Transition 2025 Series: The Future of U.S.-China Relations

Panelists discuss the future of U.S.-China relations under the new Trump administration, including recent developments relating to trade, technological innovation, and increasing military tensions in the Indo-Pacific.

DOSHI: Well, good afternoon, everybody. Welcome today to the Council on Foreign Relations and our meeting entitled “The Future of U.S.-China Relations.” This meeting is part of CFR’s Transition 2025 Series, which examines the major foreign policy issues confronting the Trump administration. It’s also co-branded with the China Strategy Initiative that I run at the Council as well.

In addition to the members here in New York, I would like to welcome, I think, our over 400 CFR members that are joining this meeting today via Zoom. Four hundred is a lot, so I’m not sure we’ll get to all of your questions but we’ll do the best that we can.

So, by way of introduction, I’m Rush Doshi, the C.V. Starr senior fellow for Asia and director of the China Strategy Initiative here at the Council. And I’ll be presiding over today’s discussion.

So, you know, we have—we’re convening a very interesting moment. Liberty day, as many of you know, is around the corner. A lot of disruption potentially coming in the global economy. And so we thought it was great to have a panel that draws from the strengths here at CFR, but also from others in other institutions, others who have worked on China and really understand the economic and technology dimensions that are incredibly important right now.

With that, I want to introduce the speakers that we have on this panel.

To my right is Liza Tobin. Liza is the managing director at Garnaut Global, a geopolitical risk advisory firm, and a senior fellow at the Jamestown Foundation. Now, prior to joining Garnaut, she was part of the founding team at the Special Competitive Studies Project, or SCSP. That’s a nonprofit founded by former Google CEO Eric Schmidt. And then she served as senior director for economy there for four years. Before that, Liza served in the Trump and Biden administrations. We actually worked together briefly as well—actually, not so briefly. For, like, eight months—a long time, contributing to both presidents’ China strategies.

We’re also joined virtually by my friend Jeremie Waterman. He is president of the China Center and vice president for greater China at the U.S. Chamber of Commerce. He’s responsible for developing and executing chamber policy work in the Asia-Pacific region and carrying out the greater China agenda for the chamber. He directs its trade and investment policy advocacy, you know, intellectual property rights, financial services, agriculture, healthcare, energy, environment, corporate governance, and social responsibility, and many, many other things. And so we’re grateful to have him with us. He’s also pioneered a number of chamber business initiatives focused on China, such as the U.S. China CEO Dialog, among others.

And then to my right we have Zoe Liu, the Maurice R. Greenberg senior fellow for China studies here at CFR. Her work focuses on international political economy, global financial markets, sovereign wealth funds, supply chains, critical minerals, development finance, emerging markets, energy, and climate. So it’s a pretty full agenda. Oh, I’m sorry, and Middle East relations with East Asia, specifically the Gulf Cooperation Council countries. She’s the author of a number of books and well-received journal articles and Foreign Affairs pieces. I’ll just name a few, Can BRICS De-Dollarize the Global Financial System?, Sovereign Funds: How the Communist Party of China Finances its Global Ambitions, a very worthwhile read especially now. Prior to joining CFR, Zoe was actually an assistant professor at Texas A&M’s Bush School of Government and Public Service in Washington, D.C.

So there’s a lot more I could say about our speakers, but I want to start now with our conversation. And our plan today is to basically spend about thirty minutes together talking, you know, as a panel about China, and about Trump administration’s approach but particularly the economic and technology dimensions. And then we’ll turn it over to all of you for your questions. So with that, let me start by just calling attention to a fundamental challenge in thinking about China, one we were actually just discussing internally as a panel. And that challenge is really about how we assess China right now. Because if you look at the media commentary, there’s two assessments you’ll find.

One, that China’s economy is stalling out, its demographic problems are hopeless, its debt is too high, and it has enormous challenges politically as well with dissatisfaction, not to mention zero COVID has not—you know, after zero COVID there was not a resumption of growth. That’s one view of China. There’s another view of China about its incredibly formidable technological capabilities, its military modernization, its industrial base strength. So which view is right, or are they both right? So with that, I want to start with Jeremie Waterman. And I want to ask you, Jeremie, if I could, how should we assess China’s economic and technological strength? Maybe you can talk to us a little bit about some of the strengths. And then, you know, I think I’ll have a few follow-ups for you as well, but let’s start with how you’re looking at things. Jeremie.

WATERMAN: Great, Rush. Well, thanks to you and thanks to the Council. I wish I could be with you in person, but great to be with you virtually and to be on a panel with—obviously, with Liza and Zoe.

I think you aptly started with some of the weaknesses that many tend to focus on. Obviously, China has today an imbalanced economy. The property market collapsed some time ago, which has caused considerable challenges across the economy of high levels of local debt. Of course, challenging demographics as well, which we probably don’t spend enough time on. You have very high exports today, but low consumption. You have tremendous overcapacity in China in many sectors, so it can be hard to make a buck. And obviously China is in some areas, maybe even overall, either teetering or on the brink of deflation. And I would say that the situation appears relatively stable, having just gotten back from a few days in Beijing, but not really improving, notwithstanding some recent capital flows into the markets, obviously some successes—DeepSeek and other successes which we know about.

But in terms of the strengths, and I think you touched on some of them, China has tremendous industrial strength. And that strength is rooted in world-class infrastructure, a skilled and highly educated labor force. Obviously, there are regulatory challenges for both domestic and foreign companies, which I’m sure we’ll have an opportunity to talk about, but overall when you look at China’s regulatory environment since the advent of reform and opening, it’s been—it’s improved. There’s been a measure of stability for foreign business over decades. China also more recently has adopted—well, I would say, over the last decade—a laser-like focus on science and technology development. And that also in recent years has been a very intentionally fused in a top-down manner with military development. And obviously that has had benefits for many sectors in the economy.

