Risk 3: US-China breakdown

The détente established by presidents Joe Biden and Xi Jinping at Woodside in November 2023 kept US-China tensions contained last year. Donald Trump's return to office will break this stability, unleashing unmanaged decoupling in the world's most important geopolitical relationship and increasing the risk of economic disruption and crisis.

The relationship will change trajectory because of a combination of factors, most critically trade policy. Trump will move to announce and implement new tariffs on Chinese goods shortly after his inauguration—possibly within weeks—with the intention of wielding them as a cudgel to extract a deal from Beijing. While falling short of his threatened 60% blanket tariff, the top rate on some products will quickly increase to or beyond 50%-60%, and the average applied rate on all Chinese imports will roughly double to around 25% by the end of 2025. Even a more moderate scenario—where top rates rise to just 40% if Treasury Secretary-designate Scott Bessent prevails over trade hawks like US Trade Representative Jamieson Greer—would cross Beijing's red lines.

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