Trump’s New Imprint on US-China Competition

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This is the 169^th in the China Chronicles series

For all the chaos that has ensued from Trump’s return to the White House and his policy decisions in the weeks that have followed, his China policy remains the strongest and the most decisive outlier in shaping America’s role and influence abroad. Trump’s “Make America Great Again (MAGA)” motto has had a strong domestic orientation, yet increasingly China seems to be gradually gaining centre stage, even as the singling out of China seems an inevitable strategy for the US. The eventual tariff escalation between China and the US which has reached a mindboggling 145 percent in certain sectors by the US and similar retaliations by China lead one to believe the US Treasury Secretary Scott Bessent when he claimed that the strategy to roll back tariffs to a baseline 10 percent for all countries but China was Trump’s ‘strategy all along’. Given Beijing’s response until now, the odds of Chinese President Xi Jinping picking the phone to call the US for a bargain are low, especially as China has said that it will not be bullied.

The eventual tariff escalation between China and the US which has reached a mindboggling 145 percent in certain sectors by the US and similar retaliations by China lead one to believe the US Treasury Secretary Scott Bessent when he claimed that the strategy to roll back tariffs to a baseline 10 percent for all countries but China was Trump’s ‘strategy all along’.

The decision to levy high tariffs on China has brought Chinese ports virtually to a halt. While turning the screws on China and leaving other countries with a baseline tariff of 10 percent, the Trump administration may have moved towards an unintended China strategy. However, China’s response is likely to shape the policy in a confrontationist way. What makes Trump’s trade war with China different in his second term is the US’s ongoing trade war with the top three exporting partners—Canada, China and Mexico, as indeed with its top 50 odd exporting countries. For the US economy, assessments range from price rises to lower growth rates. However, much of the change in the American economy remains to be seen in its early days but China’s response to the US tariffs has sent some signals. One of the biggest jolts that American businesses have received which could lead to wider disruptions is China’s decision to cut supply of a range of critical materials such as rare earths and magnets to the US. This is expected to impact critical sectors like automakers, aerospace manufacturers, semiconductor companies and the military not just in the US but across the world.

Trade war with China is a legacy from the Trump first administration, with the Biden administration building on it through his policy of export control in the technology realm. Trump’s first term saw an aggressive posturing to decouple from China and maintain US superiority in areas like tech and semiconductors. In the years since Trump left office after his first term, China’s capacities in tech, investments, manufacturing and control over supply chains have advanced dramatically. For context, how the entry of Chinese start-up DeepSeek stunned the world and roiled the markets wiping billions was just one example of not just the strides made in a short time by China but also how the nature of US-China competition has changed.

One of the biggest jolts that American businesses have received which could lead to wider disruptions is China’s decision to cut supply of a range of critical materials such as rare earths and magnets to the US.

The Biden administration which succeeded the first Trump administration continued some of its China policies and developed strategies to deal with China without an aggressive confrontation akin to Trump’s term while working on policies to maintain a competitive edge over it. Its focus on strengthening partnerships with key allies witnessed a remarkable reversal during the Trump administration. Furthermore, the Biden administration’s focus on targeted investments in enhancing and upgrading its domestic tech and semiconductor manufacturing capabilities became a spotlight for competition with China. The most promising step in that direction was the CHIPS and Science Act, which allotted US$52 billion for domestic manufacturing and R&D and established a 25 percent investment tax credit. The administration also focused on stringent export control blocking the export of critical AI and semiconductor material to China, besides working with key allies to do the same. Alliance building and enhancing allies' abilities was a major focus of the administration.

The return of Trump to the White House for the second time has marked an even harsher coercion than his first term, the primary approach being an indiscriminate use of tariff as a cudgel to compel policies on friends, partners and allies alike—as evidenced by the announcement of reciprocal tariffs a range of countries. Trump’s use of executive orders to specifically focus on boosting domestic manufacturing capabilities and investments and attaining tariff parity is now a strategy for all but most pronounced for China. Trump’s policies also point to policy continuities from the Biden era to maintain pressure on China. This is perhaps most stark in Trump’s focus on  AI, as evidenced in an Executive Order dated 31 March, which seeks to establish the United States Investment Accelerator. The accelerator will facilitate and accelerate investments above US$1 billion and help investors navigate regulatory approvals. The accelerator will also be responsible for the Biden era’s CHIPS Program Office to offer better incentives to investors and innovators.

The Biden administration’s focus on targeted investments in enhancing and upgrading its domestic tech and semiconductor manufacturing capabilities became a spotlight for competition with China.

Boosting investments in the US is now a coercive strategy under Trump. Trump’s Executive Order dated 21 February 2025 intends to put in place an America First Investment Policy. The policy commits to maintaining a strong, open investment environment that benefits the people and the economy. More importantly, the order calls out China for its unfair means to invest in US companies and assets to obtain cutting-edge critical technologies. It also stresses the fact that China does not allow US companies an equal competitive environment, especially in critical tech infrastructure and therefore justifies the US’s steps not to allow Chinese firms in retaliation. Blocking China’s access to critical technology with more intensity will now be a central focus of the Trump administration, as Beijing is fast catching up with the US on tech.

The unfolding tech competition between the US and China is going to be decisive. If current trends are any indication the Trump administration is likely to continue a strategy of building capabilities at home while blocking China’s access to critical technologies where possible and extending partnership with like-minded allies. With a 90-day suspension of the high levies on all countries, except China, could well be the start of Trump’s new trade war with China, as Trump seeks to strike a balance by assessing sectoral impacts. Leaving out smartphones, computers and some other electronic devices from “reciprocal tariffs” may be only a reprieve for China as the Trump administration may be planning new tariffs on semiconductors and pharmaceuticals.

China’s retaliation in areas like critical minerals and magnets may be the first direction in estimating the restructuring of supply chains around the world because of the new escalation in the China-US war that would take place. Meanwhile, China’s adaptation to US tariffs would be one of the greatest externalities shaping great power competition and trade around the world. As such, Xi Jinping’s visit to Vietnam, Cambodia, and Malaysia is part of the Chinese preparations to deal with the incoming impact of the trade war may be a start for China. For countries like Vietnam, which is one of the highest tariffed countries in Trump’s new plans, aligning strategies with China could have mutual benefits.

The policy commits to maintaining a strong, open investment environment that benefits the people and the economy.

It has just been weeks since the Trump administration has taken office, but its policies have already disrupted the old rules of global world politics and economics and threaten to impose a new order with the US regaining its primacy. Given that tariffs are a cause of concern for domestic stakeholders in the US as well, it remains to be seen if the Trump administration continues to use coercion by tariff as its primary tool in competing with China, as indeed with the rest of the world.

From a geopolitical perspective, China is likely to retain its position in American strategic assessments as the ‘pacing challenge’ for the US.  The Trump administration continues to see value in working through a partnership in the Indo-Pacific which is critical to deal with common threats and challenges in the vast region, as evidenced by the joint statement by QUAD foreign ministers. Recently, two senior officials from the Trump administration, including the US Secretary of Defence Pete Hegseth, visited the USINDOPACOM committed to strengthening alliances and partnerships in the Indo-Pacific. The Indo-Pacific in retaining centrality under Trump could well be the region where the arteries of Trump’s economic and strategic matrix converge.

Vivek Mishra is Deputy Director – Strategic Studies Programme at the Observer Research Foundation. 

Akshat Singh is a Research Intern with the Strategic Studies Programme at the Observer Research Foundation.

• International Affairs
• China
• USA and Canada
• Trump tariffs
• us china policy under trump
• us china relations
• us china tariff war
• US China trade war

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