And I would say that China has an ability to scale industries generally through marshaling state resources, leveraging a very large market, obviously creating intense competition within that state construct. You have provinces and localities and companies from across the country and foreign companies competing within that overall state construct. And obviously a tremendous ability to diffuse technology across the economy. China—

DOSHI: But, Jeremie, if I could ask, that’s really interesting. Would you say that Made in China 2025, the program that was essentially picking key industries of the future that China would go after and seek to dominate potentially, has that largely been successful? Has it been unsuccessful? Has it been wasteful? You know, in other words, if you had to do an assessment on net, are China’s strengths greater than its weaknesses or vice versa?

WATERMAN: So let me just end on Made in China 2025. The chamber was certainly—I don’t know if we were the only organization, but we were one of the key organizations that translated the original green book roadmap for Made in China 2025, in late 2015. And then we were one of three organizations to write about the original policy in late 2016 and 2017. The others being the EU Chamber of Commerce on China, and MERICS, the German think tank. And so to your question, did Made in China 2025 work, I think, you know, our assessment—and we’re not—obviously, this is a moving target. But overall, when you—when you look at the goals, the localization targets in key sectors, it generally did work. And I would—and I would add that the Chinese—the Chinese, are not done yet, obviously.

But I think China has reduced import dependencies, generally speaking. It has reduced, in many sectors, dependency on foreign firms. Again, they haven’t achieved all of their goals with regard to reducing foreign dependencies. You see Chinese companies that are now globally competitive in sectors ranging from information and communication equipment, clean technology, of course, EVs and connected vehicles, ag equipment, ships, drones, high-speed rail, among others. And you are now seeing technology leadership from Chinese companies in certain sectors.

So overall, I think—and when you look at the localization targets, we don’t have time to go through all of them—all the ten sectors—but China has either achieved or part partly achieved nearly all of the targets. Now, to your point, it’s come with a cost. And tremendous, I think, amount of resources—state resources have been devoted to these efforts, a tremendous—I think there’s been a tremendous amount of waste. But obviously China is focused on outcomes, at the end of the day. And so overall I think the policy is—it’s hard not to regard the policy overall as a success.

DOSHI: That’s very helpful. So the reason I want to start with this is because it’s going to take us to Trump policy in a moment, because we want to ask ourselves how the Trump administration regards these strengths and weaknesses. But before we do, I want to turn to Zoe, who’s written in the pages of Foreign Affairs quite, you know, impactfully about some of China’s weaknesses, its macroeconomic challenges. So Zoe we heard from Jeremie a story about both, strengths and weaknesses, but notice that, you know, some of those strengths, like Made in China 2025, have—you know, that industrial policy investment has paid off. How do you think about China’s weaknesses? What’s driving the industrial access capacity? Do you see all the challenges that China’s economy has as structural or cyclical? Again, I think this sets up a foundation for us to think about how the Trump administration is prosecuting a potential trade war with China. But, Zoe, over to you, if I could.

LIU: Thank you, Rush. Yeah, and thank you for inviting me today to the conversation. And I also want to thank our members for sharing your time with us here today at the Council.

I would—very briefly, Rush, I would say that China’s current economic challenges, I describe it as structural. And the way that I—the framework that I tend to use to describe the Chinese, or understand the Chinese economic challenges, are the so-called four Ds. I’ve written about it. The first D that debt. The second D is demand, including both export as well as domestic consumption. And the third D is demographics. And the fourth D would be decoupling or de-risking. So either way, you do see the four Ds are interconnected. And it’s all linked to the fundamental character of the Chinese economic growth model, at least up until now, which is state led investment and export driven.

Now, we can make the argument to say that the Chinese economy in terms of export dependence, if we measure export dependence in terms of export contribution to GDP. Now, at its peak it’s almost 30 percent. And since then—since after global financial crisis, the number has decreased steadily. But the ratio decreased as a part, not necessarily because the value of Chinese export decreased, but it’s because the share of GDP increased, right? So from that perspective, understandably, you know, when people talk about China’s export dependency in terms of shrinking from—reduced from over 30 percent to stabilize around 18 or 20 percent, that does not necessarily mean the Chinese economy is no longer export driven. And in fact, if we—the export dependency since COVID have actually increased.

And if we also look at it decomposed—you know, what are the—who contributed the most to China’s export growth engine? And for that matter, if Trump’s 20 percent of tariff, with the risk of further escalating, what are the companies that are that are going to be hurt the most? These would be the companies, the so-called small- and medium-sized enterprises in China. Famously, you know, China’s former premier talked about the five, six, seven, eight and nine characters of these companies. Meaning, they actually accounted for—small- and medium-sized enterprises accounted for over 90 percent of the number of companies in China. They contribute to over 50 percent of tax revenue. They contribute to about 80 percent of technological innovation, and 70 percent about employment. So from that perspective, 20 percent tariff is going to hurt these companies the most. Part of the reason is also because they contribute to about 80 percent of Chinese export.

Now, basically a lot of this also means that, well, if these companies compete against each other in the sectors that are prioritized by the government, you ended up having companies across the nation to produce the same—the similar type of product or goods. They ended up having razor-thin margin. So this is a sort of the background story about overcapacity. In other words, although there is no national strategy to flood international market, the nature of industrial planning and the nature of companies competing with each other lead to the so-called overcapacity phenomenon. That not necessarily—not just triggered protectionism from the United States or European Union. If you look at the 198 cases that we face against China, the over-majority of them are actually from developing countries.

DOSHI: That’s very interesting. Yeah, and I think it raises a question now as we begin to consider over the next forty-five minutes of our time together Trump administration’s view. And the reason I thought it was valuable to begin with the macroeconomic question, and the fact that there’s this duality in the view of China, is because what exactly does the Trump administration think right now about China? And how does that inform their approach? Now, Liza, you spent time in the first Trump administration. You were also involved in economic policy in the Biden administration. What is your assessment of how the Trump team is looking at China’s strengths and weaknesses, and how that shapes the Trump administration’s approach economic and technology?

