US-China imperialist conflict set to escalate on all fronts
Vincent Kolo, ISA International Committee
(This is an extended version of an article from the latest issue of Socialist magazine, published by ISA in China, Hong Kong and Taiwan).
The return of Donald Trump as US president marks a turning point for a global capitalist system in crisis and disarray. Trump’s economic and political agenda promises a new level of disruption and conflict in ways that cannot be fully predicted at this stage. The US-China imperialist rivalry, which is the main driving force behind global processes – including Trump’s policies – is set to escalate on all fronts.
Most immediately, the stage is set for an intensified trade war, dwarfing the conflict that began seven years ago during Trump’s first term. The tariffs imposed at that time have already had a big impact on China’s economy, beginning a process in which China-centric supply chains are broken up and re-routed. China’s share of US imports fell from 21.6 percent in 2017 to 15 percent in 2023. But compared to Trump 2.0 this was “starter protectionism” in the words of Martin Wolf of the Financial Times.
Behind this is a complete reversal of the prevailing capitalist doctrine of more than three decades (neoliberal globalization) and the reassertion of state power and control by the biggest imperialist economies, with a strategy to re-industrialise their economies (easier said than done), ultimately driven by preparations for war between the imperialist powers.
Despite the tariffs levied in 2018 and since, China exported $500bn of goods to the US in 2023. The Economist calculates this could fall by 85 percent if Trump carries out his promise of 60 percent tariffs on Chinese goods. Some speculate that Trump won’t carry out his measures in full. Indeed, the shock to the US economy itself, which Trump evidently doesn’t understand, could act as a brake on his government. A Reuters poll of experts predicts the new Trump tariffs are more likely to settle at 40 percent, which is still huge, however.
But many Republicans and Democrats in Congress want to go further, including cancellation of China’s “permanent normal trade relations” (PNTR) status, which the US Congress granted in 2000. If this happens, China would be relegated in terms of access to the US market to a rump of heavily-sanctioned “pariah states” including Russia, Cuba, Belarus and North Korea.
Oxford Economics calculates that the loss of PNTR would shrink China’s share of US imports to just 3 percent. While revoking PNTR is perhaps unlikely in the short-term, a Republican-sponsored law to this effect has begun moving through Congress, and Trump will probably allow this threat to hang like a ‘Sword of Damocles’ over trade negotiations with the Chinese regime. Suspending PNTR is favoured by several heavyweight figures in Trump’s new cabinet, including Marco Rubio, set to become Secretary of State.
Disabling China’s export machine
The next phase of intensified trade war will “rock the world” and drag more and more countries into the conflict, according to The Economist. For Xi Jinping’s regime, wrestling with the most serious economic crisis since capitalism was restored in China over three decades ago, Trump 2.0 marks the beginning of a desperate and dangerous period. China is in much worse shape than it was in 2017 and the gap between the two superpowers has widened. The dictatorial regime ultimately faces existential threats, something that is reflected in its increased repression, militarization and the heavy “national security” focus of all its economic policies. The latest round of purges in the tops of the military, to reassert Xi’s control, is a clear sign of regime jitters.
The Chinese economy has become ensnared in ‘Japanification’: debt crisis, collapsed asset bubbles and falling prices (deflation). Ironically, China’s export sector has been the one engine of economic growth that has kept running while its wider economy slumped. Despite US tariffs (maintained and expanded by Biden), the combination of a weaker yuan, increased state-backed investments in manufacturing, and deflation, which makes its products cheaper, has helped China maintain its position as the world’s biggest exporter. It commanded a 14.2 percent share of global exports in 2023, compared to 8.5 percent for the US and 7.1 percent for Germany.
Trump’s promised tariff blitzkrieg will inevitably severely impact China’s exports and at the same time drive its exporters to look for alternative markets in Europe and the Global South. But here they are already encountering much tougher protectionism. This is not only in Europe, which in 2024 launched its own tariff war against China over electric vehicles, but also in nominally ‘China friendly’ states across Southeast Asia, the Middle East and Latin America.
