Emerging Markets

China’s response to Trump 2.0: A conversation with Professor Steve Tsang

17 Jan 2025 Reading time 10 minutes

Executive Summary

With President-Elect Donald Trump set to impose hefty tariffs, global markets are reacting. Professor Steve Tsang from SOAS University of London shared insights on China's response to Trump’s re-election at Chatham House.
 

  • China sees an opportunity in leveraging President Xi and Trump’s personal rapport to ease restrictions through diplomatic overtures.
     
  • Xi Jinping’s long-term strategy aims to restore China’s imperial glory and surpass the US, with a cautious approach towards Taiwan in the short to medium term.
     
  • Trump’s unpredictability presents both challenges and opportunities for Beijing, allowing China to influence US policies and position itself as a reliable partner globally.
     
  • The GIB AM Emerging Markets Team highlighted China’s strong fundamentals and significant upside potential in underweighted equities, despite near-term turbulence.
     
  • Key questions include how China can leverage its relationship with Trump, the reshaping of the international order, and balancing risks with long-term opportunities in emerging markets.

China’s strategic response to Trump 2.0

With President-Elect Donald Trump set to be sworn into office soon, global markets are already reacting to his pledge to impose hefty tariffs on China, Mexico, and Canada. In December, Professor Steve Tsang from SOAS University shared his expert views with our GIB Asset Management Emerging Markets team at Chatham House. The discussion, co-chaired by Portfolio Manager Kunal Desai, focused on China’s response to Trump’s re-election and its implications for global markets. They explored the challenges and opportunities China anticipates under Trump 2.0 and the investment strategies needed to navigate this complex environment.

Xi Jinping’s vision and Trump’s influence

China’s perspective on a second Trump administration China may not welcome a second Trump administration, but it sees an opportunity. President Xi and Trump’s personal rapport, highlighted by Xi’s invitation to Trump’s inauguration, will likely be leveraged. Chinese policymakers might use summits and diplomatic overtures to appeal to Trump’s vanity and personal interests to ease restrictions on specific issues.


Xi Jinping’s strategic vision Professor Tsang explained that Xi Jinping’s long-term strategy aims to restore China to its former imperial glory and surpass the US as the most powerful country. Xi’s focus includes reshaping global power dynamics through diplomatic engagements, institutional reform, and managing US relations. Despite concerns over Taiwan, Xi’s approach remains cautious and calculated, with reunification expected within our lifetime as part of the 2050 'China Dream' project.


Trump’s role in US-China dynamics Trump’s leadership style presents both challenges and opportunities for Beijing. A renewed trade war could harm China’s economy, but Beijing can use Trump’s unpredictability to drive wedges between the US and its allies. China has also shown it can influence Trump’s policies through personal relationships and position itself as a reliable partner to Europe and the Global South.

Navigating opportunities in a shifting landscape

Our Emerging Markets team at GIB Asset Management shares timely insights into China’s evolving role within the global investment landscape. Amid a complex stock selection environment, we emphasize the importance of strategic portfolio construction. Despite short-term volatility, China’s strong fundamentals and underweighted equity positions present compelling long-term opportunities.

Looking ahead, geopolitical shifts—particularly around U.S.-China relations and leadership strategies in the Global South—will shape the investment terrain. As global dynamics evolve, understanding Beijing’s strategic direction and broader market implications will be key to unlocking value across emerging markets.

 

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