Trump’s big deal with China?

The return of Donald Trump to the White House is expected to lead to more hostilities between the US and China. However, could his love of a transactional deal give way to an unexpected deal with Xi Jinping? Call it soy on steroids.

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

Add to that, the Biden administration’s extensive export controls and a network of alliances that echo Cold War containment strategies, and US-China relations are near a low point. Famous investor Ray Dalio summed up the atmosphere“Advertises ‘America First’ foreign policy and preparations for external war with China, perceived as America’s greatest threat.”

However, while further deterioration of relations is possible, conventional wisdom may rule out a competing scenario, perhaps even more likely: a major US-China negotiation, driven by Trump’s ambitions to be remembered as one of America’s greatest statesmen. In fact, Trump has done it He seems to have already made a call ahead of his inauguration, discussing “trade balancing, fentanyl, TikTok and many other issues.”

Trump, driven by a transactional mindset, sees diplomacy as a series of high-stakes deals. His 2018 rates were about systemic economic strategy and gaining leverage, ultimately Achieving a $200 billion trade deal focused on agricultural products such as soybeans.

However, Trump values ​​his reputation above all else, and a winning strategy for him could be to impose early punitive tariffs on Chinese imports, as well as imports from Chinese companies operating in neighboring countries such as Mexico. That would create a pressure cooker, paving the way for negotiations with Beijing before American consumers feel the impact.

The result? A big deal where China offers a mix of substantive and symbolic concessions, winning Trump the admiration of his base and bolstering his self-image as a master negotiator. Call it “soy on steroids.”

However, such an agreement would not come without risks. While a Trump-Xi deal could bring short-term economic relief, it could alienate US allies in Asia. His admiration for strong leaders like Xi Jinping, whom Trump has called upon “bright, honest and clever” it contrasts sharply with his disdain for the democratic leaders of Japan, South Korea and Taiwan, who accused him of asking for protection without paying their fair share. A purely transactional approach risks strengthening Beijing’s regional ambitions while undermining its long-term strategic goals.

However, Trump’s unpredictability and penchant for dramatic posturing make a reset of US-China relations plausible. As the world watches, one thing is clear: Trump’s return promises surprises. “Soybeans on steroids” may be the opening act of an unexpected geopolitical shake-up that few could have expected.

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