As President Donald Trump imposes tariffs on goods from around the world, China is casting itself in a role once claimed by the United States: champion of free trade and stable market in a chaotic world.
Canada’s decision to walk away from trade talks and impose retaliatory tariffs on U.S. products, becoming the second nation to do so, drew praise from the first.
A “Chinese-styled counterattack,” state media claimed Sunday. “Canada’s response offers the world a glimpse of what China has long stood for.”
U.S. Trade Representative Jamieson Greer said as much last week. Retaliatory tariffs, he said, are “like the kind of things that China would do.”
Ottawa and Beijing prepared for this moment. In January, Canadian Prime Minister Mark Carney, looking to reduce his nation’s dependence on the United States, struck a deal with Chinese President Xi Jinping on agricultural products and cars.
Carney’s visit to Beijing, the first by a Canadian prime minister since 2017, was a signal that the sides were mending a relationship strained by Canada’s 2018 arrest of a top Chinese technology executive wanted by the United States and China’s subsequent detention of two Canadians.
Now the deal, in which Ottawa agreed to admit 49,000 Chinese electric vehicles at most-favored-nation tariff rates in exchange for improved access for Canadian canola seed, canola meal, lobsters, crabs and peas, appears prescient.
China signed a free trade agreement with Switzerland last week and waived tariffs on goods from all but one African nation in May.
“China seeks to cast itself as a steadying counterweight to an erratic superpower that targets its allies and partners with whipsaw tariffs,” said Ali Wyne, a senior U.S.-China researcher with the International Crisis Group.
“The Chinese government is always willing to take advantage of a situation that would weaken the Trump administration’s position,” said Zongyuan Zoe Liu, a senior fellow for China studies at the Council on Foreign Relations. Beijing has invested heavily invested in foreign development projects and alternative international payment systems to ensure it holds a central position in the global financial system.
Still, Liu said, policymakers will have to walk a delicate balance between challenging U.S. financial dominance and avoiding responsibilities they’re not prepared to assume.
As a net exporter — China produces more goods than its own people can buy — the country relies on the rest of the world to buy its products. But it has much to lose from dethroning the U.S. outright.
The U.S. dollar is the global financial system’s dominant currency. While the role confers significant advantages, including lower interest rates to the ability to impose effective sanctions, it also requires constant attention: payments infrastructure, bailouts and military power.
Beijing might not want — or be able — to bend the system toward the renminbi. Policymakers “would want the dollar system to work because they themselves can hardly build an alternative system that works as smoothly,” Liu said. ”China can basically free-ride.”
As the trade war deepens, Chinese is already winning.
“We are literally abandoning leadership on our own,” Liu said. “China doesn’t even need to do anything.”
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