Trump increases pressure on Xi prior to official state visit

US-China Relations Face Renewed Tensions Amid Tariff Threats

Last October, global markets and businesses breathed a sigh of relief when Donald Trump and Xi Jinping seemed to put their differences aside. However, that sense of calm is now under threat.

As President Trump prepares for his upcoming visit to Beijing in April, he aims to demonstrate a fresh start in US-China relations after a year marked by economic clashes and retaliatory measures. Yet, his recent announcement of a 25% tariff on any nation trading with Iran has reignited tensions, particularly with China—a major trading partner of Iran.

This move could jeopardize the delicate trade ceasefire between Washington and Beijing before it has a chance to solidify. The White House has yet to provide specifics about the new tariff, which many see as a negotiation tactic aimed at Iran. Still, China stands out as the primary target, having previously purchased the bulk of Iranian oil and remaining its largest trading partner according to the latest data.

Beijing is unlikely to accept this quietly. Over the past year, Chinese leaders have shown little patience for external pressure and have become more willing to respond in kind. On Monday, China’s embassy in Washington condemned the “unilateral sanctions,” denouncing the tariffs as an example of “long-arm jurisdiction.” By Tuesday, Chinese foreign ministry spokesperson Mao Ning issued a pointed warning: “There are no winners in a tariff war. China will resolutely defend its legitimate rights and interests.”

Uncertainty Returns to Global Trade

Businesses and investors, who welcomed the apparent reconciliation between Trump and Xi last autumn, now worry about a return to the instability and disruption reminiscent of the 2025 trade conflict.

Jonathan Steenberg, an economist at Coface, warns: “Any new tariffs could undermine the fragile peace between the US and China, potentially provoking retaliation and undoing the recent period of relative calm and predictability in global commerce.”

During the height of their dispute, the US threatened China with tariffs exceeding 100%, while China retaliated by restricting exports of rare earths essential to American industries. Negotiations repeatedly stalled, and direct trade between the two nations plummeted.

Following a meeting between Xi and Trump in South Korea on October 30, an agreement was reached: the US reduced its average tariff to around 47% in exchange for China pausing its own tariffs, resuming rare earth exports, and purchasing American soybeans. Both countries have so far honored their commitments, with Trump’s attention shifting to other international concerns.

China’s Ongoing Grievances and Strategic Moves

China’s main point of contention now centers on Sanae Takaichi, Japan’s new prime minister, following her remarks about Taiwan.

Meanwhile, China has already purchased 10 million of the 12 million tonnes of American soybeans it pledged to buy by next month—a move that has likely boosted US farmers ahead of the upcoming midterm elections.

In December, China announced plans to expedite the issuance of 12-month general licenses for rare earth exports, easing restrictions on a market it largely controls.

China Maintains Leverage

Despite these gestures, China has kept its export licensing system in place, favoring shipments of finished goods over raw materials that would allow the US to manufacture its own magnets. China has also limited rare earth exports to Japan, signaling its readiness to use economic leverage if provoked—and it may interpret the new US tariff as just such a provocation.

Trump’s declaration regarding the Iran-related tariff was unequivocal: “This Order is final and conclusive,” he posted on Truth Social.

Nevertheless, the White House appears hesitant to reignite a full-blown trade war with China. As trade adviser Peter Navarro remarked last year, “We don’t want to get to a point where we hurt ourselves.”

Dan Wang, China director at Eurasia Group, observes: “Trump’s tariff strategy didn’t succeed. He tried to play hardball with China, but China effectively pushed back.”

Strategic Calculations and Future Risks

The US has imposed a 25% tariff on buyers of Russian oil, but has mainly targeted India rather than China, leaving Beijing in a cautious, wait-and-see position. Wang notes that Chinese officials likely anticipated such moves and are unlikely to escalate the situation unless provoked further, particularly over sensitive issues like Taiwan.

The upcoming meeting between Trump and Japan’s Takaichi in March could raise the stakes, especially if the US adopts a more assertive stance on Taiwan. So far, however, the White House has been unusually restrained in its support for Japan’s leader.

As Trump and Xi prepare for their anticipated April summit, they may succeed in containing trade tensions for now. Yet, Steenberg of Coface warns that even the threat of new tariffs could prompt companies to stockpile goods, disrupt supply chains, and drive up costs.

Trump is also turning his attention to domestic economic concerns, such as rising living expenses, which could influence the outcome of the midterm elections. If the fragile truce with China collapses, the political consequences could be significant.