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In China, Donald Trump’s victory in the United States presidential election has been met with indifference, at least officially. A second Trump administration does not have to be worse for China than the Biden administration. It will depend on whether Trump finally opts for rapprochement with China or continues to push for separation from China.

When Biden came to power, Chinese leaders hoped that China-US relations would improve, moving away from Trump’s harsh containment. But Biden levied additional tariffs on Chinese imports and, most importantly, placed much tighter export controls on US technology. This brought China to the realisation that US-China strategic competition is here to stay, irrespective of who is in the White House.

The new Trump administration could offer some advantages to China, for four reasons. First, the Chinese leadership knows that Trump’s positions can be erratic and that he likes to strike deals. This is exactly what happened in December 2019 when then Chinese vice premier, Liu He, reached the so-called with Trump. This was intended to lift at least some of the US tariffs in exchange for $600 billion in Chinese imports from the US and preferential access to the Chinese market for US companies, especially in the financial sector.

Second, Trump’s isolationist agenda benefits China in that traditional US allies, including the European Union, might have no option but to look elsewhere for support. This might imply getting closer to China. Negotiations between China and the EU on a Comprehensive Agreement on Investment (CAI) accelerated just after the signature of the Phase One deal, which undermined European interests in China.

Thirdly, Trump has been clear on his intention to end the war in Ukraine as soon as he becomes president. A quick fix is bound to accommodate some – possibly many – of Russia’s requests, which is positive for China. A US administration that abandons Ukraine will discourage the Taiwanese government’s belief that the US will support Taiwan in the event of aggression from the mainland.

Fourthly and more generally, Trump’s victory will make it easier for Chinese leaders to spread the narrative of America’s decline and the decadence of its democracy. China’s leverage over the Global South has increased enormously since Israel’s military attack on Gaza and, more recently, Lebanon, beyond its long-standing initiatives, such as the Belt and Road Initiative and the BRICS. Trump is expected to offer international partners fewer incentives for cooperation and a more transactional approach than the Biden administration. This should bring the Global South even closer to China.

But the return of Trump might also come at a high economic cost for China. Trump has committed to imposing 60% additional tariffs on Chinese exports to the US and, more generally, to push for further decoupling from China. During Trump’s first mandate, Chinese investment into the US plummeted as requirements were tightened through a reform of the (CFIUS). Chinese firms were also discouraged from raising funds in the US as Trump threatened them with delisting from US stock markets. People-to-people exchanges were also made more difficult, especially for students of hard sciences. For his second mandate, Trump has given every sign that tech, financial and people-to-people decoupling can be expected to continue, well beyond tariffs.

Against this backdrop, China’s leadership will have little room to retaliate against Trump’s tariffs and will probably prefer to negotiate a deal as soon as possible. For Trump to agree a ‘Phase Two’ deal, China will have to offer much more than in 2019, in terms of the volume of imports from the US and by offering preferential access to US companies to many more sectors.

In this scenario, the big loser could be Europe because a large share of its exports to China competes with those from the US. Aerospace is a good example but there are many others. Trump’s policies will of course have a direct impact on the EU which will be probably larger than on China. A US-China trade-investment deal could make things even worse for Europe.

The best outcome for the EU might be if Trump does continue to push for decoupling from China, rather than reaching a second deal. While the consequences of decoupling are obviously negative in terms of further fragmentation of trade, there will be less diversion of Chinese trade away from the EU towards the US than in a scenario of US-China rapprochement.

This First Glance was also published on in French.