TOBIN: Thank you so much, Rush. And thanks to CFR for having me here.

So you mentioned the word “duality,” which I think is really useful. To answer your question, I think we have to look at it in terms of two levels. There’s the president himself and his views, and then there’s one level down—a Cabinet secretary on down to positions that that you and I filled when we were in the White House, Rush. So, you know, the people that Trump has put in place on economic and national security policy, who have, you know, a stake in the game of how China policy is made, is the most tough on China lineup that you’ve had in decades, at least going back to WTO. So if you look at the people in place at NSC, at the Commerce Department, at USTR, at State, at Treasury, you have this incredibly unified team of hardcore decouplers who really, if you kind of took the president out of the equation, we would be going towards accelerated decoupling in economics and technology.

But, of course, the president is the number one person in terms of how China’s strategy is made and executed. And there, President Trump is clearly a lot less hawkish on China than most of his staff. And so what you’ve seen so far in the first couple months is that his national security and economic team has put out a few policies that indicate an instinct for decoupling on trade, finance, and technology, but most of these decisions do not have to go all the way to the president’s level. The president—and the examples I’m thinking of are putting the rule into place from the Commerce Department banning Chinese-connected vehicles that is now in force. There are the export controls that were sort of the Trump team cleaning up unfinished business of the Biden team going against Chinese server companies. So this was part of this ongoing bipartisan war on Chinese AI companies, kind of taking—

DOSHI: This is the Inspur and Nettrix entity listings? Yeah.

TOBIN: Yes, just a few days ago.

DOSHI: Yeah. Yes.

TOBIN: You know, it would have been a lot bigger deal if you had actually gotten it done two years ago—(laughs)—but I know you tried. (Laughter.)

DOSHI: Inspur was entity listed, as many of you may know, but its subsidiaries, sadly, escaped the entity list. I see Jeremie nodding on the screen.

TOBIN: Right, right, right.

DOSHI: So, Liza, back to you.

TOBIN: Yeah, yeah. So, in any case, there’s a lot that folks like me and Rush can get done at the staff level. But then for anything really big, that does have to have presidential signoff. So China is not front and center right now in President Trump’s policy agenda. He’s been focused on DOGE, the border, restoring U.S. dominance in the Western Hemisphere, Greenland, Canada, Panama. He’s been focused on immigration, a global tariff agenda rather than a China-focused tariff agenda. This could all change on Wednesday if we see a lot of China tariffs. It could change if Beijing puts the kibosh in the Panama Canal deal, which Trump personally cares about a lot. There’s a lot of things that could tip the apple cart and kind of force Trump to focus on China as a problem. But for now, he’s been kind of keeping it on this friendly back burner, saying friendly things about Xi Jinping, clearly in hopes of coming up with some type of a deal, maybe around trade, and TikTok, and other issues. So a lot could change quickly in the next days and weeks.

DOSHI: Well, Liza, you ended with a discussion of a deal. I think it’s worth us now taking some time to consider the possibility of a U.S.-China deal. You know, a few months before the election, I actually had been speculating that President Trump would be more inclined towards doing a deal based on his record in the first term, where famously he offered to lift the export controls on Huawei. He did lift them on ZTE. And he sort of gave a green light on Xinjiang and Hong Kong, all in hopes, in part, that that would actually enable the possibility of reaching a kind of sustainable accommodation on trade.

Now, that accommodation wasn’t finalized. There was a phase one trade deal, but it was never a phase two. Purchases that China was supposed to have made didn’t fully materialize, and the industrial policy concessions that the U.S. wanted never fully were achieved. So maybe now is a chance to try again. And maybe it’ll look very different because many years have passed. So, Jeremie, maybe I’ll turn to you to give us a sense of how you think about a possibility of a U.S.-China grand bargain, or maybe a small bargain. Doesn’t have to be grand. You know, small bargain. Some kind of deal that takes the temperature down, perhaps, and gives both sides something they want in economics and technology. Is that possible? Or are people overestimating the likelihood that something like this is feasible at all?

WATERMAN: Yeah. So I think certainly deals are certainly possible, as you’ve noted, as Liza has noted. And I—but I completely agree also with what Liza said, that ultimately this will come down to what the president wants and what the president is prioritizing. I think it will also come down to the overall atmosphere. As Liza correctly noted, there are a lot of decisions that administrations make that don’t necessarily go up to the presidential level. And those decisions have an impact, on both sides, on the willingness to do a deal, on how they see their equities being addressed, or are their concerns being addressed or not being addressed? The environment either getting better or the environment getting worse.

So, you know, I think—I guess, zooming out for a minute, I think, you know, we often talk about, you know, is a deal possible on technology? I would observe that, you know, technology is certainly—if it isn’t the central—or it’s, I think, arguably, the principal focus or animating issue of U.S.-China competition today. And it’s, of course, incredibly complicated because technology has real implications for national and economic security. And both countries are prioritizing leadership in the technology—in the advanced technology domain. And obviously Made in China 2025 is a case study in point. Does that mean that any—that accommodation is impossible? Does it mean that there can’t be some kind of deal or kind of deal around an issue like TikTok? No. But I—but I think, you know, when we talk about a grand bargain in the technology space, I think I would argue that’s going to be real challenging, pretty unlikely. Never say never, but very, very challenging.

I would note as well that when we talk about national security and deals, obviously we hear a lot of concern from the Chinese government and Chinese businesses about U.S. national security measures from the U.S. government. Certainly we in the business community have our own concerns about how some of those measures are scoped. And we regularly provide input to the U.S. government on measures from outbound investment screening to export controls to sanctions. And certainly, we want those measures—we strongly support national security, certainly, at the U.S. Chamber of Commerce. We understand there are very legitimate concerns that have to be addressed. But we also want measures to be tailored and scoped to the to the specific national security concerns, so as not to disrupt the vast majority of trade, which is really important to both countries and both business communities—certainly our country and our business community and workers and farmers and such.

