President Trump repeatedly takes actions that foreign policy experts predict will be catastrophic. When these gambles do not result in the worst-case scenario, it reinforces his unconventional approach in the public eye and erodes the credibility of traditional institutions and their warnings.
China's key learning from the past year is not that the U.S. lacks economic leverage, but that it lacks the political will to use it. Beijing perceives an unwillingness in Washington to endure domestic consequences, like higher consumer prices during an election year, to win a trade war.
Beijing believes that as the U.S. midterm elections approach, the Trump administration will feel increasing pressure to secure a tangible "win" or deal. By prolonging negotiations, China aims to maximize its leverage and extract more favorable terms, mapping this strategy from the first trade war.
Unlike the first trade war, where Beijing was caught flat-footed, it entered the second with a prepared policy plan and emotional resolve. China developed a toolkit of retaliatory measures, such as the rare earth card, and seized the initiative rather than simply reacting to U.S. actions.
Beijing's expansive export controls on rare earths were not an overplay but a calculated risk to shift from a defensive to an offensive posture. They correctly bet that the U.S. administration would ultimately seek to de-escalate and preserve the diplomatic track, thereby validating China's proactive strategy.
The administration was influenced by bearish Wall Street analyses after China's zero-COVID policy and the "Peak China" narrative in the strategic community. This led them to believe China was economically weaker than it was, causing them to miscalculate China's ability and willingness to retaliate in a trade war.
China effectively steered talks away from major macroeconomic imbalances and unfair trade practices. Instead, the focus has been "whittled down" to sector-specific issues like TikTok or soybean purchases, allowing China to manage concessions without addressing core U.S. grievances in a game of "whack-a-mole."
The Trump administration demands allies take more responsibility for regional security. Yet when Japan's leader did so regarding Taiwan and faced Chinese pressure, the U.S. prioritized its direct relationship with Beijing, effectively hanging a key ally "out to dry" and contradicting its own strategic doctrine.