Trump’s big deal with China?

Donald Trump’s return to the White House is expected to lead to further battles between the United States and China. However, could his love of a transactional deal pave the way for a surprise deal with Xi Jinping? Call it soybeans on steroids.

If history is any guide, many are bracing for a worsening of US-China relations once Trump returns to office for a second term. After all, his first term is widely seen as the turning point in relations with China, and his cabinet is expected to include some of Washington’s most prominent China hawks.

In addition, relations between the United States and China are near low point, with a network of alliances that reflect the Biden administration’s broad export control and Cold War containment strategies. A well-known investor Ray Dalio summed up the sentimentHe predicted “America First” foreign policy and preparations for a foreign war with China, America’s greatest threat.

However, while a further decline in relations is possible, conventional wisdom overlooks a competing, perhaps more likely, scenario: a US-China grand bargain driven by Trump’s ambition to be remembered as one of America’s great statesmen. Actually, there is Trump it is reported that he has already called before the inauguration, “balancing trade, fentanyl, TikTok and many other issues” was discussed.

With a transactional mindset, Trump sees diplomacy as a series of high-value deals. His 2018 tariffs were less about systemic economic strategy and more about leveraging — ultimately It secures a $200 billion trade deal centered on agricultural products such as soybeans.

However, Trump values ​​his popularity above all else, and a winning strategy for him could include early punitive tariffs on Chinese imports and even imports from Chinese firms operating in neighboring countries such as Mexico. That would create a pressure cooker, opening the way for negotiations with Beijing before American consumers feel the impact.

The result? A spectacular deal in which China offered a mix of substantive and symbolic concessions, endearing itself to Trump’s base and bolstering his image as a master dealmaker. Call it “soy on steroids.”

However, such a deal would not be without risk. While the Trump-Xi deal may bring short-term economic relief, it could alienate US allies in Asia. Trump’s admiration for powerful leaders like Xi Jinping “bright, fierce and smart” It contrasts sharply with the disdain for democratic leaders in Japan, South Korea and Taiwan. accused of seeking protection without paying his fair share. A purely transactional approach not only strengthens Beijing’s regional ambitions, but also undermines long-term strategic goals.

Still, Trump’s love of unpredictability and dramatic posturing makes a US-China reset plausible. As the world watches, one thing is clear: Trump’s return promises surprises. “Soybeans on Steroids” could be the opening act of an unexpected geopolitical upheaval that few expected.

David Bach is President of IMD, a position he holds since September 2024, and Nestlé Professor of Strategy and Political Economy. Before joining IMD in 2020, he was Associate Dean at the Yale School of Management.