Governments in Brazil, Chile, Indonesia, Mexico, South Africa, Thailand, Turkey and Vietnam were among those to impose tariffs in 2024 on Chinese goods ranging from steel to solar panels. Many of the aforementioned are BRICS members or “partner states”, showing that the China-aligned BRICS grouping is far from a cohesive alliance against the Western bloc led by US imperialism.
These governments are under pressure from their own capitalists who complain that the flood of Chinese imports is driving them out of business. China’s total exports grew 12 percent in volume terms in 2024 against a growth in global trade of just 3 percent.
The “anti-hegemonic” (anti-US) propaganda of Xi’s regime finds a ready echo in many parts of the world, especially the Global South, both from regimes and from the population in general. This is not at all surprising based on decades of US military aggression and economic austerity imposed by US-controlled agencies like the IMF. But China’s own imperialistic practices and capitalist mercantilism, which lead to increasing unemployment and de-industrialisation in the economies affected, produces the opposite effect, generating a growing anti-China backlash.
Trump’s tariff policies will be more expansive than during his first term. The new administration will look at ways to block China’s “workarounds” by which it exports goods to the US and Europe through third countries such as Mexico and Vietnam. This could resemble a cat-and-mouse game, with rules circumvented only to be replaced by even tighter rules. The same thing is happening already with US tech sanctions that cut off China’s access to advanced microchips and chip-making equipment. Despite loopholes, such measures have taken a toll, hobbling parts of China’s economy and reinforcing a further shift of supply chains away from China.
Beijing was resigned to the fact that the US-China conflict and deglobalization (decoupling), would continue whoever won the US election. But under Trump’s second term the world should brace for acceleration: a “hard decoupling” between Washington and Beijing in the sphere of economy, trade, technology and financial links, alongside an equally high-pressure campaign of US-led military build-up and containment.
Isolationism?
Trump’s unpredictable character and often contradictory statements confuse many commentators. While we cannot pretend to be able to forecast every eventuality, there are certain scenarios that can be discounted. The main contours of his government’s policy, as with Biden and Obama, will be dictated by the historical imperative from US capitalism’s standpoint to defend its global hegemony by defeating its main challenger, Chinese capitalism.
Lenin explained that imperialism was not a “policy” as some, including Karl Kautsky, imagined. It is an inevitable historical phase of capitalism’s development as it exhausts all national avenues of development. Capitalism is forced into the global market, where the most powerful capitalist states vie for dominance.
The US is a global power, the most formidable ‘empire’ the world has seen. A retreat into their North American home base is not an option for the US capitalists whose profits to a significant degree are derived from their hegemonic position in the world economy and financial system. Economic power must ultimately be defended by military power.
Rather than isolationism, therefore, as some have interpreted Trump’s agenda, the new administration will stand for the exercise of raw imperialist power, by economic and military means, on an unprecedented scale. Even before his term has begun, Trump has again declared his designs on Greenland, which he wants to pressure Denmark into “selling” to the US. This is no joke; during his first administration Trump ordered his National Security Council staff to look into the Greenland option. Behind this is the desire to expand US imperialism’s footprint in the Arctic, where a polar ‘Great Game’ is unfolding between the China-Russia bloc and US-led bloc. Trump has also declared his wish to take back control of the Panama Canal. This imperialist shopping list is a mirror image of Xi Jinping’s territorial claims over the South China Sea and Taiwan.
Many CCP advisors miscalculate that the new administration will be easier for Beijing to handle than Biden’s, because the “transactional” Trump is only interested in economic deal-making. He isn’t interested in military alliances and could even give up Taiwan for the right price, they falsely reason.
Trump’s military doctrine, if it can be so described, is to outsource the cost of fighting wars as much as possible onto middle and small imperialist allies. A clear example of this are his threats towards NATO allies, even saying he would “encourage” Russia to attack NATO members that didn’t increase their defense spending. In the process the president will act as a broker for the US arms industry, which accounts for almost 42 percent of the world’s military exports.