But if we’re being honest, I think we don’t hear that the Chinese government is putting its national security laws and measures on the table for negotiation. You know, the Great Firewall, which arguably is one of the highest fences and perhaps one of the largest gardens that can be constructed. China’s national security law, cyber security law, data security law, the counterintelligence law, the counterespionage law, the state secret law, and, of course, a very sweeping censorship regime, and now a burgeoning export control regime with extraterritorial reach. All by way of saying that I think, given that the significant challenges and complexity around national security for both sides, I think, you know, it may be advisable for both sides to spend more time on economic issues and some of these, you know, confidence building measures, some of these smaller issues, than on some of the national security issues, which are incredibly difficult and complicated to deal with.

On the economic side, certainly it’s not going to be easy there either. But I think there are areas where China could take actions now—for example, to complete its compliance with the phase one deal—the January 2020 deal. There are areas where China had made commitments to purchase. Obviously, COVID was a disrupter, but we’re years after COVID and there are still unfulfilled areas of the agreement. Not only in the purchase area, but also in the regulatory area. So for example, in the area of patent term extension, the area of ag biotech where China has made commitments over decades on ag biotech. Obviously, there were a lot of issues that were left on the cutting room floor in 2019. So subsidies and state-owned enterprises, some of the forced technology transfer issues, data and cloud policies.

When those issues fell by the wayside, I think we all remember that president—then-President Trump in his first administration, or current president but also then president, made a decision to raise tariffs because the original deal that was being negotiated by Ambassador Lighthizer on behalf of President Trump, kind of, you know, wasn’t going to materialize. The Chinese—

DOSHI: Jeremie, what I’m hearing you say is on the tech side and the economic side, just like last time, a path to a deal is pretty long and winding. It’s not easy to see. I mean, it’s easy to theorize it, but in actuality it sounds like you’re skeptical that we might be able to get there. Is that fair to say?

WATERMAN: Well, I think there are areas, clearly, you know, where there’s—you know, where there are opportunities to improve the environment, right? Where China, again, has made some commitments in the past. There’s the TikTok issue, which the president has prioritized, where a deal may be possible. So there are issues. I mean, I think it really remains to be seen whether—you know, whether there’s a solution to the overcapacity issue, right? And obviously, you know, Zoe highlights the political economy of China and the unintentional nature. I would argue that there are aspects of China’s overcapacity that are unintentional and a feature of the political economy, but we’re obviously decades after vitamin C, and cement, and steel. We were now in the area of legacy—era of legacy semiconductors and EVs, right? And so I think we need to give China credit here that China actually knows what the impact of its political economy can be, and obviously has decided not to take steps to curb some of those aspects of its political economy which tend to really produce tremendous amounts of overcapacity.

DOSHI: Well, thanks, Jeremie. Let me turn to Zoe then on this, and ask you if I could, Zoe, what is the view from Beijing, would you say, about the possibility of a kind of deal on economics, technology, maybe other issues as well? Do you sense, you know, based on your reading of what people are writing in China and the context you have, that there is optimism in China about the possibility of a deal? Do you think that there’s pessimism? Or do they simply want to delay the negotiation as long as possible because maybe no news is good news? How do you think that they look at this play?

LIU: Thank you, Rush, for the question. If I were putting myself in the shoes of Beijing and Chinese policymakers, I would say that reaching a deal, whether it is the grand bargain, or a small bargain, or small deal—reaching a deal is something nice to have, but it is not a must. And the reason is because, A, China has accumulated a lot of experience to deal with escalating trade tensions and potentially escalating of geopolitical risk. Accumulated a lot of experience. And for trade tension, tariffs, this round is not a surprise for Beijing.

And the second reason why I don’t think Beijing is very eager or desperate wanting a deal is also because over the past decade China has reduced its vulnerability against Western economic coercion, including building an alternative renminbi-based financial system. So from that perspective, indeed, I would say, if I were Beijing, and if I look at the Chinese economy through the indicators that Chinese leaders care the most—meaning technology, closing the R&D gap, and things like that—the economy probably is not doing terrible. So from that perspective, I don’t think Beijing is desperate for a deal.

DOSHI: So does the U.S. have less leverage, in your view, now than it might have had in the first trade war?

LIU: I would say that if U.S.—if U.S. policymakers—or, if the Trump administrations think that it could—or, America could force China into a deal, I do not think that is going to happen. After all, you know, think of—think through the lens of Beijing and the case of Panama Canal. A lot of this does not come—is not—to the extent that it becomes a large public embarrassment, and this is not some—this is not the leader of a great power wanting to be treated of. And a great leader do not want to come to a negotiation table with a—

DOSHI: And look weak.

LIU: Exactly, or, for that matter, with his hand tied. And if I can just conclude by saying that, you know, if we look across the board, China realized that, you know, if the United States is withdrawing from a lot of international institutions, and if the United States is actively—or, the current administration is actively damaged—potentially sabotaging the role of the U.S. dollar and sabotaging America’s alliance system, and America is trying to redefine the international order, perhaps China is going to do exactly the opposite. And I think—Jeremie was in Beijing. And I think, you know, the message has been clear. In a lot of ways, the Trump administration offered Beijing, offered Xi Jinping and his cadre ways to walk back some of China’s economic policy missteps without being embarrassed or without having to admit wrongdoing. So from that perspective, if I were Beijing, why am I going to desperate for a deal? I’m not going to. (Laughs.)

DOSHI: I think, Zoe, you bring up a very important point here, which is not just the economic and tech bargaining space, but the question of face in the negotiation. I mean, no Chinese leader can easily come to the table from a position of weakness, after having tariffs raised on them. It’s hard to come to the table and say, oh, please lift them. So maybe it’s impossible for reasons related to not the bargaining space but reasons to politics for there to be an easy deal in the near term. Although, you know, others could see it differently. There’s certainly a lot of unpredictability.

