Farshad Adel – Secretary General of Iran-China Institute for Strategic Studies

The aggressive approach of the previous Trump administration towards China has created the impression that Sino-US relations will likely face challenges over the next four years. However, it is also possible that China will avoid fueling challenges in the relations between the two countries by being patient with Trump’s decisions and taking a forward-looking view of the relationship with the United States.

Meanwhile, as expected, Trump has escalated the trade war with China to expand American economic power, using both tariffs and sanctions to counter China’s power. However, his focus on short-term American interests may ultimately benefit China, as his distinctive view of America’s strategic partnerships with other countries will allow China to forge new political and economic alliances. On February 21, 2025, Trump issued an executive order to the Committee on Foreign Investment in the United States (CFIUS) to restrict Chinese investment in strategic industries in the United States.

In addition to restricting Chinese investment in strategic industries, the order calls for restrictions on purchases of agricultural land and real estate near sensitive facilities. According to information released by the White House, about 2 percent of all agricultural land in the United States is owned by foreign entities and individuals, and China owns more than 350,000 hectares of agricultural land. Earlier, Trump issued a separate announcement ordering 25% tariffs on steel and aluminum from all U.S. trading partners, which may not directly affect China (due to the small volume of Chinese steel exports to the U.S.) but will indirectly affect Chinese steel exports to the U.S., which are mainly from Canada and Vietnam. Trump’s statements about “taking back Panama” and imposing a 10% tariff on Chinese fentanyl imports were among Trump’s other actions last month aimed at starting a trade war with China. Beijing has actively responded to Trump’s actions, especially regarding fentanyl imports and the new tariffs imposed, and has strongly criticized Trump’s trade policies, calling them unfair and unjust. China’s Ministry of Commerce has stated that any unilateral trade action by the United States violates World Trade Organization rules and that China has the right to defend its rights and interests. The ministry has threatened to file a complaint with the World Trade Organization. In this regard, China has warned the United States not to politicize economic and trade issues, as this approach could lead to further distrust and tensions in bilateral relations. In addition, China has warned that stricter rules and new tariffs may undermine the confidence of Chinese companies in the US market. Therefore, the new US administration’s approach to trade relations with China is expected to lead to increased tariffs, sanctions, and export controls on the Chinese economy, which will confront China with the key question of the best response to US actions.

Based on economic logic, Beijing’s avoidance of confronting US actions and passing Trump’s four-year term seems to be the correct choice. However, facing a flood of US sanctions, Chinese politicians will be under domestic and international pressure to take measures to prevent failure.

Although Beijing seems to have been cautious and restrained so far, considering the need to engage with the United States for continued access to foreign capital, advanced technologies, and global markets, Trump’s escalation may lead to severe damage to the Chinese economy and the weakening of the country’s strategic economic levers in competition with the United States.

Over the past years, China has taken several countermeasures against US sanctions, such as the announcement of the “Unreliable Entity List” in 2020, the “Countering Unjustified Offshore Activities Act” and the “Anti-Foreign Sanctions Act” in 2021. According to many experts, the effectiveness of these measures is ambiguous and has been interpreted mainly as a symbolic measure; however, it is expected that with the coming to power of the Trump administration, a new bias will develop among Chinese officials to try to gain more influence in specific areas such as high-tech and rare minerals.

For example, in October 2024, China imposed sanctions on the American company Skydio in response to the sale of drones to Taiwan, which caused a crisis in the company’s supply chain; or in another example, the emergence of DeepSick artificial intelligence caused a collapse in the US financial markets.

In the current situation, China seems to have limited capacity to confront the US economic war. For this reason, the country is trying to simply reduce the damage caused by the US economic war during Trump’s four-year term. However, it can be predicted that this will intensify China’s efforts to develop its influence in areas such as advanced technologies and use this tool to confront the US in the face of future crises. In general, the main approach in China is that the four years of Trump’s term must be spent in some way, and this should not have a significant impact on the long-term prospects of China’s presence in the US market in the coming decades. For this reason, between responding strongly to Trump’s actions or accepting his demands, it is trying to adopt a middle ground that includes imposing export controls on certain industries such as advanced technologies and rare earth elements. However, there is also a mentality in China that the US is the world’s largest economic power and China is still the largest developing country. Therefore, these counter-sanctions by China will not carry the same weight as the US actions against China. However, it is evident that this trade war between the world’s two leading economic powers will affect both countries and Trump, with his power-oriented policy, will not tolerate any counter-measures from China in a bullying manner. If he has objections to China’s counter-measures, it is from this position.