As Trump 2.0 targets China, 2025 could spiral into a new Cold War

Donald Trump is weeks away from taking charge of the White House as the 47th US President. But his war cry is already echoing in the power corridors of Beijing and has sent shockwaves worldwide.

The US tycoon-turned-politician’s escalation targeting China has all the ingredients of a snowballing Cold War between Washington and Beijing, the two biggest superpowers today.

Redefining the US-China tensions as a ‘Cold War’ might sound far-fetched at first glance. But scratch the surface, and there are undeniable resemblances with the original US-USSR Cold War of the post-World War II era.

Shortly after defeating Joe Biden in the presidential election in November, Trump proclaimed a menacing multi-front trade war aimed generally to protect the US economy and specifically to rein in China.

He declared he would impose steep import tariffs on China, Mexico, Canada, and India. Soon after, the EU also made it to his hitlist. He threatened the European bloc to buy more American oil and gas or face tariffs.

Trump followed up his tariff-plan announcements with intimidating rhetoric for other targets, saying he wants the US to take control of the Panama Canal, as well as Canada and Greenland.

But he has been particularly hawkish about China, announcing that the Asian giant will be slapped with 10 percent higher import tariffs – over and above the current levies – if Beijing doesn’t take action to freeze fentanyl, a banned drug, from entering US territory.

Exports: DNA of China’s growth

But why is Trump hell-bent on punishing Chinese imports? Why is he focusing on trade alone?

The answer lies in some numbers that show that China’s shadow on a stagnating US economic landscape is quickly getting longer, bigger, and darker.

In recent decades, China has shown that it is firmly on course to replace America as the world’s biggest economic superpower, perhaps much sooner than expected.

What’s the DNA of this Chinese growth story that has spooked Washington? It is China’s masterful handling of international trade. To be precise, Beijing’s ability to keep winning the perpetual ‘export war’ against the US.

In recent times, the US has suffered enormous annual deficits in bilateral trade with China.

In 2023, America’s trade deficit with China was $279.4 billion. Chinese exports to the US, worth $427.2 billion, had comprehensively outstripped US exports to China, valued at $147.8 billion.

The US would have noticed that in 2023, China’s trade surplus was a staggering $823 billion. It far outstripped any other country on the planet. That figure is nearly four times higher than second-placed Germany, with a trade surplus of $226 billion.

In stark contrast to China’s towering trade surplus, the US last year posted a trade deficit of $1.15 trillion.

Between 1979, when China began opening up its economy, and 2018, Chinese merchandise exports shot up from $14 billion to $2.5 trillion.

Today, China’s top three export markets are the US, EU countries, and the ASEAN bloc, where it exports mostly computers and peripherals, smartphones, broadcasting technology, transport equipment, apparel, and household items.

It’s amply clear why the Trump camp is desperate to revisit its 2018 trade war with China. The Asian giant is silently winning the export war against America, which loves to project itself as the world’s most powerful nation.

That’s what is hurting the US the most. Hence, the renewed tariff war – a scramble to halt China’s march in international trade.

Cold War returns

When World War II ended, George Orwell popularised the term ‘Cold War’ in a newspaper column in 1945. Soon after, the world witnessed a long-drawn US-led West vs. Soviet Cold War from 1947-1991.

Fast forward to December 2023. Gita Gopinath, the first managing deputy director of the IMF, warned that the world was entering a state of ‘Cold War II’. She said the US-China Cold War could wipe out trillions from the global economy, amounting to about $7 trillion.

Leaders of the US and China have stopped short of calling the confrontation a Cold War, but foreign policy experts from both sides acknowledge that it was a real scenario.

During the Cold War , the Western bloc squared off with the Eastern bloc. The Western bloc comprised the US-led West, including NATO nations and most of Western Europe. The Eastern bloc was led by the USSR and had other non-Western countries, including China.

In theory, that Cold War was based on the ideological fight between Western capitalism and Soviet communism. But the underlying intention was to secure control over the global economic landscape.

The current US-China tussle, especially since the first Trump administration’s trade war in 2018, has a similar blueprint. In this New Cold War, there’s a US-led Western bloc taking on an Eastern bloc that also includes the Global South. China is leading the bloc, with Russia seen as its B team.

In terms of ideology, the US seeks to portray Cold War II as a fight between Western free-market democracy and alleged Chinese autocracy. But America’s actual agenda is to stop Chinese economic growth on its tracks.

