Xi faces his biggest test since COVID

DAVID PIERSON

For the two men at the forefront of a trade war that has begun to rupture ties between the world’s biggest economies, the question has become who will blink first.

On one side is President Donald Trump, who unleashed a disruptive plan to transform the modern global trading system with tariffs — only to back down hours after it took effect, pausing the import duties for every country but China.

On the other side is Xi Jinping, China’s top leader, who has a well-earned reputation for refusing to yield. He stuck to China’s tight COVID-19 restrictions long past the point where they were working. He pressed ahead with his goal of making China the world’s leader in electric vehicles and solar panels, despite alarm from trading partners about the flood of cheap exports.

Now, as Xi faces what could be the biggest test of his leadership since the pandemic, he has been true to form. On Friday, his government escalated its response to Trump, raising tariffs on US imports to 125%, despite concerns that a prolonged trade war could deepen China’s economic malaise. Before that announcement, Xi struck a confident note in his first public comments about the trade showdown.

“There will be no winners in a tariff war, and going against the world will only isolate oneself,” Xi said while hosting Prime Minister Pedro Sanchez of Spain in Beijing, without explicitly mentioning Trump or the United States.

“For more than 70 years, China has always relied on self-reliance and hard work for development,” Xi continued. “It has never relied on anyone’s gifts and is unafraid of any unreasonable suppression.”

Xi can afford to be more stubborn than his American counterpart.

As the most powerful Chinese leader since former Communist Chair Mao Zedong, he has surrounded himself with loyalists, purged his opponents and imposed tight social controls to stifle dissent. He has styled himself as a strongman with a nationalistic vision of China’s rejuvenation. His officials have mobilised state funds to stabilise Chinese financial markets as stocks around the world plunged over the tariffs.

“Xi has spent his whole career hardening the country for precisely this moment,” said Joseph Torigian, an assistant professor at American University in Washington who studies elite politics in China. “He likely believes that the Chinese political system is superior to the American one because it has greater cohesion and discipline. He probably thinks the Chinese people will sacrifice for a mission of national rejuvenation.”

Xi can play the long game. He has no elections to consider and is empowered to rule over China indefinitely, having abolished presidential term limits in 2018. Trump has to leave office in 2029 (though he has suggested he might defy the Constitution and make a third run at the White House).

Xi can also point to the trade war as vindication of his frequent warnings about Western hostility toward China — his stated reason for taking an all-encompassing approach to national security and investing in a world-class military at the expense of other needs. Trump’s decision to give every country but China a reprieve from his tariffs reinforces that narrative.

“This will actually save Xi Jinping from having to take responsibility for the lack of economic growth in China. It is a ‘get out of jail free’ card for him,” said Jessica Teets, a political scientist at Middlebury College in Vermont and an expert on Chinese politics. “Chinese citizens and business leaders will view this as outside of his control.”

China’s propaganda organs have been rallying the country for a protracted fight.

For all his power, Xi is not immune to popular discontent, analysts say. China is sure to feel pain from Trump’s tariffs, which have reached at least 145% — a staggering figure that imperils the country’s $400 billion in annual exports to the US, its biggest market.

Already, factories near the manufacturing hub of Guangzhou that supply garments to American consumers have closed until there is more clarity on the tariffs. If such closures spread, they could exacerbate China’s unemployment problem, making it even harder for policymakers to revitalise an economy battered by a property crisis and sagging confidence.

For Xi, the test is likely to be whether the party can keep ordinary Chinese people on its side and help them endure any economic pain from the trade war.

“Even if you think you have a strong repressive capacity to hurt doubters and a jingoistic story to rally supporters, economic dislocations are still dangerous because you never know how bad they will get and whether they will turn into something worse,” Torigian said.

That economic reality suggests Xi will probably accept an off-ramp from the tariff showdown if Trump offers one, analysts said. China has said it does not want a trade war, but its officials have insisted that any deal will depend on the US treating China as an equal.

On Thursday, Trump took a softer tone on China, saying Xi “has been a friend of mine for a long period of time.”

“We’ll see what happens with China,” Trump said. “We would love to be able to work a deal.”