As the Trump administration escalates tariffs on China, the world’s largest economies are on the verge of a superpower standoff reminiscent of the Cold War era.

What Happened: A recent report in the Wall Street Journal suggests that Chinese President Xi Jinping is concerned that the growing trade tensions with the U.S. might lead to China’s isolation, akin to the Soviet Union’s during the Cold War. Despite the perceived global isolation of President Donald Trump, China’s domestic economic woes put it on the defensive.

On Tuesday, Trump increased tariffs on China, amid its role in the U.S. fentanyl crisis. This move caught Chinese officials off guard, who are still trying to navigate their relationship with the unpredictable US leader.

China, in its attempt to redefine the global order, now faces a setback. Xi’s looming concern is that trade restrictions and sanctions could isolate China, mirroring the Soviet-era scenario. The consultants around senior Chinese officials have revealed that Xi fears “China could get isolated like Moscow”

Despite the escalating trade pressures, Beijing has set a GDP target of about 5% for 2025, signaling its expectation that the Chinese economy will withstand the intensifying trade pressures. A Chinese Foreign Ministry spokesman stated, “If war is what the US wants, be it a tariff war, a trade war or any other type of war, we’re ready to fight till the end.”

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Why It Matters: Trump’s “America First” policy has become a major cause of concern for Beijing because it aims to dismantle the trade norms established by the World Trade Organization (WTO) in the mid-90s. It is due to these norms that China dominated global markets with low-cost exports while restricting foreign access to its domestic market.

China’s concerns over being cornered manifests as a forceful response to Trump’s tariff increases, which included reciprocal tariffs on selected American goods, sanctions on U.S. companies, and plans to file a complaint with the WTO. Sources told WSJ that the U.S. may pressure China to implement fundamental economic reforms, a proposal that Xi is unlikely to accept.

Meanwhile, a potential military conflict between the U.S. and China cannot be completely ruled out. Former Congressman and Head of Defense at Palantir Technologies Inc. (NASDAQ:PLTR), Mike Gallagher has raised alarm over Beijing’s military intentions, stating that the U.S. is failing to adequately prepare for potential conflict.

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