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In the first few months of 2026, the Trump administration has embarked on military interventions in Iran and Venezuela and threatened possible annexation of Greenland. Meanwhile, German Chancellor Friedrich Merz’s February trip to Beijing followed on the heels of the first state visit to China by a British leader in eight years. As the United States and China prepare for their much-touted summit in late March, Beijing is weighing its options in the face of recent American actions and the new “Donroe Doctrine.”

Chinese foreign policy remains driven by the core priorities of preserving regime security and consolidating influence in its geographic neighborhood. This translates into goals of getting the United States to deemphasize East Asia and splitting alliances to limit America’s ability to marshal long-term coalitions to counter China’s actions.

The second goal requires no sweeping change — China has long sought to draw key American allies away from Washington. U.S. President Donald Trump’s frequent belligerence is a fairly obvious new opportunity on this front and, indeed, Beijing has dangled carrots to pull other countries closer. At the same time, aside from the usual strident criticism of the illegality of American actions, its posture has been relatively cautious thus far.

If China wants to achieve the first, more ambitious goal, it will have to switch from defense to offense in economic statecraft. Beijing could take a more radical approach, seeking an agreement with the United States, say concerning Latin America and East Asia. This would be an attempt to enhance Trump’s amenability to its own core interests — in other words, to pull Washington away from its traditional partners. China may have more confidence to pursue such a bold policy given its previous success forcing America to climbdown from tariffs.

A forward-leaning shift could be strategically framed by Beijing as being aligned with rather than hostile to U.S. goals. Many Chinese experts see Trump’s assertion of the “Donroe Doctrine” and the latest U.S. National Security Strategy as a “retreat to advance”:  a way to conserve costs while maintaining hegemony and waging a protracted “war of attrition.” But Washington’s renewed desire to assert more control over the Western hemisphere and the ongoing flux in its Asia policy could be exploited by Beijing to encourage America to step back from East Asia, while continuing to entice American friends outside the Western Hemisphere. If so, this would only entrench growing worries about America’s unreliability as a global power and undermine U.S. security and economic interests in the Indo-Pacific.

Driving Wedges

Unsurprisingly, China is already contrasting its consistency in economic policy with America’s capriciousness. China is portraying itself as upholding international norms and promoting development, while the United States plays destabilizing power politics. The next logical step is to peel away Washington’s supporters.

To be sure, China’s economic diplomacy remains imperfect — many countries are protesting an influx of low-cost Chinese goods. But Beijing is able to cushion these bumps with sweetened deals ranging from Chinese battery manufacturer CATL’s partnership with multinational car company Stellantis to State Grid Corporation of China’s buildout in Brazil to China Railway Engineering’s Tanzania-Burundi line. At the multilateral level, grand sounding programs such as China’s Global Development Initiative, embedded in the United Nations’ framework, add currency to Beijing’s claims of “win-win” cooperation and partnership with developing nations. And the United States has shrinking credibility to criticize harmful Chinese  behavior, given its own increasing mercantilism.

Economic diplomacy in strategically valuable areas such as the Persian Gulf — Saudi Arabia led all nations in new Chinese construction activity in 2025 — can produce dividends for China and complicate U.S. security partnerships. China’s economic presence has gone beyond buying oil, although that is still a major component. Beijing quickly aligned its activities with Riyadh’s Vision 2030, which aims to diversify the Saudi economy. Chinese engineers are building billions of dollars of renewable energy projects. Chinese companies such as telecommunications giant Huawei are involved in developing AI infrastructure in Saudi Arabia and the United Arab Emirates, even as Trump agrees to sell advanced AI chips to both.

Other prime targets are outright U.S. allies. Offering advantageous commercial deals would help to chip away at American leadership and limit sustained United States-led opposition to Chinese behavior. China’s notable economic statecraft successes center on disrupting anti-China cohesion in regional groupings such as the Association for Southeast Asian Nations and the European Union. Both U.K. Prime Minister Keir Starmer and Canadian Prime Minister Mark Carney received a warm reception in Beijing during their January visits, which were lauded by Chinese state media as pivotal turnarounds to mend fences and even achieve “strategic autonomy” from the United States. In exchange for China lowering tariffs on Canadian canola products, Canada agreed to allow imports of Chinese electric vehicles, which had previously been subject to 100 percent tariffs under coordinated American and Canadian policies.

