Trump's return could trigger trade war, Beijing prepares for fallout

In a Tuesday interview with Bloomberg, Donald Trump addressed many issues, including Taiwan. His words can be controversial as the US presidential candidate touched on two extremely sensitive issues.

"I think, Taiwan should pay us for defense. You know, we're no different than an insurance company. Taiwan doesn't give us anything," said Donald Trump. In the next part of the conversation, he stated that China is big enough to "simply bomb Taiwan." He used distance as an argument that Taiwan is far from the States.

The words of the Republican Party leader sparked a new wave of discussion about the role Taiwan plays in the region and the world. It is the 21st largest economy in the world, with a GDP of about $1 trillion. However, it is not so much the size of the economy but that it plays a key role in the global technology supply chain. The island is a world leader in semiconductor production, with Taiwan Semiconductor Manufacturing Company (TSMC) providing 90% of advanced chips and 65% of all semiconductors worldwide.

Besides the semiconductor industry, Taiwan is also a powerhouse in electronics manufacturing. It is home to Foxconn, Apple's leading supplier. Other sectors also benefit from the advanced technological park, including bicycle manufacturers such as Giant and Merida, responsible for 10% of global supplies.

Taiwan's dominance in key technological sectors gives it enormous geopolitical significance, especially in the US-China rivalry. Potential disruptions in Taiwan's economy could have serious consequences for the global economy.

For these reasons, Chinese strategists are analyzing possible Taiwan-related scenarios—reports "The Wall Street Journal." They believe that Trump has expressed ambiguous views on this issue. Some fear that Trump could use the Taiwan issue as a bargaining chip in trade negotiations, which Beijing sees as a potentially dangerous approach.

Why? China views Taiwan as a renegade province and seeks reunification with the mainland. Beijing's motivations are both political and economic. Taking control of Taiwan's semiconductor industry would give China a huge technological and economic advantage, reducing its reliance on foreign suppliers. This is also relevant in the ongoing economic war with the USA.

Control over Taiwan would also strengthen China's strategic position in Asia-Pacific, increasing its influence on global supply chains.

Chinese officials are intensively preparing for Donald Trump's potential return to power in the United States. Remembering his first term, they fear an escalation of economic and geopolitical tensions. Beijing expects a much more aggressive trade policy from the USA in the event of Trump's victory in the November presidential elections. These preparations reflect China's deep concern over the potential consequences of a change in the administration in Washington.

According to reports from The Wall Street Journal, Chinese ministries responsible for foreign affairs, trade, investment, and technology have appointed special officials to monitor the US election campaign, focusing on the Trump campaign. Beijing fears the possibility of another trade war between the USA and China the most, which could have serious consequences for the Chinese economy.

Chinese officials are particularly concerned about Donald Trump's declarations regarding the possibility of imposing up to 60% tariffs on imports from China. Although it is unclear how such a move could be realized, it poses a serious threat to the Chinese economy, which largely relies on exports. China is already diversifying its export markets and technology sources in response to these threats.

According to a McKinsey Global Institute report, China has already started shifting its trade towards developing economies, including Russia, in recent years. In 2023, developing countries accounted for over half of China's trade in goods, compared to 42% in 2017. This trend could intensify if the US tightens its trade policy towards China. Beijing is also accelerating efforts to diversify its supply chains and export markets. Chinese companies are increasing investments in developing countries, particularly in Africa and Southeast Asia, to reduce their dependence on the American market.

Chinese leaders are also worried about potential changes in the geopolitical power balance. One of President Xi Jinping's main concerns is the possibility of disrupting his relationship with Vladimir Putin. Xi has cultivated a personal bond with the Russian leader and fears that if Trump draws closer to Putin, it could weaken Beijing's relations with Moscow, which are crucial in the confrontation with the West.

At the same time, Chinese officials see some potential benefits from a possible Trump victory. In their view, he could accelerate what Xi sees as the decline of the USA as the sole world power, worry America, and discourage the allies that Biden has gained, potentially helping Beijing rebuild relationships with Europe.

Due to the above, China is intensifying efforts in the technological sector to develop its advanced technologies, including semiconductors and artificial intelligence. The goal is to become independent of American supplies and technologies, which could be cut off in the event of an escalation of tensions between the two countries.

China's preparations for Donald Trump's potential return to the White House reflect Beijing's deep concern about the possibility of a sudden shift in US-China relations. Although the Biden administration has maintained many of Trump's tough policies toward China, Beijing sees the current US president as more predictable and less prone to radical actions.