China's new dawn? Why Beijing could be the winner from Trump's tariff chaos

On the basis of Napoleon's dictum "never interrupt your enemy while they are making a mistake", there was a large incentive for China to do precisely nothing as Donald Trump displayed his determination to lose friends and induce market panic.

- Patrick Wintour

On the basis of Napoleon's dictum "never interrupt your enemy while they are making a mistake", there was a large incentive for China to do precisely nothing as Donald Trump displayed his determination to lose friends and induce market panic. Indeed, the Chinese advocates of passivity cited a social media meme attributed to President Xi Jinping: "Do nothing. Win."

Initially it was tempting for China to sit back and watch the US's former allies recoil at Trump's disruptive war on globalisation and let them realise that, by comparison, China represented an oasis of stability, modernity and predictability.

China instead decided to be far from idle. It foresaw and prepped for this trade war, probably more so than for Trump's first term, and decided that if the US president imposed on China the kind of tariffs he had suggested on the campaign trail, it would have to mount a counterattack. China insisted its wider-than-expected and swiftly executed package of reprisals, initially set at 34% but increased to 84% in response to Trump's tariffs, was a justifiable retaliation.

Even now, with lines of communication into Washington limited, China says it had no desire for this confrontation, but was forced to react after the scale of Trump's assault. And by making an appeal to the World Trade Organization (WTO), it seeks to project itself as a defender of rules-based trading order. Why, after all, would China favour such a trade war? Trump's initial tariffs were predicted to cut as much as 2.4 percentage points off China's growth.

By Wednesday night war was being waged by both sides with every weapon in the field in a crazed and destructive bidding war. China's retaliatory tariffs on the US sat at 84%, with the US's even higher at an oxygen-free 125%.

At these figures there could be virtually no trade between the two world's largest economies and a complete decoupling would begin.