These visits have not produced significant economic benefits nor moved the needle on issues that Europe and others care about, such as Ukraine. If Ukraine is off the table, the European Union would like a reprieve from China’s assault on their manufacturing, while Canada wants Chinese energy investment. In contrast, Starmer’s visit produced relatively modest economic outcomes — visa-free travel to China, reduced import duties on Scottish whiskey, and a few billion pounds of investment and export deals. During a Dec. 2025 state visit, French president Emmanuel Macron failed to secure a long-anticipated deal for 500 additional Airbus jets, possibly due to Beijing’s desire to maintain leverage for trade negotiations with Washington, given Trump’s interest in selling more Boeings. As consolation, Beijing subsequently agreed during Merz’s February visit to purchase 120 planes.

Even if such economic diplomacy is only moderately successful at creating goodwill in the short to medium term, this may be sufficient to derail U.S. alliance coordination and stymie broader coalition-building against China. Furthermore, strategic use of economic inducements buffers Beijing’s periodic use of economic coercion. Protecting existing trade and investment flows while the United States disrupts them, offering comparative diplomatic reassurance, and dangling future promises of trade and investment keeps governments and companies coming back rather than diversifying away from China. As a case in point, China’s recent escalation in its use of rare earth export controls — hitting multiple critical sectors that left corporations worldwide scrambling to minimize supply chain disruptions — does not seem to have dissuaded European leaders seeking an audience with General Secretary Xi Jinping.

Then why has Beijing not gone further, why not offer bigger carrots to try to win over American friends? For one, China perceives that it has the upper hand as it is, with European heads of state and business leaders lining up in hopes of warmer ties. Additionally, Chinese strategists presumably see these countries as more interested in transactions than realignment toward Beijing. And there could be a third reason, made more plausible under the second Trump administration: the possibility of succeeding by focusing on the biggest prize.

An Informal Grand Bargain?

Trying to pull away American allies would unavoidably take multiple forms and lead to differing results. The simpler approach is to pull the United States away from its allies, or rather pull the United States toward China’s view of one or more of its core interests. To make this concrete, an obvious proposal is a partial Chinese withdrawal from Latin America in exchange for a lesser American role in East Asia. This version of a grand bargain is more plausible than a decade ago, as isolationists are more influential in the Republican party and typically emphasize Latin America as “our backyard.”

The first obstacle for the next few years at least, is Trump does not care about grand strategy. There arguably already are grand strategic shifts occurring due to his Presidency but, for Trump to actively promote these changes, he must see commercial gains. To be feasible and valuable, a deal must feature Chinese statecraft beyond the standard purchase of soybeans, energy, and aircraft.

Since  Latin America has become a higher American priority, China could offer to reduce its footprint there. This coin has two sides: Beijing has a range of concessions it could possibly make because it holds a variety of economic assets in the region, some hard-won. The two threads running through most of these assets are commodities, chiefly metal ores, and technical capacity.

China is the world’s top exporter and top commodities importer. The former means Latin America is not important as an export destination. Mexico led the region in receiving goods from China in 2025 at $89 billion (some ending up in the United States), but this is within a Chinese goods export total of $3.77 trillion. While trade and investment statistics are distorted by classification of Hong Kong as an external customs port, it’s unlikely a disproportionate amount of goods pass through Hong Kong to Latin America. The import side is more interesting. Brazil’s $116 billion in goods exports to China are 4.5 percent of the latter’s total. The top products are no surprise — soybeans, ores, and mineral fuels. Chile is a distant second in the region at $41 billion, also led by ores.

Brazil is the dominant recipient of Chinese investment in the region at $79 billion, followed by Peru at $29 billion. (Large numbers for Mexico or others usually stem from announcements by local officials with little basis.) Energy draws the most money in Brazil, metals does in Peru. China also builds locally without owning. Here Venezuela and Argentina seem to vie for the lead, but the larger contracts were some years ago.

China’s economic relationship with Brazil is too extensive to simply abandon. Brazil provides agriculture, energy, and metals — a broader swathe of strategic sectors than others. Brazil is not the only country with Chinese investment in power grids, but State Grid’s position there sees approximately $15 billion invested and more on the way. China could possibly give up on either Chile or Peru as a major partner, but retaining one would be necessary for copper supply. Since Beijing’s pattern is to try to protect its access by building out infrastructure, such as roads and rail, the deepwater, Chinese-controlled megaport at Chancay makes Peru the more likely “keeper.”

Everything else could be on the table. Transshipment through Mexico to the United States of Chinese goods, either via stamps in a warehouse or China-supplied and owned facilities in Mexico, could be stopped. Beijing could end its contestation of Panama Canal ownership. While Venezuela has not been an important partner for years, China could offer to assist in restoring energy exports through investment for minority ownership of ventures controlled by American firms. It could curtail relationships with much of the rest of Latin America.