The Financial Times (20 December, 2024) reported on talks between Trump’s representatives and European officials to stave off his threatened trade tariffs of 10–20 percent in return for European governments raising their defense spending from today’s target of 2 percent to around 3.5 percent of GDP, if not to “5 percent of GDP” as Trump has publicly demanded. Such increases, which several NATO governments will willingly embrace, can only mean correspondingly huge cuts in social programs and public services, setting the scene for a hard fightback by workers’ organisations.
Many CCP advisors, repeating their mistakes of eight years ago, focus too much on Trump’s personal idiosyncrasies and too little on the fundamental processes that “created” Trump. These are rooted within capitalism, which has positioned the two superpowers on a collision course. Trump may throw out contradictory signals, which of course grab attention, like his recent intervention to try to save Chinese-owned Tiktok from being banned in the US. But this does not signal a deviation from the main anti-China thrust of US policy on Trump’s watch.
Setback for the working class
Trump’s re-election is a big setback for all workers, women, migrants, trans people and Black people in the US and globally. As our international organization ISA has explained, Trump’s victory reflected mass disaffection with the Democratic Party and the Biden-Harris administration, but also a swing to the right in society driven by the reactionary turn of the ruling class and the abject failure of the left. In the 2024 election, Harris got 6.2 million fewer votes than Joe Biden received in 2020. Biden’s victory, gaining the highest ever vote for a US president (81.2 million), was carried by a massive anti-Trump mood that no longer existed to the same extent this time around. The shift to the right among sections of the US population has to be seen in the context of a very polarized situation, where within Trump’s vote there is now a hardened far right core, something we have also seen in other countries. This is the case today, in the absence of a sizable and serious left alternative, which can change and be driven backwards by mass struggles in the years ahead.
This is payment for the Democrats’ unswervingly pro-capitalist policies, swallowed without protest by the party’s “left”, leading to increased hardship for working class families. This ceded ground to Trump, despite his repugnant reactionary character, to profile himself as the candidate of “change”. On the economy, ultimately the election’s most decisive issue, Trump declared he would “end inflation” and “make America affordable again”. These are promises that will come back to bite him in the next period. Trump’s new trade war — if carried out in full — has the potential to ignite an inflation bomb in the US.
Trump’s win was celebrated by reactionary and far right forces around the world, from Israel’s Prime Minister Netanyahu to France’s Marine Le Pen and South Korea’s Yoon Suk Yeol. The latter, who was even dubbed “K-Trump” due to the political resemblance, has since been thrown out of office by a mass protest movement and partial general strike, after he declared martial law and attempted to ban political parties, marches and strikes. This is a sign of what could develop in the US should Trump try to follow his own authoritarian proclivities. Argentina offers another example, with mass strikes and street protests continuing throughout the past year against the large-scale poverty created by Javier Milei, who like Netanyahu plans to attend Trump’s inauguration.
The January 20 ceremony looks set to be a garish “who’s who” of global reaction. Xi Jinping, whose right-wing nationalist and anti-working class credentials make him an otherwise perfect fit, will almost certainly decline Trump’s invitation to attend the inauguration. The CCP will probably send an understudy, suspecting that Trump’s real aim is to cast Xi in a less than flattering light. In Xi’s mindset an Emperor does not pay homage at the coronation of a mere President. Xi’s regime also sees a trap: Trump could unleash new tariffs against China as soon as on his first day in office (as he recently promised), with Xi’s plane having barely left American airspace, making the Chinese leader look weak.
It is also possible that Trump will try to enlist the Chinese regime’s help to influence Putin to accept a ceasefire in the Ukraine war. Trump is under some pressure on this score, because he boasted he would end the war on his “first day”. Trump could even offer Beijing inducements including a reprieve from tariffs if it can deliver Putin’s signature to a deal. But this is extremely unlikely to bear fruit for a multitude of reasons.
Even if Xi was motivated to oblige Trump, which is unlikely, he does not control Putin. The deal between North Korea and Russia to supply 10,000 Korean troops to the Russian war effort, an unwelcome development in Beijing’s eyes, is an example of these limits. A geopolitical alliance or bloc does not mean that the dominant partner, as China is by an overwhelming margin in this case, can simply impose policy on its allies if this runs counter to their core interests.
