China's Strategy and the Divergent Paths of Japan and the EU

China swiftly retaliated against Trump's trade war declaration, implementing tariffs mirroring those imposed on Chinese goods. This action effectively initiated the "decoupling" of the Chinese and U.S. economies. In contrast, Japan and the European Union chose to postpone retaliatory measures, prioritizing dialogue with the Trump administration. This approach could be interpreted as leveraging China's actions, reducing the immediate pressure for them to respond. China's stance serves to demonstrate the possibility of resisting American pressure, potentially lessening the need for other nations to take similar action.

A critical question revolves around the potential convergence of positions among China, Japan, and Europe. All three major trading powers emphasize the importance of increased communication, with some discussions already underway. Both the EU and the UK harbor security concerns regarding China, particularly its support for Russia in the Ukraine conflict. Japan also prioritizes its security interests. However, a separation between trade and security may be possible.

China's primary objective is to demonstrate its strength and resilience, aspiring to achieve parity with the United States in military power, technology, geopolitical influence, and economic strength. While surpassing the U.S. might be a long-term goal, the current focus is on achieving equal standing with the world's leading superpower. Trump's policies have provided China with an opportunity to showcase its strength. A trade war, while costly, is less risky than a military conflict. Given Trump's unpredictable policies and lack of economic understanding, China may believe it can achieve a political victory.

China's advantage lies in its substantial holdings of U.S. Treasury bonds. Selling these bonds, potentially in conjunction with other nations, could raise U.S. borrowing costs, impacting a government already burdened with significant public debt. The mere threat of such a sale could pressure Trump to reconsider his policies. China's immediate need is to prevent the diversion of Chinese goods from America from escalating trade conflicts, necessitating trade management measures with major markets. The long-term objective is for all countries to agree on trade rules and institutions without American participation.

engage with Trump, offering symbolic gestures, but never at the expense of open trade or economic and energy security.