Trump, Biden, and China: What the 2024 election means for China-US relations

China’s big election is right around the corner.

• Otherwise known as the US Presidential election, it’s all but guaranteed to be a Trump-Biden rematch, ensuring that China will be dealing with a familiar face in the White House come next January.

The obvious question: Who does Beijing prefer?

The short answer: Neither. Both options are fraught with danger.

• Biden’s relatively steady and traditional style offers predictability and space for dialogue, but also ensures a continuation of the US’s hardline China policy.
• Meanwhile, Trump’s trademark unpredictability could dramatically raise bilateral tensions, but could also undermine the US’s network of alliances and partnerships, strengthening China’s relative position on the world stage.

In this Deep Dive, we’ll analyze what a second Biden or Trump term means for China, its relations with the US, and the companies who will (spoiler alert) inevitably be caught in the middle.

Scenario 1: A Biden victory ensures a continuation of the US’s hardline China policy

At first blush, a Biden victory might seem like Beijing’s preferred outcome.

Since last year, the Biden administration has worked assiduously to mend fences with China:

• A string of high-level visits by US officials to Beijing paved the way for November’s Xi-Biden summit, which marked a breakthrough in bilateral ties.
• Since then, the two sides have restarted key defense and economic dialogues and expanded cooperation to tackle climate change and control fentanyl, among other areas.

Biden is also a much steadier hand than Trump:

• While far from dovish, Biden’s approach to China has been measured and leaves ample space for dialogue.
• His administration has a firm grasp of the key issues affecting bilateral relations and is unlikely to escalate tensions (or launch a fun and easy-to-win trade war) in a fit of pique.

In short, a second Biden term would lead to stable and predictable – if still fraught – bilateral relations.

So, case closed, right? Beijing is a For-Biden city!

• Not so fast.

Just because Biden is measured and methodical doesn’t mean he’s soft on China:

• Biden views Beijing as a major threat to US interests and will continue to tighten the screws on China wherever possible.

The Biden administration has implemented damaging economic containment measures.

• 2022’s wide-ranging export controls on semiconductors (and their 2023 update) devastated China’s tech ambitions and left Chinese policymakers scrambling for alternatives.
• The administration has also steadily expanded its Entity List and sanctioned the bejesus out of all manner of Chinese companies and officials.

Even in the warm afterglow of November’s Xi-Biden meeting, the US is still expanding economic restrictions.

• On April 24, Biden signed the bill requiring TikTok to divest from ByteDance or wind up its US operations.
• His administration has also launched investigations into China’s steel, aluminum, shipbuilding, and connected vehicle industries, likely leading to tariffs or bans on many of those products.

In other words: Despite expanded dialogue, the Biden White House will continue to hold Beijing’s feet to the fire.

• The US has marshaled a broad Sino-skeptic coalition, positioning itself as a democratic bulwark against malign authoritarian actors like China and Russia.
• They’ve also leaned on their allies to support tech export controls and generally vex China’s economic interests.

To be sure, plenty of countries mistrust China for reasons unrelated to the US:

• A growing chorus of European voices are frustrated with the imbalance in the EU-China economic relationship.
• China’s neighbors are unnerved by Beijing’s often belligerent regional diplomacy and expansive territorial claims.
• Many democracies worldwide are uncomfortable with China’s unwavering support for Russia following its invasion of Ukraine.

But the US plays a decisive coordinating role in harnessing this unease and defining its “free world values” in oppositional terms to Beijing’s “creeping authoritarianism.”

• That will present a major roadblock to Beijing’s efforts to reform the US-led global system in favor of a multipolar alternative.

The bottom line: A Biden administration offers predictability but would lock in ongoing efforts to contain China economically and isolate it diplomatically.

Scenario 2: A Trump victory promises turbulence in bilateral ties, but presents opportunities for China

Donald Trump’s first term in office heralded a new era of instability in China-US relations.

• There’s no reason to think his second term would be any different.

Indeed, Beijing has plenty of reasons to be anxious about Trump returning to the White House:

• In his first term, Trump launched a trade war against China and announced crippling sanctions on Chinese champions like Huawei and ZTE.
• He’s promising to up the ante in his second term and recently threatened to impose tariffs of 60% on Chinese goods if reelected.

Trump could also derail recent progress in bilateral ties in an effort to undo his predecessor’s achievements and “do things his own way.”

• That could mean severing recently re-established economic and military dialogue mechanisms and removing key guardrails in the China-US relationship.

Worse still, a second Trump administration might actively seek to overthrow China’s government:

• Potential Trump 2.0 bigwigs like Mike Pompeo and Steve Bannon have openly advocated for regime change.
• During his first term, Trump authorized a CIA campaign to spread anti-Party narratives on Chinese social media platforms to foment popular discontent.

