Key topicsTrump’s tariffs hurt China but also push it toward economic reform.China sees a chance to expand global influence amid U.S. chaos.Xi’s strategy of self-sufficiency and innovation gains traction. .Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa's bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here.From The Economist, published under licence. The original article can be found on www.economist.com© 2025 The Economist Newspaper Limited. All rights reserved..The Economist .A big beautiful opportunity.Editor’s note (April 5th 2025): On April 4th China retaliated against Donald Trump’s tariffs, announcing a 34% duty on American goods. As Donald Trump unleashes a volley of tariffs and his administration talks up the strength of its military alliances in Asia, you might think that these are anxious times in the country that America sees as its main adversary. In fact, our reporting from Beijing reveals a very different picture. MAGA is putting pressure on China’s leaders to correct their worst economic errors. It is also creating opportunities to redraw the geopolitical map of Asia in China’s favour. China has come out badly from Mr Trump’s Rose Garden rant. Counting the new levy of 34%, plus existing duties, the total rises to 65%—and slightly higher if you include the disruptive removal of a tariff exemption for small packages. Given that exports are still roughly 20% of GDP, as they were in 2017, this will hurt China’s economy. China’s tactic of rerouting its firms’ manufacturing chains through countries such as Vietnam to bypass tariffs will work less well now that America is erecting barriers globally. The trade war comes as China is still struggling with deflation, a housing bust and dismal demography. For the past five years the Communist Party has neglected weak consumption and embraced an unwise statism that has cramped the private sector. China has exported its overcapacity, swamping the world with goods, and fostered a spiky chauvinism that unsettles America’s allies both in Asia and Europe. Despite all this, China enters the new age of MAGA stronger than in Mr Trump’s first term. President Xi Jinping has long argued that America is too polarised and overstretched to sustain its global role. One of his slogans warns of “great changes unseen in a century”. His paranoid nationalism used to seem like dystopian hyperbole. Now that Mr Trump is committing such wanton self-harm and general destruction, it looks ahead of its time. Mr Xi has been preparing for today’s chaotic world ever since becoming China’s leader in 2012. He has urged economic and technological self-sufficiency on his country. China has reduced its vulnerability to American chokeholds, such as sanctions and export controls. Although its banks still need access to dollars, it now makes most non-bank international payments in yuan. China’s domestic economy has unrecognised strengths. Competition and an embrace of technology mean that its industrial firms thrash Western rivals in everything from electric vehicles to the “low-altitude economy”, meaning drones and flying taxis. Viewed from China, Mr Trump’s tariffs will condemn Detroit to 1970s-style obsolescence, just as his crusade against universities will set back innovation. One example of China’s promise is DeepSeek, which is taken as a sign that the country can innovate around America’s semiconductor embargoes. The party is comfortable with home-grown AI, and this could allow the technology to diffuse through China faster than the West, boosting productivity. That, and signs Mr Xi may have grown more tolerant of entrepreneurs, help explain why the MSCI index of Chinese shares has risen by 15% in 2025, even as American stocks have slid. Four years after the bubble burst, property is at last becoming less of a drag on growth. In some cities, including Shanghai and Nanjing, prices have even started to rise. The party has also belatedly taken steps to boost consumption. Local governments can refinance themselves with 6trn yuan ($830bn) of new bonds over three years, and another 4.4trn of “special” bonds this year. Some extra money will go to households. To grasp the full economic opportunities, the party needs to stop persecuting the private sector. Even China’s Leninist autocrats realise the “common prosperity” crackdown on entrepreneurs that began in 2021 went too far. Although some zealous officials have yet to get the message, Li Qiang, Mr Xi’s deputy, used a speech on March 23rd to laud the “dragons” of Hangzhou, China’s capital of innovation. The economy will also need more stimulus to boost consumption, and more determined efforts to stabilise the property market, which still weighs on household confidence. Extra consumption would benefit Chinese relations abroad too, by helping absorb surplus capacity. As America puts up walls, China will have a chance to reset trade relations around the world by offering to invest in manufacturing in partner countries rather than flooding them with exports. These economic opportunities sit alongside a geopolitical one. America’s China policy is alarmingly unclear. Hawks in the administration insist that, by turning away from Europe, America is freeing up resources to contain China. However, Mr Trump admires Mr Xi and has sent an ally, Senator Steve Daines, to Beijing to put out feelers for a deal. In his first term, Mr Trump struck a trade agreement with China; now he wants to haggle over TikTok. China is betting that MAGA talk of a “reverse Kissinger” deal, with America prising Russia away from China, is silly. And Trumpian protectionism, ally-abuse and indifference to human rights are a repudiation of American values: the beacon of the free world now seems capricious and dangerous. Mr Xi has no intention of filling the vacuum left by Uncle Sam, but he has a chance to expand China’s influence, especially in the global south. If, as well as spreading clean technologies, China becomes bolder about cutting emissions at home, it could show leadership on climate change. Mr Trump’s disdain for NATO and Ukraine have corroded confidence in his commitment to Asian allies and willingness to fight for Taiwan. If America makes more of its own advanced semiconductors, its incentive to defend Taiwan will decrease. This is a gift for Mr Xi. Still, dangers lie ahead for China. A trade war could trigger a global recession. If Mr Trump fails to strike a deal with the government in Beijing, he could lash out over currencies and impose more sanctions. China may yet poison relations with the rest of the world by dumping exports on it. Whether it seizes this moment depends on one man: Mr Xi. But the fact the opportunity exists owes much to another: Mr Trump..Read also:Tariffs are just the tip: Ray Dalio warns of a looming global systemic resetTrump’s tariff strategy: Economic risks and uncertain rewardsThe Economist: The end of the post-1945 order – Donald Trump has begun a mafia-like struggle for global power
