US President Donald Trump signs executive orders in the Oval Office of the White House in Washington, DC on January 20, 2025.
Jim Watson | AFP | Getty Images
Donald Trump’s return to the White House is expected to lead to further hostilities between the US and China. Yet could his love of transactional business pave the way for a surprise deal with Xi Jinping? Call it soy on steroids.
If history is any guide, many are bracing for a worsening of US-China relations once Trump returns to office for a second term. After all, his first term is generally seen as the point when relations with China took an adversarial turn, and his cabinet is expected to include some of Washington’s most prominent China hawks.
Add to that the Biden administration’s sweeping export controls and network of alliances that mirror Cold War containment strategies, and US-China relations are near rock bottom. Renowned investor Ray Dalio summed up the moodpredicting “an ‘America First’ foreign policy and preparations for foreign war with China, perceived as America’s greatest threat.”
And yet, while a further decline in relations is possible, conventional wisdom may overlook a competing, perhaps even more likely, scenario: a US-China grand bargain, driven by Trump’s ambition to be remembered as one of America’s great statesmen. Actually, Trump has he allegedly already made the call ahead of his inauguration, discussing “trade balancing, fentanyl, TikTok and many other topics.”
Trump, driven by a transactional mindset, sees diplomacy as a series of high-stakes deals. His 2018 tariffs were less about systemic economic strategy and more about gaining influence — ultimately securing a $200 billion trade deal focused on agricultural products such as soybeans.
However, Trump values his popularity above all else, and a winning strategy for him could include imposing early punitive tariffs on Chinese imports, and even on 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.
Result? A grand bargain in which China offers a mix of substantive and symbolic concessions, earning Trump the admiration of his base and bolstering his self-image as a master dealmaker. Call it “soy on steroids.”
However, such a job would not come without risks. While the Trump-Xi deal may bring short-term economic relief, it could alienate America’s allies in Asia. Trump’s admiration for strong leaders such as Xi Jinping, whom he invited “brilliant, fierce and smart,” contrasts sharply with his disdain for democratic leaders in Japan, South Korea and Taiwan, which was accused of seeking protection without paying their fair share. A purely transactional approach risks encouraging Beijing’s regional ambitions while undermining long-term strategic goals.
Still, Trump’s unpredictability and love of dramatic posturing make a reset of US-China relations likely. As the world watches, one thing is clear: Trump’s return promises surprises. “Soybeans on steroids” could be just the prelude to an unexpected geopolitical upheaval that few could have predicted.
David Bach is President of IMD, a position he holds from September 2024, and Nestlé Professor of Strategy and Political Economy. Before joining IMD in 2020, he was Deputy Dean at the Yale School of Management.
