Trump tests China’s nerves with tariff threats, but Beijing bets truce will hold

U.S. President Donald Trump has widened his tariff playbook, unleashing a string of warnings and policy moves that affect Beijing’s interests without directly escalating tariffs on Chinese goods.

But analysts are hopeful that the recent geopolitical turmoil is unlikely to unravel the delicate U.S.-China trade truce, as Beijing appears to be betting that Trump’s threats will not be enforced in ways that meaningfully harm China. Both sides are seeking to keep plans on track for an upcoming leaders meeting in April.

“Beijing is watching,” but is likely to respond cautiously to Trump’s latest tariff threats, said Deborah Elms, head of trade policy at the Hinrich Foundation. She said Trump is unlikely to follow through on threats, such as imposing 100% tariffs on Canada, or on many of his other warnings to trade partners.

“There is no reason to provoke any other reaction from Washington at this time [as] both the U.S. and China are trying to maintain the fragile truce through Trump’s planned visit to China in April,” Elms added.

Gabriel Wildau, managing director at consultancy firm Teneo, said Chinese leaders may doubt Trump will follow through on his latest tariff threats, given that he has largely retreated from earlier measures after backlash from financial markets and the business community.

Over the past month, the Trump administration has seized control of Venezuelan oil flows, a crucial source of crude for China, and threatened a 25% tariff on countries doing business with Iran, a move that could hit Beijing as Tehran’s largest oil customer.

Trump had also threatened to take over Greenland, raising concern in Beijing, which has sought to develop Arctic shipping routes and has shown interest in the island’s rare-earth resources. The American president later backed away from threats of force and tariffs but said there was “the framework of a future deal.”

Canada has emerged as the latest flashpoint. Trump warned he would impose a 100% tariff on Canadian goods if Ottawa moved forward with a trade deal with China, in a stark contrast to his previous comments that such a deal could be “a good thing.”

Prime Minister Mark Carney reached a trade deal with China — Canada’s second largest trading partner after the U.S. — following his trip to Beijing earlier this month. Under the deal, Ottawa would roll back 100% tariffs on Chinese electric vehicles while Beijing would lift retaliatory tariffs on Canadian canola seeds and meal.

Trump’s tone on the Canada-China deal shifted after Carney’s speech at Davos, when he urged middle-power nations to band together against coercive tactics by major powers. Carney later said Canada has no plans to pursue a free trade agreement with Beijing, framing the latest deal as limited in scope.

Trump appeared to make it clear that “if you go too far in the China direction, we’re going to be really rough on you,” said Kurt Tong, managing director of The Asia Group, as officials prepare for an upcoming renegotiation of the U.S.-Canada-Mexico free trade agreement.

Beijing said that the trade agreement with Canada was “not directed at any third party” and aligned with the two countries’ shared interests.

Chinese leaders may welcome the opening created by Carney’s engagement and trade deal, but see limits to how far Canada can pivot away from its deep ties with Washington, said David Meale, Head of Eurasia Group’s China practice.

Dong Yan, China’s vice minister of commerce, said in a press briefing Monday that the two sides have maintained regular communication since Trump and Chinese President Xi Jinping met in South Korea in October.

China is willing to work with the U.S. to manage differences and deepen cooperation to ensure a stable and healthy bilateral relationship, Yan said, while stressing the relationship must be based on mutual respect and win-win cooperation.

Both sides appear to have adapted to a world in which they “lob hand grenades at each other – or at least threaten to – without disrupting plans for the two leaders to meet,” said Stephen Olson, a visiting senior fellow at the ISEAS-Yusof Ishak Institute.

It is in the best interests of both sides to keep the April meeting on track, he added.

China’s restrained response also reflects efforts to strengthen its position against the U.S. while reassuring global leaders that its ties with Washington remain stable, as Beijing hosts a fresh round of foreign leaders.

Several world leaders have visited China this year, including Ireland’s Prime Minister Michael Martin and South Korea’s President Lee Jae Myung. Xi met Finnish Prime Minister Petteri Orpo on Tuesday, while U.K. Prime Minister Keir Starmer is expected to visit China this week, marking the first visit by a British leader in eight years.

Separately, Xi said in a phone call with Indian President Droupadi Murmu on Monday that Beijing and New Delhi were “good neighbors, friends and partners,” calling for deeper cooperation.

There have been few signs that Beijing plans concrete policy responses — such as sanctions, trade restrictions, or military deployments — to counter Trump’s recent broadside, Wildau said.

“Beijing’s overarching strategy appears to be maximizing global distrust of the U.S. through commentary highlighting perceived U.S. bullying, while presenting China in contrasting terms as supportive of restraint, multilateralism, free trade, and win-win cooperation,” said Wildau. He added that China is able to do so without directly undermining the ongoing detente with the U.S.

“‘Never interrupt your adversary when he is making a mistake’ appears to be the guiding principle [for China,]” he noted.