And while Trump’s “America First” foreign policy may benefit China, it also could also prove destabilizing:

• Trump’s affinity with Russian President Vladimir Putin could ease tensions with Moscow, freeing up Washington to put more energy into containing China.
• Doubts about the reliability of the US security guarantee could prompt Washington’s Asia-Pacific allies to beef up their military capabilities, raising the prospect of a nuclear-armed Japan and South Korea.

So yeah, not great.

On the other hand, if Beijing can guard against some of the more outlandish contingencies, there may be significant silver linings to a second Trump administration.

Trump has shown himself susceptible to personal diplomacy and has been persuaded on several occasions to soften his stance against China:

• In 2018, Xi Jinping successfully prevailed on Trump to lift sanctions on ZTE.
• Incredibly, Xi repeated the trick with Huawei in 2019.
• And while Trump launched a trade war with China, his administration also negotiated the phase-one trade deal, somewhat easing trade tensions.

What’s more, Trump appears to like and respect Xi on a personal level, which counts for a lot:

• Xi could easily take a page out of Putin’s playbook and play to Trump’s vanity to get him to ease pressure on China.
• After all, he’s done it twice before.

The upshot: China could use Trump’s mercurial decision-making style and desire to be seen as a great dealmaker to its advantage, blunting some of the immediate danger of a second Trump administration and even relieving existing US pressure on Chinese industry and trade.

Moreover, Trump’s America First foreign policy could benefit China on the world stage:

• Trump will likely alienate and unnerve key US allies, raising serious doubts about Washington’s reliability as a strategic partner.
• Trump has expressed his disdain for NATO and openly considered withdrawing the US from the alliance.

This would be a dream come true for China:

• Beijing has repeatedly railed against Washington’s “hegemonic” alliance system, which makes it feel perpetually threatened and hemmed in.
• By fatally weakening US alliances, Trump would destroy a key lever of American power and give China more breathing room on the world stage.
• Additionally, the more Washington is seen as unreliable, the more erstwhile partners are incentivized to chart their own foreign policy course rather than towing the hawkish US line.

It’s also unclear how committed Trump is to the US partnership with Taiwan.

• Asked whether he would defend Taiwan against a mainland attack, Trump declined to answer, but made cryptic comments about Taiwan having “taken away all our chip business.”
• It’s easy to imagine Trump “striking a deal” with Beijing that entailed a US retreat from its defense commitments to Taiwan.

Simply put, a second Trump administration would likely damage the US’s global standing and weaken its alliances, creating space for Beijing to advance its own foreign policy agenda.

In sum: The defining feature of a second Trump presidency would be uncertainty.

• China-US tensions could spike, depending on Trump’s priorities and capricious inclinations.
• But no matter how Trump approaches China, Beijing will likely be able to capitalize on a US retreat from the world stage.

Beijing’s got a plan

We’re gonna let you in on a little secret:

• China doesn’t actually care who wins the US election.

That’s because whether it’s Trump or Biden, Chinese officials nearly universally agree on one fundamental truth about China-US relations: The US cannot be trusted.

Successive US administrations have identified China as public enemy number one and taken steps to suppress Chinese interests at nearly every turn.

• A glimmer of hope over Biden’s 2020 election gave way to bitter disappointment when it became clear that, if anything, the Biden White House was tougher on China than Trump had been.
• Moreover, the bipartisan consensus on “the China threat” in Washington means there’s nobody in the US political establishment for China to root for.

Washington looks committed to rivalry with China no matter who’s in charge.

• That means heightened tensions for the foreseeable future, but it also creates a clear set of policy imperatives that Beijing will follow, regardless of who’s in the White House.

These include:

• Diversifying supply chains and pursuing self-sufficiency in strategic industries, particularly in tech, to reduce dependence on the US and its allies.
• Strengthening its position as a supplier of key commodities and strategic goods – such as electric vehicles – to increase global reliance on Chinese supply chains.
• Building out a counter-sanctions regime and other measures to raise the costs for companies that comply with US sanctions.
• Reducing reliance on exports and increasing the role of domestic consumption to power growth.
• Exploiting rifts between the US and its allies and partners and strengthening its own relationships with these countries.
• Promoting China’s alternative vision for global governance based on non-interference, collective security, and multipolarity.
• Cultivating developing world solidarity and rallying like-minded countries to resist “American hegemony.”
• Building up China’s military preparedness and deterrence capabilities to defend China’s territorial claims and guard against external threats.

While many of these goals predate the recent spike in China-US tensions, the past several years of intense American pressure have increased Beijing’s urgency in advancing them.

• Chinese policymakers may make tactical adjustments depending on which candidate wins in November, but its long-term strategy will not change.

