Beijing seeks strategic negotiation to avoid full trade war with Washington

Beijing is positioning itself strategically to preempt further escalation of trade tensions with the United States as Donald Trump intensifies threats of new tariffs. Analysts suggest China is leveraging restrictions and economic measures to draw Washington into negotiations before a potential all-out trade war develops.

Having learned from the previous trade conflict during Trump’s first term, China is focusing on securing bargaining advantages to address contentious issues such as trade, investment and technological cooperation with the US. However, the Chinese economy remains fragile, and additional US tariffs could further destabilise it.

This week, China launched an investigation into US semiconductor giant Nvidia over alleged antitrust violations, following its recent ban on US-bound exports of rare earth minerals. Experts believe these actions signal China’s initial negotiating tactics rather than an outright escalation. Fred Neumann, chief Asia economist at HSBC, noted that Beijing is likely pursuing a “negotiated outcome” rather than full economic confrontation.

George Magnus, a research associate at Oxford University’s China Centre, suggests that while China could withstand most tariff scenarios, a “60 per cent blanket tariff” would be catastrophic. Despite its technological advances, China remains dependent on strategic US imports such as advanced microchips, while also counting on American consumers to sustain demand amid growing economic pessimism.

Dr Alicia Garcia-Herrero, chief Asia Pacific economist at Natixis, highlighted Beijing’s urgency to renew the US-China Science and Technology Agreement, which lapsed in August. This agreement underpins scientific collaboration but faces delays, particularly as Trump’s administration ramps up restrictions on high-tech exports.

To strengthen its hand, China has new economic incentives, such as expanding purchases of oil and liquefied natural gas from the US — sectors that could support American production. Bo Zhengyuan of Shanghai consultancy Plenum sees these moves as strategic tools aimed at easing pressure on Washington through economic concessions.

Despite these attempts at negotiation, tensions persist. US firms are increasingly cautious about market access in China, with sentiment among American companies operating there at its lowest point since 1999, according to a September survey by the American Chamber of Commerce in China.

Further complicating matters, Trump has pledged a 10 per cent tariff on Chinese goods, justified in part by concerns over the flow of fentanyl into the US. Critics argue this reflects political motivations that risk deepening economic and diplomatic divides. Analysts suggest that this strategy mirrors Beijing’s own use of coercive trade restrictions linked to non-economic issues like human rights and territorial disputes.

As the US and China manoeuvre on the global stage, the economic stakes remain high, with both sides deploying strategies of negotiation and pressure to secure their respective interests.