Chinese Concessions on Trade Indicate Restraint, Not Weakness

Since the “Liberation Day” tariff bonanza in early April, the White House has repeatedly stated that China will have to negotiate soon because it cannot endure the economic pain of a protracted trade war. Treasury Secretary Scott Bessent declared the current tariffs “unsustainable” for Beijing and suggested they could erase millions of jobs from an economy already struggling with high unemployment. “The ball is in China’s court: China needs to make a deal with us, we don’t have to make a deal with them,” White House Press Secretary Karoline Leavitt stated last month. In a similar vein, on May 6th, Donald Trump told reporters, “By not trading, we’re losing nothing…they want to negotiate and they want to have a meeting… their economy is suffering greatly because they’re not doing trade with the U.S.”

In racing to portray China as desperate and on the verge of capitulation, the Trump Administration isn’t just downplaying the costs a protracted trade war would impose on the American people. It is also failing to recognize the possibility that Beijing’s reluctance to escalate the trade war and willingness to move first to deescalate may be tactics in a larger strategy of restraint. Concessions from China should give the Trump Administration pause, not pride. Xi Jinping isn’t happy about Trump’s upending of the bilateral trade relationship and global economic order, but that doesn’t mean he has nothing to gain from Trump’s destructive tendencies. By standing firm, picking his battles, and refraining from tariff escalation, Xi thinks he can mitigate the real threats of the trade war, win over skeptical trading partners, and facilitate the further erosion of the alliance system on which U.S. hegemony depends.

The View from Beijing

China’s actions in the coming days, weeks, and months need to be understood in terms of its own interests and perspective. Xi probably didn’t want the current trade war, but there is no indication he is surprised by it. The basic elements of Trump’s foreign and economic policies—bluster, bullying, and tariffs—were already on full display during his presidential campaign and first administration. And as a steady stream of analysis has shown, China’s leaders have been investing in their country’s economic resilience for years. They have worked hard to diversify their supply chains and trading partners through the Belt and Road Initiative, multilateral forums like BRICS, and extensive bilateral trade agreements. These mechanisms help channel China’s economic might and amplify its influence, but above all they mitigate the risk of exposure to any single trade partner, even a superpower. China also dominates many industries that are poised to become only more important and valuable in the coming decades, from shipbuilding and electrical vehicle manufacturing to solar panels and batteries.

This isn’t to say that China has nothing to lose from deteriorating trade relations with the United States, which has been the largest single-country market for its exports for decades. Xi would probably be happy to return to the status quo ante, which benefited the United States and China asymmetrically. There are reportsthat China’s factory activity is rapidly decreasing in response to U.S. tariffs, adding pressure to an economy that is already strained by slow growth, high unemployment, and crippling government debt. But even if the tariffs take their toll on the Chinese economy, Xi won’t necessarily come begging for relief: not facing the threat of being voted out of office, he may think all he has to do is outlast Trump, whose Republican Party will have to answer to American voters as the 2026 midterm elections approach.

From Beijing’s perspective, the real economic catastrophe would come if Trump managed to internationalize the trade war and convince other countries to impose secondary tariffs on China. Bessent and others close to Trump have already floated the idea of making other countries sever or curtail trade with China as a condition for negotiating their own tariff adjustments with the United States. It remains an open question whether the Trump Administration could actually achieve this, either through diplomacy or bullying. But there is at least an emerging faction in Washington that sees building an anti-China united front as key to correcting the global economy, a development Xi is committed to blocking. Moreover, there is precedent for such a coalition, at least from the perspective of Beijing, which has long viewed Washington’s security policy as aimed at encircling and constricting China through an extensive network of Atlantic and Pacific alliances and partnerships.

Trump is a frustrating interlocutor, and his administration may be filled with hawks advocating policies that Chinese officials would consider existential threats. But Trump isn’t all bad for Beijing. His administration’s disdain for liberal norms and resentment of the financial and security costs of American primacy (even as its militarism and bullying are premised on that primacy) are straining the alliance system, while the capricious implementation of tariffs and constant back-peddling chip away at other countries’ confidence in the United States as a reliable partner.

Strategic Restraint

If China’s interests lie in 1) containing the trade war and 2) facilitating the erosion of the US-led alliance system, what approach would we expect it adopt toward the United States? Strategic restraint—carefully picking battles, refraining from tariff escalation, and even offering concessions on trade issues—would advance these goals. By keeping Trump optimistic about his own ability to “fix” U.S.-China relations and avoiding dramatic actions that might encourage Trump to defer to the hawks in his administration, Xi may be able to achieve both aims.

How might this strategy of restraint play out? On the trade front, Xi is likely to tease a victory for Trump and possibly offer a symbolic one. After signalinggreater openness to a deal in recent weeks, Beijing has dispatched Vice Premier He Lifeng to meet with Secretary Bessent and U.S. Trade Representative Jamieson Greer in Geneva this weekend. He Lifeng may offer incentives for Trump to ease tariffs, for example increased imports of American agricultural products, the prospects of greater investment in American manufacturing, and renewed commitments to fairer treatment of American companies operating in China. This was essentially what Xi and Trump worked out after the first trade war in 2020. There are many reasons why negotiation of and compliance with a broad, substantive deal that goes beyond the fairly narrow “Phase One” agreement (which China anyway failed to live up to) are highly unlikely: well-deserved mutual distrust, bipartisan hostility toward China in the United States, and Trump’s particular hostility to the sector where the strongest economic case for cooperation can be made – the green economy. But another narrow deal that enables Trump to claim victory may work toward Beijing’s long-term advantage, if it motivates Trump to continue waging the trade crusade against other countries, further alienating the United States in the process.

On the security front, Xi’s priority will be to avoid unnecessary actions that would galvanize further bipartisan support for an even tougher American security posture against China, especially one that involves cooperation with allies and partners in the Indo-Pacific. Xi will need to save face and continue to project national confidence and strength; and as recent provocations in the South China Sea make clear, he will not relent on China’s territorial claims. We should not expect a cessation of China’s now routine intimidation of its neighbors through “grey zone” tactics. But it is likely that Beijing will refrain from bolder action on Taiwan and more aggressive positions in other theaters that might incline Trump to heed the hawks in his administration. After all, Xi isn’t just responding to the United States. With the future of American engagement around the world more uncertain than ever, Beijing is keen to present itself as the responsible defender of trade and stability and build credibility with other countries—including traditional U.S. allies and partners—that want to keep trading. Hence Chinese Foreign Minister Wang Yi’s declaration of his country’s commitment to being a “factor of certainty” and a “steadfast constructive force” at the Munich Security Conference in February.

In the long run, restraint in the bilateral relationship with the United States may strengthen China’s global position. By selectively offering Trump concessions and even the domestic political victory of a deal, Xi may be able to avoid the worst and extract the best of a Trump presidency, channeling Trump’s disruptive and destructive tendencies away from China’s interests and against the U.S.-led alliance system. In their recent Foreign Affairs manifesto, Rush Doshi and Kurt Campbell (both former senior officials responsible for China policy in the Biden Administration) argue that this network must be strengthened and leveraged if the United States wants to outmatch China’s massive military and industrial capacities. It’s safe to say that many Chinese officials would concede the premise of this argument—that the alliance system is a pillar of American global power—however much they despise that system. The irony of the present moment is that the president and administration whose unilateralism and militarism depend on that power may be hastening its demise.