The world breathed a collective sigh of relief as Donald Trump's return to the White House didn't immediately reignite the fires of trade war with China. Yet beneath the surface calm, seasoned observers detect a troubling reality: this isn't resolution, but merely postponement.
The Art of the Temporary Deal
President Trump's initial moves suggest a preference for dramatic gestures over substantive policy. His administration has opted for what might be called 'managed tension' - enough confrontation to satisfy his political base, but stopping short of the economic mutually assured destruction that characterised his first term.
The fundamental problems remain unaddressed:
- Technology transfer and intellectual property disputes
- China's industrial overcapacity flooding global markets
- The strategic competition for technological supremacy
- Taiwan's precarious position
A World on Edge
Global markets have responded with cautious optimism, but this masks deeper anxieties. Business leaders remember the whipsaw effect of Trump's first term - sudden tariffs, unpredictable policy shifts, and the constant threat of escalation.
The temporary calm comes with significant costs. Companies continue diversifying supply chains away from China, a process that began during the first Trump administration and accelerated during COVID. This 'decoupling', while reducing some risks, creates inefficiencies and higher costs that ultimately affect consumers worldwide.
The European Dilemma
America's European allies find themselves in a familiar bind. While sharing many concerns about China's trade practices and human rights record, they worry about being caught in the crossfire of US-China competition. The EU prefers multilateral approaches through the World Trade Organization, but faces pressure to align with Washington's more confrontational stance.
Key areas of European concern include:
- Maintaining access to the Chinese market for premium goods
- Protecting European technology companies from US restrictions
- Navigating US secondary sanctions that could affect European firms
- Preserving climate cooperation with China despite other tensions
The Long Game
What makes this period particularly dangerous is the illusion of stability. Without addressing the structural issues in the US-China relationship, we're simply storing up problems for the future. The next crisis - whether over Taiwan, technology, or trade - could be even harder to manage.
The world's two largest economies have stepped back from the brink, but they haven't built any guardrails to prevent future trips to the edge.