Putin feels that the war has moved in his direction and will be hard to shift through diplomatic pressure. Any peace talks are likely to be slow-moving, based on the premise of accepting today’s frontlines — something neither Moscow or Kyiv are likely to accept, certainly not as a permanent solution. Xi’s regime is unlikely to cooperate with Trump on this issue because it also knows that any US concessions on tariffs would be reversed at a later date.
As much as Trump and his advisors might want to walk away from the Ukraine war to “focus on China”, the complexities of the current imperialist bloc conflict allow for no such option. A victory for Putin and a perceived NATO-US climb down would strengthen and embolden the Chinese regime, something the US side must avoid at all costs.
Is Elon Musk Beijing’s man?
As in his first term, Trump has assembled a government of billionaires — no less than 13 — showing beyond any doubt which class interests he represents. The combined wealth of his cabinet team is a staggering $383 billion. Wealthiest of all is of course Elon Musk, not formally a cabinet member but picked to co-lead Trump’s “Manhattan Project” — the newly created Department of Government Efficiency (DOGE). This aims for mass layoffs of federal employees and big cuts in funding for social programs. Musk’s CV is full of union-busting episodes including the mass sacking of Twitter’s workforce when he took over the company.
Musk is the Chinese regime’s “favourite Western CEO” and it harbours exaggerated hopes that he can exercise a restraining influence from inside the Trump administration, which is otherwise dominated by anti-China hawks. Musk’s factories in China make more than half Tesla’s global output and were built with $500 million in loans from CCP-controlled banks. Musk has aligned himself with the CCP on many issues such as Taiwan (“an integral part of China”). It says a lot about the politics of both, that an obnoxious capitalist with open fascist sympathies is on such good terms with the CCP dictatorship.
But Musk is likely to disappoint Beijing, which is repeating miscalculations it made when Trump first took office in 2017. At that time, Xi’s regime underestimated the trade war threat, believing the “China lobby” on Wall Street would hold Trump back. They didn’t understand the global landscape had changed and that the trade war was only one component in a new imperialist Cold War. We cannot predict how long Musk will remain in Trump’s inner circle. In the meantime he will attempt to balance between Trump and China to protect his billionaire interests, but ultimately the US-China imperialist power struggle is driven by deeper forces.
Trump’s wolf warriors
The new administration is heavily weighted with Trump’s version of “wolf warriors” — ideological China hawks like Rubio, who is actually under CCP sanctions for his — completely disingenuous — “support” for Hong Kong’s democracy protests. This could cause considerable embarrassment to the Chinese regime in future dealings, when it will have to decide whether to refuse to meet this “persona non grata” or to violate its own sanctions.
As a congressman, Rubio has also initiated several pieces of legislation to bolster Taiwan’s military and diplomatic position against China. This includes fast-tracking the sales of arms to the island and increasing joint training with US military forces (Taiwan Peace Through Strength Act, 2023). Trump raised eyebrows in July with widely reported comments about Taiwan needing to “pay us for defence” and hinting the island was too far away for the US to intervene militarily.
But Taiwan, very unfortunately for its people, will remain a crucial geopolitical “chess piece” in the struggle for supremacy between US and Chinese imperialism. Taiwan’s ruling DPP shows every intention of accommodating Trump’s demands for more “protection money”, with a $385m arms contract sealed three weeks after Trump’s election. For reference, the first Trump presidency sold three times as much weaponry to Taiwan than Biden’s government has done. This trend is likely to be repeated under Trump 2.0.
Mike Waltz, a former army special forces officer who becomes Trump’s national security advisor, has called China an “existential threat”. While previously a staunch supporter of Ukraine against Russia’s invasion, he has aligned his stance with Trump and others who see Ukraine as “the wrong war”.
