting to US policies and consumer expectations is key to long-term success.

Understand regulatory and political risks. Stay informed about evolving US trade policies, investment restrictions, and national security reviews that may impact Chinese firms. Regulatory compliance and proactive engagement around shifting policies are essential.

Invest in local partnerships and workforce development. Establishing strong local partnerships and investing in the US workforce can help mitigate political and economic risks while improving corporate perception.

Develop a strong communications narrative and stakeholder engagement strategy. Chinese companies should craft clear, transparent messaging that highlights their contributions to the US economy, job creation, and technological innovation. Proactive engagement with key stakeholders—including policymakers, industry groups, and local communities—can help mitigate risks and improve brand perception in an increasingly scrutinized business environment. 

Conclusion

China-US relations are set to remain competitive, complex, and highly dynamic into the future. While both sides may explore limited areas of engagement, particularly on trade and investment, the broader trajectory points toward continued strategic rivalry. Beijing will focus on economic resilience, global trade diversification, and diplomatic maneuvering, while Washington is expected to leverage tariffs, technology restrictions, and security alliances to maintain pressure on China. The coming months will test the flexibility and adaptability of both nations—as well as businesses—as they navigate an increasingly uncertain global landscape. 

Materials presented by Edelman's public & government affairs experts. For additional information, reach out to Cynthia.Xing@Edelman.com or Matt.Streit@Edelman.com