Those actions would be easily tolerated in Beijing. China signaled its continued geostrategic interest in the region in December, but that may be a marker rather than a red line. The muted response to the United States’ capture of Venezuelan President Nicolás Maduro suggests that Beijing’s “all-weather strategic partnership” with Venezuela (the highest tier of China’s bilateral partnerships) had become a fair-weather partnership. The implicit devaluation of diplomatic ties to Latin America would be acceptable if it came alongside a meaningful and sustained American pullback in China’s own backyard. From the Chinese side, anything credibly reducing U.S. ties to Taiwan is worth discussing.

Trump would need to do more than just float the possibility of a grand bargain. Achieving a partial or implicit grand bargain would be complicated and conditional. The 2025 National Security Strategy continues to view China as a core competitor, and the United States is unlikely to openly cede to Beijing in East Asia. But the administration’s interest in retrenchment from the Asia-Pacific, or at least a shift in the traditional security posture, its tendency to view Taiwan as a transactional chip rather than a vital partner, and Trump’s enthusiasm for dealmaking with China presents a unique opportunity to shift the playing field. At the moment, at least, another round of embroilment in the Middle East adds to pressure on the United States to draw down in East Asia, as seen in a possible shift of missile defense assets.

On the Chinese side, Beijing would want to maintain access to critical economic inputs from Latin America. But most of its economic interests and diplomatic engagements in the region are not vital, and many are ultimately designed to serve China’s core interests, including over Taiwan. Nor does any partial grand bargain require China to abandon global ambitions, which largely center on either enticing or pressuring countries to fall in line with these core interests rather than providing a genuinely positive vision of the international order.

Details would be vital. If formal acknowledgement of Beijing’s claims to Taiwan remains out of reach, slashing American arms sales or defense commitments would be steps toward that goal. Beyond Taiwan, Beijing would be interested in paring back U.S. alliance relationships with Japan and South Korea or reducing America’s contestation of Chinese territorial claims in the South China Sea.

The process of securing a shared understanding is uncertain. If Trump and Xi start down this road during one of potentially four 2026 meetings, who would be the American interlocutor? Vice President JD Vance’s lack of experience may leave him unable while Secretary of State Marco Rubio may be unwilling. Officials with less political heft may not be worthwhile. The present Congress’ unwillingness to challenge Trump is intriguing for Beijing. Yet even if future sessions accept foreign policy as the president’s prerogative, this is a multi-year process. President Trump cannot guarantee the cooperation of his successor — can he bind the United States to some extent in 2029 and beyond? Is there a way, for example, to make future arms sales more difficult? This would make China ponder concessions in America’s “backyard.”

Such questions would have been prohibitively risky for past Chinese leaders. The safer, easier path is to coax a few more American allies to take a few more steps away. But Xi is not always minded for the safe path and faces a slowly ticking clock. Even creating uncertainty in Taipei about the American commitment has value in Beijing. A dealmaking American president aggressively disinterested in rules and norms combined with a partial turn toward isolationism in the Republican Party  represents an excellent opportunity to burnish Xi’s legacy.

Any approximation of a grand bargain with the United States must have Taiwan at the center. If the United States is emphasizing the Western Hemisphere, China could make economic offers that go beyond purchases. An acknowledgement of America’s preeminence over the Panama Canal, Mexico trade, and regional initiatives would not challenge China economically and might become worthwhile politically. At the least, Beijing could nudge America along the slow road of retrenchment from the Asia-Pacific the Trump administration is already scouting.

What China Has Waited For?

American behavior in 2025 and 2026 practically shouts “there’s a chance!” at Beijing. China still must make tricky decisions, though. Is there more opportunity in engaging Washington or countries that America is alienating? How can relationship changes become durable? And of course, what to offer? To date, Xi has been cautious. But if he sees this as part of what Chinese leaders like to refer to as “great changes unseen in this century,” China certainly has the economic assets to do more to modestly separate the United States and its allies.

Audrye Wong, Ph.D., is nonresident senior fellow at the American Enterprise Institute. Her research focuses on China’s economic statecraft, propaganda and disinformation campaigns, and foreign influence operations. Her book Subversion and Seduction: China’s Economic Statecraft is forthcoming at Oxford University Press.

Derek Scissors, Ph.D., is a senior fellow at the American Enterprise Institute. His work focuses on Chinese and Indian economic performance and U.S. economic relations with Asia. He is also chief economist for the China Beige Book, a large corporate survey, and author of The China Global Investment Tracker, a public dataset on Chinese investment and construction around the world.

Image: Presidencia Perú via Wikimedia Commons