But. Zoe, you concluded with a kind of very sharpest assessment, which was all the ways in which, you know, the leaders in Beijing see the Trump administration as sabotaging itself in ways that might reduce its long-term leverage and competitiveness vis-à-vis China. Now that’s a very sharp assessment, in part because it’s also sharply stated. And I’m wondering, Liza, if I could turn to you. I mean, that’s obviously not an assessment that that the Trump administration, or at least not all of it, would share. They probably don’t see themselves as weakening the U.S. position on net long term. But maybe Beijing sees it differently. I certainly think that is how—I think I would agree with Zoe. That is how Beijing looks at things.

How do you think that the administration squares that? Do they see the possibility that, you know, certain tariff actions against Canada, or against Mexico, or against the European Union, could undermine the kind of collective capacity that might be necessary to push back on the PRC. It might undermine America’s leverage in the long term. How would they think about an argument like that?

TOBIN: Yeah. It’s a great question. Everybody’s eyes, at least the markets eyes, are all on April 2, liberation day. So—

DOSHI: Yes. What are we liberated from? (Laughter.) Tariffs? Bad trade?

TOBIN: I think we’re liberated from trade surpluses that are taken away—taking away American jobs. But, no, I think, having worked in both administrations, they both had their strengths and weaknesses. And I think the Biden administration took a much more balanced approach. And I think that the both the strength and the weakness of the Trump administration was their willingness to consider and to take disruptive action, and to see disruption as kind of tilling the soil for something new that could come out of it. So sometimes you need those disruptive actions and statements to break up bad, old assumptions. And we would encounter this a lot with the Europeans, who kind of hold up the WTO almost as some kind of temple. This theology of multilateral trade that, no matter how much evidence there is that this isn’t working and hasn’t worked for decades, in fact, the WTO has never concluded a successful negotiation round. And yet they cling to it, for understandable reasons. These are smaller economies, dependent on global trade.

Nonetheless, I think the Biden administration and the Trump administration share this internal assessment of the failure of these free trade assumptions. And yet, the Trump administration was willing to go to disruptive lengths to actually do something about it. Now, the question that I don’t think we’ll have the answer to on April 2—it’ll take a lot longer to have the answer—is, will that disruption that we’re going to see on April 2 actually lead to new green shoots coming up later, where perhaps our allies and partners in a few months can kind of sit down and say, OK, we agree with you. This has failed. We now need to develop and build a new system where we’re gradually walling China out—the biggest cheater, the biggest trade surplus country—and building something where democratic market economies can be trading more with each other and less with—

DOSHI: So, Liza, is your argument—is your argument that tariffs on Canada and Mexico could help create a common allied tariff wall against China? (Laughter.) Is that—is that what we’re asking for?

TOBIN: Well, I’ll be very—I’ll be very clear that I’m giving an assessment.

DOSHI: Yeah, yeah.

TOBIN: Certainly—I think there are certainly plenty of people within the national security establishment that are wringing their hands about the Canada tariffs, that think these things are just crazy. You know, I had a conversation with Peter Navarro in 2018 where I was a China analyst—CIA China analyst at the time. I had never really thought about Canadian trade practices in my life, other than—(laughter)—you know, I like to, you know, drive north to buy a few things. You know, like a lot of eighteen-year-olds in college, right? (Laughter.) But, you know, I was a China analyst. I went in and was giving—

DOSHI: You are out of government now, that’s right. (Laughter.)

TOBIN: Was giving him a briefing about Chinese trade practices. And he was eating this stuff up. It’s, like, oh, this is great. This is great. We should get you into brief the president about this. Of course, that never happened. All of a sudden, out of the blue, he was like—he turned to his staff member said, Canada does the same thing, you know. And it was—you know, and it’s true. There’s now stuff on Twitter about 200 percent 300 percent tariffs on American dairy. So I’m not sure if this is some deep sympathy for the Wisconsin cheese farmers, but there—I mean, the point is Navarro’s there. He’s a lot less constrained than he was in Trump one.

And in fact, all of Trump’s trade and economic—or trade and national security advisors are fairly unified in this view that this WTO-led multilateral trading order is irrelevant. It’s broken and irrelevant. And we need something new. We tried to do this. Rush, and I, and our colleagues tried. The Biden effort—Biden administration put in a lot of valiant effort into building the Indo-Pacific Economic Framework. But we were not willing to give more market access. We weren’t willing to give the sticks—I mean, the carrots. And Biden—now the Trump team is only wanting to use the sticks. So I’m not sure which strategy—will the disruptive approach work? Or will it just lead to recession, inflation, alienation of allies? We don’t know yet.

DOSHI: Yeah, it’s a very important—

WATERMAN: But, Rush, can I maybe jump in?

DOSHI: Jeremie, if I may, I do want you to jump in. But I also want to get to our audience.

WATERMAN: OK.

DOSHI: So I’m going to come back to you on two things, Jeremie. Keep ready, because I want to come back to you on this and on the perception from Beijing, since you were just there.

But first, let me go to the audience for questions. We have about twenty, twenty-five minutes left to do that. I’m going to take them in batches to get as many of your questions as possible. I will just say, things we have not talked about yet—and not because we didn’t think of them but because we wanted to let you raise them, potentially—Taiwan, Russia-Ukraine, you know, the Chinese military modernization, space, cyber, and so much more. So with all of that, in the back in the blue jacket. Thank you.

Q: Thank you. Elise Labott. I’m the CFR Murrow press fellow here at the Council.