The US-Soviet Cold War saw the two sides fight each other on multiple flashpoints, through militarised deployments, nuclear escalations, direct battles, proxy wars, blockades, rhetoric exchanges, and propaganda narratives.

The US-China Cold War has a similar pattern of engagement, with AI development serving as an added dimension to the confrontation.

Writing is on the wall

The signs of another Cold War are crystal clear – such as Trump’s tariff wars in both terms; China’s role in forming BRICS to counter the West’s G7; China’s Belt and Road Initiative (BRI); and anti-West cooperation among China, Russia, Iran, and North Korea.

Also, there’s China’s tacit support for Russia on the Ukraine War; the US move to sanction Russia; and Beijing and Moscow teaming up to bypass the dollar and conduct bilateral trade in yuan and ruble as part of a ‘de-dollarisation’ drive.

We are also witnessing an escalating tit-for-tat chip war; a race for advancement in AI technology; an intensifying tussle for space explorations; and US doggedness in deploying THAAD missile defence system in South Korea, Israel, Romania, and UAE against the wishes of China and Russia.

Cold War II is giving the world chills just like the previous one did with multiple geographical flashpoints simmering at the same time.

Take, for example, Washington’s hawkish position on Taiwan, Xinjiang, Hong Kong, Tibet, and the South China Sea disputes. The US is using this collective of flashpoints to keep China tied down.

There are a few other flashpoints as well – such as the AUKUS security pact among the US, Britain, and Australia that targets the Indo-Pacific domination; growing Chinese and Russian footprint in Africa; China’s deepening ties with Afghanistan and the Gulf; and most recently, a thaw in India-China border tensions, two key BRICS members.

Clearly, there’s a full-spectrum face-off between the US-led Western bloc and a China-led Eastern bloc in this New Cold War, reminding us of the US-USSR confrontation.

Keeping Cold War II in mind, Trump has put together a cabinet that paints an ominous picture. His administration is packed with hawks brimming with anti-China fervour and mindset.

One such name is China-critic David Perdue, Trump’s pick as US ambassador to China. Then there’s Marco Rubio as Secretary of State, Mike Waltz as National Security Advisor, Pete Hegseth as Defence Secretary, Scott Bessent as Treasury Secretary, and Howard Lutnick as Commerce Secretary.

The line-up represents a collective outlook of seeking to contain China on multiple fronts – tariffs, Taiwan, human rights, South China Sea, Hong Kong, semiconductors, artificial intelligence, and so on.

Moving beyond words

How has Beijing responded to Trump’s recent chest-thumping? The Chinese leadership’s retorts have been pacifist but not submissive. On December 10, Chinese President Xi Jinping cautioned that a US-China economic war will have “no winners”.

China has moved beyond words in its retaliation to Trump’s provocations. Earlier in December, the US imposed curbs targeting China’s capability to make chips. In response, China banned exports to the US of vital materials and parts required for producing semiconductors.

China also targeted American drone makers to protest US weapons sales to Taiwan. Xi’s administration sanctioned six US defence industry officials and as many as 13 US-based defence firms.

Unlike during Trump 1.0, China has decided to utilise its bargaining chips.

Interestingly, amid the anti-China rhetoric, Trump has played a puzzling card, inviting arch-rival Xi to his inauguration on January 20. The Chinese President hasn’t yet confirmed if he will attend it.

Can Trump’s tariff war and repeated sanctions on China in this Cold War halt Beijing’s march towards further economic superiority?

It looks unlikely that Trump’s America will be able to make too big a dent in the Chinese economy. Xi’s government appears more emboldened to take on the West, no matter how shrill Trump’s rhetoric becomes and how punitive new sanctions are.

After all, despite the animosity, the two superpowers are way too economically interdependent to risk full-scale decoupling and a full-blown war.

China’s miracle export story depends on access to US markets. The biggest holder of US treasury bills is China. US firms increasingly see China as a growing market. And the two countries need each other as critical supply chains when it comes to advanced technology.

America and China are deeply interdependent, that's the uneasy paradox of this Cold War.

Trump’s belligerence will continue. So will China’s retaliatory and evasive moves. Only time will answer how the two rivals will handle the New Cold War when it gets more frigid, more frightening, and more bitter in 2025.