Trump’s big deal with China?

Donald Trump’s return to the White House is expected to mark the beginning of new hostilities between the United States and China. However, could his love for a transactional deal pave the way for a surprise deal with Xi Jinping? Call it soy on steroids.

If history is any guide, many are bracing for worsening US-China relations once Trump returns to power for a second time. After all, his first term was widely regarded as the moment 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 a network of alliances that echo Cold War containment strategies, and U.S.-China relations are near a low point. Renowned investor Ray Dalio summed up the moodpredicting an “‘America First’ foreign policy and preparations for an external war with China, perceived as America’s greatest threat.”

However, while further deterioration in relations is possible, conventional wisdom may overlook an opposite, perhaps even more likely scenario: a grand deal between the United States and China, driven by Trump’s ambition to be remembered as one of the great statesmen of the United States. In fact, Trump has supposedly already made a call Before his inauguration, he discussed “the balance of trade, fentanyl, TikTok and many other issues.”

Trump, guided by a transactional mindset, sees diplomacy as a series of high-risk deals. His 2018 tariffs had less to do with a systemic economic strategy and more to do with ultimately gaining leverage. secure a $200 billion trade deal focused on agricultural products such as soybeans.

However, Trump values ​​his popularity above all, and a winning strategy for him could involve the early imposition of punitive tariffs on Chinese imports and even imports from Chinese companies operating in neighboring countries like Mexico. This would create a pressure cooker, paving the way for negotiations with Beijing before American consumers feel the impact.

The result? A grand deal 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 negotiator. Call it “soy on steroids.”

However, such an agreement would not be without risks. While a deal between Trump and Xi could bring short-term economic relief, it could alienate US allies in Asia. Trump’s admiration for strong leaders like Xi Jinping, whom he has called “Brilliant, fierce and intelligent.” contrasts sharply with his disdain for the democratic leaders of Japan, South Korea and Taiwan, whom has accused of seeking protection without paying their fair share. A purely transactional approach risks emboldening Beijing’s regional ambitions while undermining long-term strategic objectives.

Still, Trump’s unpredictability and taste for dramatic posturing make a reset in US-China relations possible. As the world watches, one thing is clear: Trump’s return promises surprises. “Soybeans on steroids” could be just the opening act of an unexpected geopolitical shakeup that few could have anticipated.

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