Thanks for this amazing discussion. I was going to bring up Taiwan. And when you’re talking about a deal, I’m wondering if you could talk about the kind of idiosyncrasies that Trump may not care about are in the deal—maybe, Liz—versus his advisors. It seemed like Trump wants a deal. I don’t know if it necessarily has to be the best deal. He just wants a deal. And whether you think that, as I think a lot of Taiwan watchers are afraid, that he would be willing to be, like, all right, you take Taiwan, give me semiconductors. You know, this kind of little bargain that, you know, may benefit him, but would really benefit the Chinese. Thanks.

DOSHI: Thanks, Elise. Appreciate the question. Let’s see. I think we have Steve here at the center.

Q: Like Jeremie, I’m just back from Beijing this weekend. Have we seen a pivot? So we met with Li Qiang early last week. And the policies that he was laying out suggested that the tariffs are going to come, but we’re going to be prepared, and we’re going to pivot.

The other pivot was we met with Xi Jinping on Friday. A year ago, when we met with him, it was fifteen Americans. This time it was thirty-eight people, fourteen Americans. The rest were from Europe, Saudi, Brazil, Japan, South Korea. And speaking—last time, obviously, 100 percent of the people who spoke were American. This time, one of the seven who spoke were American. And have the Chinese—was the message. And this was immediately on Zhongyang Dianshita, on CCTV. So they published it and they published the text. Were they basically letting us know, we still want you guys to come, but if you don’t come we’re OK?

DOSHI: Steve, we should have put you on the panel. We should have had you come up here and answer questions. So maybe we can turn back to you. Thank you for those insights. You’re asking a question about the pivot, but actually I think that is something people picked up on in the symbolism. And it does seem like the message is, we can go to the Global South. We don’t have to just rely on the U.S. So I will come back to the panel on that too.

One more question from the audience. Right here in the front, Isaac, I think. And then we’ll take right next to Isaac as well. So we’ll take two more.

Q: Thank you. I’m Isaac Stone Fish, CEO of Strategy Risks.

On Elon Musk, do you feel like he is either solely or importantly responsible for weakened policies towards the party? And when he has his almost inevitable fall, do you feel like the Trump administration will become more hawkish to China? Thank you.

DOSHI: OK. And then to your right.

Q: Hi. James Heimowitz, SCMP.

Following up on Steve. I also just got back from Beijing the day before yesterday. Excuse me. A lot of, you know, the sentiment I felt was a new sense of confidence from China, a new sense that, you know, we’re on the right track and America’s got it wrong. And they were circulating among, as Steve said, many of the other countries that were there—Middle Eastern countries, Central Asian countries—asking the question, what does it mean to be an American ally? And this was a piece written by somebody actually from—that I saw, from the Chinese Ministry of Defense, that was widely circulated.

And I’d be curious to understand—and, of course, you understand what’s behind that, questioning what it means. And I’d be curious, from your guys’ perspective, from U.S.-China relations, from the U.S. perspective, how would you answer?

DOSHI: Great questions. So we will take these four and we’ll come back to the audience for another round. But we’ll start with the Elise’s question on Taiwan. Maybe I can turn to you, Liza, on that. Do you—and we talk a lot about a U.S.-China deal in the context of economics and technology. Do you see a possibility that there could be some kind of bargain between the two sides on Taiwan? It would presumably contravene the Taiwan Relations Act, maybe the Six Assurances, but it could happen. What do you think?

TOBIN: I see that as a tail risk. From listening to the president’s statements on Taiwan, I think it fits into the category of, you know, there’s two lenses. One is a perception that the U.S. is spending a lot on Taiwan’s defense, whether or not that’s true. Second is the trade surplus. So Taiwan is a big trade surplus country. And so, you know, he goes into any negotiation with a country with a question of what is their trade surplus, or trade—what is a trade balance—the bilateral trade balance in goods? He cares especially about the goods trade imbalance. And then, how much have we spent on defense, and what percentage of their GDP are they spending on defense? And then he puts pressure to kind of rebalance all those things and get reimbursed from the ally for whatever he perceives we’re spending.

So he has threatened to impose semiconductor tariffs on TSMC. That hasn’t happened yet. And now he has this evidence that this pressure has worked, because TSMC has announced a new $100 billion investment in Arizona, five new fabs, R&D facilities. So that, in Trump’s mind, is evidence that his tariff strategy has succeeded. So I think that does take a little bit of the heat off of Taiwan for now, but Trump will continue to kind of wield this tariff cudgel. And he can say, hey, it’s working in the European case, too. His negotiating strategy is working, because they’re now talking about spending a lot more on defense. And so I think it’s sort of this very business-first approach to are we getting a good deal from this partnership, this business partnership that we’re in with this country? And so far, you know, Taiwan is kind of, like, going in the right direction on that—on that front.

DOSHI: So maybe the way Taiwan has played it makes it less likely they’ll be sold out to Beijing, short term? Maybe that’s the upshot of that analysis.

TOBIN: I see it as still a tail risk, but probably a bit lower. I do think that the antibodies towards that in the U.S. system are very strong. I think Trump might be tempted on that front, but I see it as a as a tail risk for now.

DOSHI: Very interesting. Thanks, Liza. I want to combine the comment and question we got from Steve and James, who were both recently in Beijing in some of these high-level engagements with the PRC. And, Jeremie, I want to come to you, because I know you were also in Beijing recently. And to the extent you can, how do you see Steve’s point that maybe we’re seeing China kind of execute a bit of a pivot away from the industrialized West to the sort of larger Global South when it comes to its exports? I mean, they already are larger portion of Chinese exports now than exports to the developed world. And there’s also the point that we heard from James about this greater PRC confidence. So if you put those two together, is that also what you saw on the ground? Do you find a Beijing now feeling like the wind is more in its sails? Or maybe, the wind has gone out of America’s sails, so on net they feel better about this. How would you look at this?

