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Trump unexpectedly held off on tariffs on China

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US, China both want negotiations rather than fresh

tensions

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China sees chance to unwind Biden administration export

controls

By Joe Cash and Xiuhao Chen

BEIJING, Jan 21 (Reuters) -

Donald Trump unexpectedly held off tariffs on China on his

first day back at the White House and did not single it out as a

threat, raising the prospect of a rapprochement as both sides

look to gain from each other rather than rain harm on an

adversary.

In a speech after his inauguration, the U.S. president

refrained from mentioning China, its erstwhile opponent in a

previous trade war, even as he said tariffs would make the

United States "rich as hell", leaving the door open for fresh

negotiations with the world's second-largest economy.

Trump also delayed the ban on China-owned short-video app

TikTok, but in an unprecedented move, suggested that the U.S.

should be a half owner of TikTok's U.S. business in return for

keeping the app alive, saying the company could be worth

hundreds of billions of dollars.

As Trump begins his second term, Beijing and Washington find

themselves needing a new roadmap to advance their goals and

guard their interests, analysts say, although previously

unresolved issues such as the 2020 trade deal could jar the

currently cordial undertones.

During his first term, Trump quickly struck up a

relationship with Chinese President Xi Jinping. Both men

lavishly hosted each other in Florida and Beijing. But that did

not stop ties deteriorating into a trade war that unleashed a

series of tit-for-tat tariffs and uprooted global supply chains.

Neither side appears interested in picking up where they

left off, however, with signs pointing to the negotiation table

instead.

"Trump wants a deal. Otherwise, he would have shot up China

on day one," said Alicia Garcia Herrero, chief economist for the

Asia Pacific at Natixis.

"He ran a campaign which was very aggressive towards China,

and then on day one shied away from it."

"China wins because their tariffs are going to be limited.

Because they are going to offer Trump whatever he needs to do a

deal. Financial services? The renminbi? You want a stronger

renminbi? Sure, perhaps on a temporary basis," she added.

Another trade war would find China much more vulnerable than

when Trump first raised tariffs in 2018, as it grapples with a

deep property crisis, weak domestic demand and 16% youth

unemployment, among other challenges.

Chinese stocks were volatile on Tuesday as investors

struggled to make sense of Trump's plans for China.

Last week, Xi and Trump agreed on a phone call to create a

strategic communication channel on "major issues".

The 47th U.S. president also said he could travel to China

as soon as this year.

CHINA HAWKS

Hurdles could come from elsewhere, including Trump's inner

circle.

Marco Rubio, a known China hawk, was confirmed as Secretary

of State shortly after the president was sworn in for a second

White House term.

But other members of Trump's administration may have

divergent views on China.

Elon Musk, appointed by Trump to lead an advisory body

aimed at creating a more efficient U.S. government, has

extensive business interests in China and spent years

cultivating close ties with the Chinese leadership as Tesla's

CEO and might also want to weigh in on China policy.

Analysts say Trump will see himself as America's top

diplomat and will not look to rely on Rubio, who is still under

sanctions that China imposed in 2020, or his picks for commerce

secretary or trade representative.

"The concentration of power by Trump is unprecedented in

recent U.S. history. He may be the only one China can speak to

from a practical perspective," said Bo Zhengyuan, a

Shanghai-based partner at consultancy Plenum.

"But it depends how much Trump can move inside the U.S.

system, because the consensus has already formed that China is

the U.S.' No.1 adversary."

If pragmatism holds, there is an opportunity for China to

talk Trump into unwinding export controls that the Biden

administration had introduced to curb China's capability in key

technologies such as semiconductors, analysts say.

"Trump is a businessman at heart, his considerations are

more pragmatic, he is not interested in ideology," said Wang

Dong, an international relations professor at Peking University.

"Other problems, like geopolitical issues, the Taiwan

question, are all secondary to Trump," he added, noting the

self-governing island, which Beijing claims as its own, did not

come up in his inauguration speech.

"We will see whether the U.S. will return to a more

pragmatic and rational state, so that both sides can further

enhance China-U.S. relations and return to the track of healthy,

stable and sustainable development," Wang said.

"If this can be done, we can even compare it to a 'Nixon

2.0."

Former U.S. President Richard Nixon visited Beijing in

February 1972 at the height of the Cold War, paving the way for

the establishment of formal diplomatic ties and China's return

to the international arena.