US President Donald Trump signs executive orders in the Oval Office of the White House in Washington, DC, on January 20, 2025.
Jim Watson | AFP | Getty Images
Donald Trump's return to the White House is expected to lead to further hostilities between the US and China. However, could his love of the transactional deal pave the way for a surprise deal with Xi Jinping? Call it soy on steroids.
If history is a guide, many are bracing for a deterioration in relations between the United States and China once Trump returns to office for a second time. After all, his first term was widely viewed as the point at which relations with China took a hostile turn, and his cabinet is expected to include some of Washington's most prominent China hawks.
Add to that the Biden administration's sweeping export controls and a web of alliances that echo Cold War containment strategies, and U.S.-China relations are nearing a low point. Famous investor Ray Dalio summed up the moodExpect an “America First” foreign policy and preparations for foreign war with China, which is seen as the greatest threat to America.
However, while further decline in relations is likely, conventional wisdom may ignore a competing, and perhaps more likely, scenario: a grand bargain between the United States and China, driven by Trump's ambition to be remembered as one of America's greatest statesmen. In fact, Trump did just that He has reportedly already made a call Before his inauguration, he discusses “balancing trade, fentanyl, TikTok, and many other topics.”
Trump, guided by a transactional mentality, sees diplomacy as a series of high-stakes deals. His 2018 definitions were less about systemic economic strategy and more about gaining influence — ultimately. Reaching a trade agreement worth $200 billion Focuses on agricultural products such as soybeans.
However, Trump values his popularity above all else, and a winning strategy for him could involve imposing early punitive tariffs on Chinese imports and even on imports from Chinese companies operating in neighboring countries like Mexico. This would create a pressure cooker, paving the way for negotiations with Beijing before American consumers feel the impact.
The result? It's a grand bargain in which China offers a mix of substantive and symbolic concessions, winning over Trump from his base and bolstering his self-image as a consummate deal-maker. We call it “soy on steroids.”
However, such a deal would not come without risks. While the Trump-Xi deal may bring short-term economic relief, it may alienate US allies in Asia. Trump's admiration for strong leaders like Xi Jinping, whom he called “Brilliant, fierce, and smart.” It contrasts sharply with his disdain for the democratic leaders of Japan, South Korea and Taiwan, whom he criticizes He was accused of seeking protection Without paying their fair share. A purely transactional approach risks emboldening Beijing's regional ambitions while undermining long-term strategic goals.
However, Trump's unpredictability and love of dramatic situations make a reset in US-China relations plausible. As the world watches, one thing is clear: Trump's return promises surprises. “Soybeans on Steroids” may be just the opening chapter in an unexpected geopolitical shakeup that few could have predicted.
David Bach is President of IMD, a position he has held since September 2024, and Professor of Strategy and Political Economy at Nestlé. Before joining IMD in 2020, he served as Vice Dean at the Yale School of Management.