WATERMAN: So, first of all, I share the same observation—Steve was in the room for those meetings, I was not. But I certainly share the same observation with regard to, in particular, the meeting that President Xi did with foreign CEOs, including U.S. and U.S. CEOs, but obviously only one U.S. CEO was given a speaking role, in a real contrast with the meetings last year. I would say I’m not surprised, obviously. I think—you know, I think going into the China Development Forum I think the sense was that China was going to try to take advantage of the sense that U.S. policy is very much in flux, is changing rapidly, new approaches to allies and partners that we haven’t seen in a very, very long—in generations. And that China would seek to take advantage of that.

You know, I think there was a sense of confidence. Obviously, we see that confidence come through with DeepSeek, with the big animation hit. We see a sense of confidence coming out of China. But I think also a tremendous sense of frustration from Chinese officials that they have not been able to engage with the president and the president’s inner circle just yet, in a very meaningful way. A sense that they really do want to have discussions. That they’re—

DOSHI: Jeremie, can I ask you about that? Why haven’t we seen a meeting between—or, another phone call between President Biden and President Xi? I mean, you mentioned frustration on the Chinese side, but it also might be that they don’t want to take a call from a position of just having been tariffed. What is the reason, do you think, for that—

WATERMAN: I think there are—I think there are multiple reasons. I think, look, this president came in with very much a domestic first agenda. He’s been very focused on the border. He’s been very—I mean, if you listened to the State of the Union, I think China was mentioned six times, five of which were trade. One was Panama. But a very intensely focused—obviously, tariffs part of that agenda. So I think his attention has been elsewhere. I also think, obviously, he asked for a whole series of reports. He asked for his administration to do a stocktaking. Obviously, some of those reports, I think, are coming due tomorrow, are supposed to be delivered to the whole series of them, and then through April.

So I think to expect the president and his administration to engage—but also when there are not political—there are very few politicals outside of the Cabinet who are in place, right? So you have very few politicals across the administration. A couple deputies just got confirmed. I saw Mike Kratsios got confirmed at OSTP. So, again, I think not realistic to have the kind—China wants very much of a bottom up kind of approach, right, where everything is worked on at working levels, senior working levels, and then prepared, and then the two leaders get together, right? So it’s hard to do that when you don’t have a full team. So I think there are a variety of reasons.

I guess what I would say on—you know, on the issue of how comfortable China is, and does China want a deal, does it not want to deal? I go back to where we started, which is this sort of duality. You have a Chinese economy, a macroeconomy, that is not doing very well, at all. But you also have these areas of strength in certain areas of technology and industrial capability, right? Made in China—some of these Made in China 2025 areas. And I think what China needs, obviously, with a tremendous focus on exports now, is aggregate demand. It needs global demand. And obviously some of that demand, in a bilateral sense, has been cut off through tariffs. Tariffs from the first Trump administration, the Biden administration.

But China has—and China has been very open about this—continues to tap U.S. demand, but also demand elsewhere in the world, by offshoring component manufacturing, offshoring other types of manufacturing through transshipment. So I think there’s this big question on the—on the president’s tariff agenda for the Chinese side, is how—you know, depending on how that tariff agenda moves forward and sort of advances, and, you know, what is the real impact on the Chinese economy? And what is the pain threshold for Xi Jinping? I think, obviously, the actions that the president has taken are—we all know, are going to be disruptive to the U.S. economy. So that question is there on the U.S. side as well.

So I think it’s a more complicated—I think it’s a complex question in terms of how this is all going to play out, and where are we going to be in a year, in terms of—in terms of—in terms of deals. And in particular, I didn’t mention tariffs earlier, but, obviously, I think Beijing does have a real interest in—and then other countries. On the point about how other countries are going to respond here. Obviously, with the U.S. tariff wall going up, or with U.S. tariffs going up, a lot of that capacity—a lot of that isn’t going to be going into the—it’s going to be going into the EU. It’s going to be going into Indonesia. It’s going to be going to, you know, Japan, Korea. And we’ve seen these barriers around the rest of the world—to Brazil, right?

And so I think South Korea is going to be more focused—you know, we see the news about China pursuing a trilateral with the Japanese and the Koreans, and asking the EU. But I think a lot of these countries are going to be more focused on their industries, and what China’s capabilities mean for their economies, and their jobs, and legacy semiconductors, and biopharmaceuticals, and AI, and so on and so forth, right? And so I think that’s going to be really interesting to watch in terms of how the rest of the world continues to respond as China continues to move up the value chain and overcapacity persists.

DOSHI: OK. Thanks for that, Jeremie. We didn’t quite come to the Elon Musk question, but we’re going to come back to it in a moment. I want to take a final round of questions from within the room, and then we’ll come back to that. I want to bring in Zoe on some of this question that Jeremy tabled as well about Beijing’s perception of a deal. And if you’re online and would like to raise your hand and ask a question, please go ahead and do so. We have the capacity to call on you and make sure you can be heard in the room here. So is there anybody else in the room who has a question that they’d like to ask? We’ll take another round now. There were more questions earlier that I didn’t get to, so maybe we answered them all. Up here in the front. OK, just give me one minute. We have your microphone right behind you.

Q: I guess I’d direct my question at you and the book that you wrote about, you know, the plan to displace America’s global order. What moves do you think China is going to make that we’re not looking at? Today’s conversation has been almost entirely about China-U.S. But what moves do you see China making elsewhere around the world less obviously to achieve that displacement of American order?

DOSHI: Well, thanks, Ted. I’m not supposed to answer questions, but I’ll make an exception in this case. (Laughter.) So thank you for asking me one. Who else? Here in the table here, on the right.

Q: Debra Valentine.

Can we get one view on U.S.-Ukraine-Russia deal, and what will that do to China’s relationship with Russia, and China’s perception of the U.S., and, obviously, what China will do with Taiwan. And then I still want to know what the U.S. naval strategy is going to be, as we watch the Chinese navy just grow by gazillions, and we’re now down to less than 1 percent of shipbuilding in the world.

DOSHI: Yes. In the next five years, China will build sixty-five vessels. It’ll achieve a naval strength of, I think, 230, to the U.S. 300. So about almost, yeah, quite a significant increase. We have more question from online.