Navigating Cold War 2.0

No matter who wins the White House in November, China-US tensions are here to stay.

• But for the thousands of multinationals that do business in both countries, the show must go on.

To state the obvious, MNCs need to factor heightened geopolitical risk into their strategic outlook.

• The expanding US barrage of sanctions, export bans, executive orders, and bipartisan legislation targeting Chinese industry shows no sign of slowing. 
• If Trump is elected and follows through on his promise to impose massive new tariffs on Chinese goods, the China-US trade war could resume in earnest.

So far, China has mostly refrained from retaliating against US businesses, but this could change.

• Beijing continues to develop legal tools to counter economic coercion and raise the costs for companies that comply with US sanctions.
• If it gets serious about using these tools, MNCs could quickly find themselves in a “damned if you do, damned if you don’t” situation.
• This risk grows as Beijing continues to reduce exposure to the US and its allies in important sectors, thereby reducing US economic leverage.

Heightened geopolitical tensions also harm the business environment in more subtle ways.

• A growing obsession with security on both sides of the Pacific means companies in an increasing range of industries (such as NEVs and due diligence firms) will face increased scrutiny from both governments.
• Likewise, the ever-present risk of nationalist boycotts and other forms of reputational damage means that MNCs must be extremely careful about their messaging, especially in China.

More than ever, foreign companies also need to think about the unthinkable:

• There is a non-zero – albeit very low – risk of all-out conflict over Taiwan. This would devastate the global economy.
• An intensifying territorial dispute between China and the Philippines has the potential to disrupt trade in the South China Sea, especially if it draws in the US.

The upshot: Geopolitical risk assessment and contingency planning are no longer optional for multinationals operating in China – they’re mission-critical.

However, while the overall geopolitical picture is bleak, there are a few notable silver linings. 

In an effort to head off de-risking, Chinese policymakers have made significant efforts to win over the foreign business community.

• Recent high-level messaging, including Xi’s meeting with a US business delegation, has centered around reassuring MNCs that they are welcome and valued.
• Beijing has also repeatedly pledged to address long-standing foreign gripes about the business environment.

Relatedly, China’s self-sufficiency drive creates opportunities for foreign companies in the short to medium term:

• Foreign investment and R&D will be crucial to Beijing’s efforts to move Chinese manufacturing up the value chain and develop a globally competitive tech sector.
• Expanding market access for foreign firms in key sectors is a tried-and-true way to spur domestic companies to new heights.

Additionally, continuing Sino-American tensions open the door for third-country companies to pick up market share from US firms.

• A second Trump term makes this outcome likelier, as Trump’s signature “America First” foreign policy would probably cause US allies and partners to seek more productive ties with Beijing.

There’s also the (very) outside chance that China-US economic relations stabilize on their own:

• Continued consultations between senior Chinese officials and the Biden White House have generated more dialogue on key issues than we’ve seen in years. While this doesn’t change the fundamental tension at the heart of China-US relations, it could create a new framework for managing economic disagreements.
• As noted above, Trump has shown himself amenable to personal diplomacy. It’s possible he would tone down economic pressure on China as part of a broader “deal” with Xi.

That said, we’re not holding our breath.

Conclusion: Adjusting to the new normal

To sum up: The business outlook will be challenging no matter who wins the White House in 2024.

• With both sides’ long-standing grievances coming to the fore, the rift between Washington and Beijing will last longer than a single US election cycle.
• But, as we’ve discussed, the nature of the risks depends on who wins.

A Biden victory would herald an era of gradually escalating trade tensions, de-risking, and continued American efforts to marshal an international coalition to pressure China. 

• In this scenario, MNCs will benefit from a clear, methodical, and slow-rolling US policy trajectory, giving them more time to craft and adjust their risk management strategies.

A Trump win means unpredictability and a US approach to China guided first and foremost by Trump’s personal preferences.

• This uncertainty means that MNCs will need to be responsive to changing conditions, ranging from a massive escalation of the trade war to a personality-driven thaw in China-US ties – and everything in between.

The good news for MNCs is that China’s strategy is clear. And one part of that strategy is to deepen ties with foreign businesses.

• Beijing views foreign business both as a driver of economic growth and a force that can lobby home governments for more productive bilateral ties.
• Top leaders have pledged further opening and equal treatment for foreign companies, and have tried not to scare them off through heavy-handed retaliation against hostile governments.

Any way you slice it, multinationals will be forced to navigate a new normal defined by structural great power competition and a litany of geopolitical pitfalls.

• However, neither side wants to fully sever the economic ties that bind.
• With a bit of foresight and an eye toward opportunity, multinationals can not only mitigate potential dangers, but prosper in a new era of global economic uncertainty.

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