• The Biden administration reopened key diplomatic channels with China on issues like climate, security, and the economy, though progress is limited on overcapacity and Russia support.
• A Trump return could disrupt these efforts, favoring unilateral actions like tariffs.
• Economic tensions persist, with the U.S. pushing China to address overproduction and financial risks, while both countries stress the need for financial stability.

Economic discussions between the U.S. and China, reestablished under President Biden's administration, are facing an uncertain future as former President Donald Trump prepares for a possible return to the White House. These high-level talks, which have been a cornerstone of Biden’s strategy to address U.S.-China tensions, could diminish or disappear entirely if a Trump administration resumes its tougher, unilateral approach toward Beijing.

Diplomatic Channels Revived by Biden Administration

Since taking office, President Biden has repaired diplomatic channels that had disintegrated under Trump’s presidency. By 2017, the U.S. and China had over 90 formal communication pathways, but these dwindled to nearly zero under Trump, who saw these mechanisms as ineffective. In contrast, Biden restored around two dozen high-level channels in recent years, covering topics such as economic policies, climate change, and security issues. Treasury Secretary Janet Yellen and Chinese Vice Premier He Lifeng even announced two economic and financial dialogue channels to tackle shared concerns like anti-money-laundering efforts and trade imbalances.

These dialogues have allowed Washington to address significant issues, such as China’s industrial overcapacity and its economic support for Russia. Treasury Undersecretary Jay Shambaugh, who has led seven rounds of talks with Beijing, emphasized that such discussions have provided an opportunity to press China on critical matters, including excess manufacturing capacity that disrupts global markets. However, he has also acknowledged that progress has been limited, saying, “We don’t think they’re moving far enough.”

Trump’s Return Could Signal Major Shift

If Trump returns to office, analysts predict a drastic shift in U.S.-China relations. Trump’s team has historically dismissed formal diplomatic proceedings, viewing them as futile exercises that allow China to avoid meaningful policy changes. Trump’s spokesperson, Karoline Leavitt, recently reiterated his administration’s tough stance, stating that “the American people elected President Trump to stand up to China” through measures like enforcing tariffs.

Chinese officials, accustomed to structured diplomatic exchanges, are wary of Trump’s unconventional methods. Despite extending an invitation to Chinese President Xi Jinping for his inauguration, Trump’s team has reportedly made it clear that they prefer direct interactions with Xi’s top aides rather than working through standard diplomatic channels. This approach has left Beijing uneasy, with one insider remarking, “Don’t they know how China works?”

Economic Dialogue Highlights Strains

Economic tensions remain at the forefront of U.S.-China relations. During her visit to China earlier this year, Treasury Secretary Yellen warned that Beijing’s massive increase in manufacturing capacity has destabilized global markets. Overproduction of goods like steel and electric vehicles has led to a flood of cheap exports, prompting many countries to impose tariffs. U.S. officials have repeatedly urged China to scale back its industrial output and boost domestic consumption instead, but progress has been slow.

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Shambaugh and his team have also used recent talks to raise concerns about Chinese firms supporting Russia’s military production. In response, the U.S. is drafting sanctions aimed at isolating certain Chinese banks from the global financial system. Shambaugh stated, “Our Chinese counterparts recognize that financial transactions carry significant sanctions risks for their institutions.”

Financial Stability a Shared Concern

Despite tensions, both nations acknowledge the importance of maintaining financial stability. Brent Neiman, a senior Treasury official, highlighted how U.S.-China dialogues have allowed experts from agencies like the Federal Reserve to collaborate on protecting the global financial system. These discussions have included “deep dives” into scenarios such as a major bank failure in either country, underscoring the interconnectedness of their economies.

Beijing’s Predictable Approach vs. Trump’s Unpredictability

China’s leadership prefers predictable, protocol-driven diplomacy, which minimizes political risks for its officials. The lack of backchannel communication with the Trump team has left Beijing uncertain about his potential strategies. Observers note that Trump’s use of tariffs could either drive a new trade deal or further decouple the U.S. economy from China’s.

Beijing has expressed frustration with Trump’s departure from established norms, including his preference for bypassing formal channels. However, some experts argue that direct engagement with Xi’s top officials, while unconventional, could provide clarity on key issues. Still, this approach risks alienating Chinese leaders who rely on structured processes to maintain stability within their government.

Future of U.S.-China Relations

As Trump positions himself for a potential return to power, the future of U.S.-China relations hangs in the balance. Shambaugh expressed hope that any incoming administration would continue the current dialogue framework, which he believes is essential for defending U.S. workers and businesses from China’s policies. However, political analysts, like Ian Bremmer of Eurasia Group, remain skeptical that Trump would maintain these channels, given his previous aversion to formal diplomacy.

Meanwhile, Chinese officials are preparing for various scenarios, but their reluctance to deviate from established processes could complicate efforts to adapt to Trump’s unpredictable style. For now, the only certainty is that the U.S.-China relationship will remain a critical—and contentious—issue in global affairs.

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