OPERATOR: We will take our next question from Susan Shirk.

DOSHI: Oh, hi, Susan.

Q: Hi, there. Nice to see everybody.

I was in Beijing for a month-plus, too. So I share this perception that it’s quite different compared to a year ago, and there is more confidence just by virtue of the comparison to what’s happening in the United States. People say, you know, China doesn’t really—nothing has really changed in China, but everyone from the very top to the bottom feels better about ourselves by comparison.

But a question about the Trump administration’s delay in getting moving in talking to China and negotiating. Isn’t part of this that nobody actually knows what the China policy is yet, because of this gap between the president’s views and the views of the people surrounding him, as Liza highlighted? And they would have to figure out what they actually want to achieve, or, you know, a little—be concrete about their goals, so that they could get things started with the Chinese side.

It actually reminds me a little bit of the beginnings of the Biden administration, because I remember how I was frustrated that the Biden administration didn’t move more quickly. And there was, of course, a focus on shaping the environment around China, rather than actually talking with China. So some of the—some of this might be something about the start of new administrations. But on the Chinese side, I think they’re frustrated because they would like to get things started. They certainly prefer to an all-out trade war. But on the other hand, they are a little bit enjoying the fact that all these other countries in the world are coming to them. They don’t really have to do anything and they just can improve their relations with other countries, while America alienates them.

DOSHI: Thanks, Susan. That sounds like it dovetails well with Steve, and the observations from James, as well as from Jeremie. So appreciate that insight. And we’ll turn to the panelists for their reactions in a moment. We will take one final question from either in the room, if we have it, or online, if we have it. We have one in the back here. And do we have one more online? No. So that’s it for online. In the back.

Q: Oh, thank you. Ken Kraetzer, CaMMVets Media.

I just thought about how China views the U.S. military buildup. I addressed it a little bit, but the U.S. Navy is building ships, the Army’s positioning forces, others to deal with Australia on submarines. And then the U.S. just announced something, a new headquarters for the military in Japan. How does that affect what China is doing, and the trade view that you’re discussing? Thank you.

DOSHI: Terrific. And, you know, this last set of questions has been really focused on security, rather than just the economics, which is wonderful. And it’s a good place for us to end. So let me, in the few minutes we have remaining, see if any members of our panel want to handle this larger question. Maybe, Liza, I might turn to you on the security elements here. How do you think that China views U.S. efforts with allies and partners to build deterrence? And, briefly, if you could, maybe thirty seconds, do they—do they view that as complicating their regional freedom of maneuver? And then, I don’t know, maybe if you want to weigh in on the Ukraine question too, and how China might feel about being cut out from a discussion between the U.S. and Russia on Ukraine. So can start with you, Liza, and then, Zoe, I want to come to you on the larger deal thing.

TOBIN: Sure. I mean just briefly on, you know, Secretary Hegseth announcing the elevation of USFJ, something, again, that Rush and his colleagues in the Biden administration, after I had left, got in motion. And the question was, is the Trump administration going to overturn this because of DOGE? You know, are they going to cut this as a cost-saving measure? And the answer is no. So there’s a lot of continuity that’s kind of—

DOSHI: Continuity on allies.

TOBIN: You know, and so I do think we’ll continue to see pressure on Japan because of their trade surplus. But at the same time, the U.S. is kind of taking actions to shore up support for Japan and Taiwan. I want to address Susan’s question quickly, because—

DOSHI: We only have about a minute left, maybe two. If my team lets me go three minutes longer, is that OK? Can we do just three minutes? Two minutes. I got two minutes, OK. (Laughter.) So I can—

TOBIN: Yeah. I mean, just don’t underestimate how little Trump’s team—you know, Rush’s and my colleagues in the NSC and State and Commerce—actually value sitting down and talking with the Chinese. I mean, it almost never produces anything of substance. And so they’re not really going to be, you know, making that a high priority. That will be, you know, if Trump really wants to get a phone call or go visit China, they’ll get it done. But it’s not going to produce anything of substance.

DOSHI: Zoe, any final thoughts from you on any of the things that we’ve discussed, including these questions?

LIU: I guess in a lot of ways the similarities between the United States and China are greater and greater on a daily basis. (Laughter.)

DOSHI: On the econ and tech side, do you mean, or in other—in other dimensions? (Laughter.) Do you care to elaborate, Zoe, in the thirty seconds we have left?

LIU: In terms of the leadership style, if I may say that. (Laughter.) And in terms of how companies—we tend to think that the Chinese used to be not shy about telling how companies should behave. That I feel like we are very much like them these days.

DOSHI: And that’s interesting. And, Jeremie, maybe from you very briefly, any last words before we wrap?

WATERMAN: I guess one thing we just didn’t—we didn’t have really time to get into is the overall business climate in China. Obviously, China continues to be a very important market for many U.S. companies. It is—obviously, its level of importance has changed somewhat. All the surveys, I think, show—whether it’s the American Chamber, or the Japan Chamber, or the EU chamber, and so forth—show that there’s been a decline in terms of the prioritization of the multinational business community on China. But it’s still very important. And obviously, you know, I think some greater stability in relations, getting the two governments together to start talking about what is possible sooner rather than later, I think would be helpful, and as needed, so.

DOSHI: Thanks, Jeremie.

All right, and very briefly on the question of the military buildup. The answer I have for you is that Japanese and Korean capability in shipbuilding is critical for the United States. It’s possible—there are challenges with laws and with unions—but the only path to American scale in the period ahead is with others. And that’s why I worry about the trade war.

And with that, I want to thank all of you for joining us today. And if we didn’t get to your question, I apologize for that. Time was scarce. But many of us will be here for a little longer, if you’d like to talk to us individually, OK? Hope you have a great rest of the day. Thanks. (Applause.)

(END)

This is an uncorrected transcript.