Waltz told the Financial Times in September, “We have to shift to the Pacific”, where according to him China has orchestrated, “the most rapid military build-up since the 1930s”. Several of Trump’s other picks fit the same profile. “This is like Christmas morning for China hawks”, one global analyst told the Financial Times.
Begin with a bang
While there is uncertainty over the size and exact timetable, it is very likely that Trump’s “second term will begin with a fierce protectionist bang” as Nicholas Spiro in the South China Morning Post predicts. After the election, Trump announced he will impose 10 percent tariffs on China, Canada and Mexico from the first day. The latter two countries can expect — at a price — to negotiate a way out of this, but for China these tariffs are likely just a “down payment” with more measures to come.
Trump also declared he would impose “100 percent tariffs” on BRICS countries if they move to create a new currency to replace the US dollar as the main reserve currency. Despite years of talk, this idea is still not a serious prospect in the short-term and only one currency — the Chinese yuan — could feasibly shoulder this role in the future. But Beijing is not able or willing to do this under current conditions.
There are splits in Trump’s administration between those who see the tariffs as an “ideological” weapon to degrade China’s economy and strengthen US industrial capacity, while also forcing other countries to align and submit to US leadership, and “pragmatists” who privately don’t share their boss’s tariff obsession. The latter realise this can be a double-edged sword that could inflict major damage on the US economy and render many of Trump’s election promises impossible. They hope the tariffs will mainly be a negotiating tool rather than become a reality. The pro-tariff camp is far more likely to win this power struggle.
China falling behind
A crucial change since Trump’s first term is the scale of the economic and social crisis in China, which has significantly weakened its position vis-à-vis US imperialism. On his first presidential visit to China in November 2017, Time magazine declared that Trump was there to “meet the world’s most powerful man”. If this was true then, it isn’t today. The balance of power in the imperialist conflict has shifted in the direction of the US. While China’s GDP was 75 percent of the US level in 2021, this has fallen to 63 percent in 2024.
This is of course not the final word, with global capitalism as a whole in a historic crisis and US imperialism being no exception. But the structural crisis of Chinese capitalism, which has been irrevocably derailed from its former trajectory of rapid catch-up growth into Japanese-style “lost decades”, gives US imperialism and Trump an advantage in the conflict for the time being. The US economy is also grappling with chronic imbalances, drowning in debt, with a fast growing stock market bubble and a dysfunctional bourgeois democratic system. It too has entered an era of social and political explosions.
But US capitalism has until now been able to borrow its way from crisis to crisis by virtue of possessing the world’s still unchallenged reserve currency, the mighty dollar, which allows it to pass on the bill to the rest of the world. Ultimately, this arrangement must break down. But we have not reached that point yet.
China’s economic agony is more imminent. Its share of global GDP is shrinking, ending a more than 40-year trend of expansion. China’s share peaked at 18 percent of global GDP in 2021 and is now 16 percent. Even these figures probably understate the extent of the decline because of the CCP’s manipulated economic data, which has become more extreme in the past three years.
In a viral speech, now deleted, former CCP economic advisor Gao Shanwen estimated that China’s GDP has been exaggerated by 10 percent over the past three years, which would put its real growth rate at close to zero. For Chinese economists, challenging the official fictitious data is becoming increasingly risky. In December, the regime ordered brokerage firms to monitor speeches by chief economists and “fire them” if they expressed “inappropriate” views about the economy.
A September 2024 report from Rhodium Group, a think tank, says it is “extremely unlikely” that China will regain its previous (2021) peak as a proportion of the global economy. Even with GDP growth of 5.5 percent each year, which exceeds even Beijing’s inflated targets, it would not recapture its 2021 share of global GDP until 2036, according to the report.
The CCP’s counter strategy
Xi’s regime is stuck in a huge dilemma as they wait to see the full extent of Trump’s new protectionist regime. Many Chinese commentators believe Beijing will not initially adopt a hard stance, but rather express an openness to negotiations, in which their strategy will be to delay as much as possible. This is likely to meet an even more aggressive line from Trump’s negotiators, who are firmly convinced the Chinese regime reneged on the 2020 ‘phase one trade deal’ and indeed never intended to honour it. At the time, Trump hailed this deal as “momentous”. It wasn’t.
