Trump keeps China guessing on tariff threats

Summary
The president postponed what appeared to be a looming clash on trade and expressed a willingness to talk business, but he remains critical of Beijing.Donald Trump’s criticism of China on the campaign trail and after his election had raised the specter that Day 1 of his second presidency would reignite a trade war between the world’s two largest economies.
As he took office this week, President Trump deferred the threat of tariffs and expressed a willingness to talk business with China’s leader, postponing what appeared to be a looming clash—while repeating threats to take action against Beijing in matters of trade, technology and security.
From China’s perspective, “this is a very positive start," said Wang Huiyao, president of the Center for China and Globalization, a Beijing think tank, and an adviser to the Chinese government.
Trump directed federal agencies to evaluate the economic relationship with China, rather than impose tariffs immediately as he had threatened. He signed off on giving TikTok more time to figure out how to keep operating in the U.S., after the Chinese-owned app briefly went dark under threat of a permanent ban.
Trump also said he might visit China this year, having spoken with Chinese leader Xi Jinping last week. Xi had sent his vice president to witness Monday’s inauguration, in what was seen as a goodwill gesture after receiving Trump’s invitation to the event.
Trump, meanwhile, restated allegations that Beijing has behaved unfairly in areas such as trade and climate, called for more Chinese cooperation in ending the Ukraine war and stopping fentanyl flows into the U.S., and warned that he could impose a 10% tariff on imports from China starting February.

Beijing, for its part, expressed willingness to engage the Trump administration, while it continued to criticize what it characterized as American unilateralism.
“Despite all the differences and frictions, the two countries enjoy tremendous common interests and space for cooperation," a Chinese Foreign Ministry spokesman said Tuesday, adding that China is ready to work with the U.S. to improve ties from “a new starting point."
Even so, China’s relationship with Trump has been volatile in the past, and featured a honeymoon period during his first presidency. “Trump had been sending mixed signals really since the election campaign," veering between tough rhetoric on tariffs and talking up his personal ties with Xi, said Ja Ian Chong, a political scientist at the National University of Singapore.
“If the first Trump term is any indication, there is likely to be some negotiation," Chong said.
Xi signaled his vigilance against strategic pressure from the U.S. hours after Trump’s inauguration, holding a video call with Russian President Vladimir Putin in which he promised to strengthen cooperation with Moscow—a pointed display of togetherness at a time of uncertainty about how American foreign policy is about to change.
Beijing has also tried to make the most of the returning U.S. president’s disdain for multilateral organizations. A day after Trump moved to withdraw the U.S. from the World Health Organization and the Paris Climate Accords, China asserted its support for both—casting itself as a champion of global cooperation.
“Protectionism leads nowhere. Trade war has no winners," Chinese Vice Premier Ding Xuexiang said Tuesday at the World Economic Forum in Davos without explicitly mentioning the U.S. “We should not only make the pie of economic globalization bigger, but also distribute it better."
The U.S. and China share a dissatisfaction over how their relationship evolved in recent years, said Zha Daojiong, a professor at Peking University’s School of International Studies. “The Chinese side will welcome opportunities for direct engagement between the two governments," Zha said. Nevertheless, “both sides are cautious—in a general sense—in reapproaching each other," he said.
In public remarks on Monday during and after his inauguration, Trump criticized China on a number of fronts—including trade, climate change and global influence—while suggesting that he is willing to negotiate with Beijing on these issues.
“We’re going to have meetings and calls with President Xi," Trump told reporters. Asked if he plans to visit China this year, he said he might do so, having received an invitation.
Trump cited China when discussing his decisions to withdraw from the Paris agreement and the WHO, saying Beijing “pollutes with impunity" and hasn’t contributed enough funds to the United Nations health agency. He has also accused China of taking control of the Panama Canal, and declared in his inaugural address that “we’re taking it back."
Then, on Tuesday, Trump said he had spoken to Xi about how Beijing could do more to help end the war in Ukraine, and said that his administration was considering a 10% tariff on goods imported from China starting Feb. 1, in response to the flow of fentanyl into the U.S. Washington has been working to pressure China to shut down a supply chain that is enabling the underground production of fentanyl and other narcotics.
Trump has accused China of taking control of the Panama Canal.
Beijing has avenues to reach a compromise on some of the issues that Trump has raised, said Wang, the think-tank president. For example, China could offer to buy more American agricultural products, channel investments to support U.S.-based manufacturing, clamp down harder on shipments of fentanyl precursor chemicals, and facilitate talks to end the Ukraine war, Wang said.
If Trump does follow through on his threats, China believes it is in a good position to mitigate the damage and even reap some benefits, some experts say.
China could navigate the 10% tariff by offering incentives such as tax cuts to exporters, according to Carlos Casanova, senior Asia economist at Union Bancaire Privée in Hong Kong. Deflation in China could keep Chinese goods attractive to U.S. buyers despite additional tariffs.
“Ten percent will be quite manageable," said Casanova.
Some Chinese foreign-policy experts said Beijing should remain cautious about Trump’s early overtures, noting that the U.S. president could switch to a more aggressive stance.
“We must not let our guard down," Jin Canrong, an international-relations professor at Renmin University in Beijing, said in a video posted on his Weibo social-media account. “My sense is that [Trump] still regards China as a strategic rival."
Trump is flattering Beijing for now, but in reality, he is also putting the responsibility on China for resolving disputes, Jin said. “In the future, should issues not get handled well, he can blame China."
Hannah Miao contributed to this article.
Write to Chun Han Wong at chunhan.wong@wsj.com