Speculation about a "Grand Bargain" between Trump and Xi persists, but deep divisions within Washington, Trump’s erratic leadership, and Beijing’s long-term strategic patience make a major breakthrough unlikely. Even if a meeting occurs, structural mistrust and political instability on both sides suggest any deal would be fragile at best.

China has taken a tough stance against US President Donald Trump, matching the last two rounds of US tariffs with tariffs of its own. The US tariff on goods from China is now 145%, while China’s is 125%. Why does China take such a position, and are there any off-ramps that would allow it to mitigate the costs of a prolonged trade war?

US President Donald Trump’s “Liberation Day” announcement of sweeping new tariffs on imports from more than 180 countries will be remembered as a man-made economic tsunami. Many are already comparing it to President Herbert Hoover’s 1930 Smoot-Hawley Tariff Act, which slashed global trade by 66% in five years and deepened the Great Depression. Trump’s tariffs – most of which have been abruptly paused for 90 days – have rattled financial markets, prompting analysts to warn that the United States could enter a recession in 2025.

Trump’s second-term foreign policy asserts U.S. hegemony in the Western Hemisphere while exploring a great power system based on spheres of influence. Its success hinges on defining these spheres—especially between the U.S. and China—without destabilizing East Asia.

Talks are underway for a U.S.-China summit this spring, with the choice of venue crucial to balancing Trump’s unpredictability and Xi’s preference for control. Hawaii and Hainan stand out as potential neutral sites, offering luxury, security, and a level playing field for both leaders.

Trump’s return creates uncertainty for Beijing, with potential economic risks from renewed tariffs and trade restrictions. While there are some prospects for relations to get better, the unpredictable nature of Trump’s policies and Washington’s internal challenges could also lead to further volatility between the U.S. and China.

The grand strategies of Sun Tzu and Thucydides converge on a central idea: true victory lies in avoiding direct confrontation. In an era of nuclear deterrence and global challenges, their wisdom underscores that great powers must prioritize strategic restraint, internal resilience, and measured competition over reckless escalation.

Washington and Beijing display stark contrasts in their approaches to the world and to each other. The dividing lines highlight the extremes — perpetrators and victims, oppressors and the oppressed, aggressors and defenders.

China and the U.S. should not entangle themselves in trade imbalances and tariffs but find a new, innovative perspective. The future will be shaped by AI, big data, quantum computing and telecom. Both countries have tremendous common interests.

The country is far more resilient today than it was four years ago and in a good position to counter Donald Trump’s promised tariffs — or unexpected moves yet to come. It has diversified markets for Chinese goods, reduced the chances that countries in the region will form anti-China alliances and is welcoming foreign investment.