With the economy in such a fragile condition the CCP will not want to further scare foreign capitalists out of the door, and may even counter Trump’s policies with new financial and investment incentives — concessions to foreign capitalism rather than concessions to Trump directly. But it is between a rock and a hard place. A contradictory and chaotic mix of ‘carrots’ and ‘sticks’ — inducements side-by-side with retaliatory measures — is most likely. At the same time, Xi Jinping will double down on his export-heavy economic strategy, despite the growing tensions this is generating even among China’s allies.
China cannot retaliate ‘tit-for-tat’ on the same scale as the US government, although it can impose selective measures as it has already done with export controls on critical minerals used in the manufacture of advanced technology (gallium, germanium and graphite among others). These measures will raise costs for the US and its allies rather than completely cut off their access to these commodities. At the same time, pressure is building for the US under Trump to expand the Biden-era tech sanctions (on advanced semiconductors) to encompass China’s pharmaceutical, automotive and civilian aircraft industries.
At a certain point, based on an extreme aggravation of its domestic crisis, the Chinese regime could resort to the “nuclear option” of a significant devaluation of the yuan, known internationally by its official name the RMB (renminbi). This would signify the abandonment of a 20-year strategy to “internationalize” the yuan in pursuit of the CCP’s many global economic and geopolitical goals (through the Belt and Road Initiative, BRICS, etc.). The case for devaluation would be to offset the effects of US tariffs, but also to mitigate deflation (a weaker yuan would act to “import” inflation). But devaluing the yuan would inflict considerable self-damage through increased capital flight from China and above all by shaking the authority of the CCP regime and its economic power, in the eyes of allied regimes, trade partners and its own population. For global capitalism as a whole this would open a Pandora’s Box as numerous other countries would be forced to devalue their own currencies in lockstep with China. The resulting global currency war would be far worse even than the trade war for the world economy.
While the CCP may make a show of willingness to engage in negotiations with Trump, and may even offer some partial concessions as it did in 2020 (which it never intended to fulfil), a deal between the two superpowers in any meaningful or lasting sense is not possible. The idea floated by some capitalist commentators of a “new Plaza Accord” is a non-starter. This references the 1985 agreement between the US, West Germany and Japan, under which the latter two were strong-armed into revaluing their currencies against the dollar, effectively blunting their own economic prospects to allow the US to reduce its trade deficit.
Both the US and Chinese regimes have a ‘bottom line’ that the other side cannot meet. For Xi’s regime, the dismantling of its state-guided version of capitalism, with large-scale government intervention, subsidies, and control of key sectors, is non-negotiable as this would lead to the collapse of the regime itself. Yet this is the real import of the US side’s demands as was shown in the trade negotiations of the first Trump administration. Economic pressures are not the only ingredients in the mix, but also the political authority of the two regimes, and the huge loss of face flowing from any display of weakness, which could trigger a serious political crisis.
Neither Trump nor Xi
Some people including some misguided groups on the left will argue in favour of China’s regime in the belief that it acts as a counterweight to Trump and US imperialism and is therefore a ‘lesser evil’. Others, including some in China itself, and in Taiwan and the wider region, may cheer Trump on in the belief that his blows against Beijing constitute ‘victories’ for the oppressed. This underlines how skewed mass consciousness has become in an era of heightened nationalism and as yet politically limited working class struggle. Trump’s record is absolutely clear: He expressed approval of Xi Jinping’s mass detention of one million Muslims in Xinjiang and also said the savage police repression against mass democracy protests in Hong Kong in 2019 was China’s “internal matter”.
The working class in China, America and globally has to oppose all sides in the clash of imperialisms. It is a brutal conflict between the world’s most reactionary regimes over who can most fully exploit the world’s proletariat and plunder its natural resources. Workers must oppose the capitalist economic and military policies of both Washington and Beijing and struggle for an alternative based on socialism, democratic rights and ending all oppression.
