China Weighs Options as US Navigates War in Iran and Shifts Global Strategy

As the United States grapples with a war in Iran and pursues a more assertive foreign policy under President Donald Trump, China is carefully calibrating its response, seeking to both protect its interests and potentially exploit emerging opportunities. Beijing is weighing how to navigate a landscape marked by American military interventions in Iran and Venezuela, and a renewed focus on the Western Hemisphere, while simultaneously attempting to draw allies away from Washington.

China’s Core Priorities

Chinese foreign policy remains centered on preserving regime security and expanding influence within its geographic neighborhood. This translates into a desire to diminish the United States’ focus on East Asia and to weaken American alliances, limiting Washington’s ability to build coalitions against China’s actions. Recent developments, including the delay of President Trump’s planned trip to China, underscore the shifting dynamics at play.

Economic Statecraft and the “Donroe Doctrine”

China is increasingly employing economic statecraft to achieve its goals. Beijing is contrasting its consistent economic policies with what it portrays as American instability. This strategy involves offering economic incentives to countries, ranging from partnerships like those between Chinese battery manufacturer CATL and Stellantis, to infrastructure projects like those undertaken by State Grid Corporation of China in Brazil and China Railway Engineering in Tanzania and Burundi. These initiatives are framed as “win-win” cooperation, particularly through programs embedded within the United Nations framework. The ongoing war in Iran is further complicating the geopolitical landscape.

Chinese strategists view Trump’s “Donroe Doctrine” and the latest U.S. National Security Strategy as a potential opportunity. Some interpret these policies as a “retreat to advance,” allowing China to encourage the United States to reduce its presence in East Asia while simultaneously enticing American allies elsewhere.

Driving Wedges and Economic Diplomacy

China is actively working to peel away Washington’s supporters through economic diplomacy. While facing challenges like protests over an influx of low-cost Chinese goods, Beijing is cushioning these issues with sweetened deals. Its economic presence in strategically important regions, such as the Persian Gulf – particularly Saudi Arabia, which led all nations in fresh Chinese construction activity in 2025 – is designed to complicate U.S. Security partnerships. China’s engagement with Saudi Arabia extends beyond oil purchases to include billions of dollars in renewable energy projects and involvement in developing AI infrastructure. The economic consequences of the war in Iran are rapidly unfolding, prompting the US to seek assistance from global powers.

Recent visits by U.K. Prime Minister Keir Starmer and Canadian Prime Minister Mark Carney to Beijing, lauded by Chinese state media, demonstrate China’s efforts to mend fences and achieve “strategic autonomy” from the United States. Canada, for example, agreed to allow imports of Chinese electric vehicles in exchange for lowered tariffs on Canadian canola products.

An Informal Grand Bargain?

A more ambitious approach for China could involve seeking an informal grand bargain with the United States: a partial Chinese withdrawal from Latin America in exchange for a reduced American role in East Asia. This is becoming more plausible given the growing isolationist sentiment within the Republican party and the emphasis on Latin America as “our backyard.”

However, the success of such a bargain hinges on several factors. President Trump’s lack of interest in grand strategy and his focus on commercial gains present both challenges and opportunities. China could offer to reduce its footprint in Latin America, potentially curtailing transshipment of goods through Mexico, reconsidering its contestation of Panama Canal ownership, and offering assistance in restoring energy exports from Venezuela.

What China Has Waited For

American behavior in 2025 and 2026 has created a favorable environment for China. The question now is whether to focus on engaging Washington directly or on strengthening ties with countries that are becoming alienated from the United States. Any approximation of a grand bargain would likely center on Taiwan, with China seeking reduced American arms sales or defense commitments in the region. President Trump confirmed the delay of his China visit, citing the ongoing conflict in Iran.

China’s strategy will depend on its assessment of the opportunities and risks presented by the evolving geopolitical landscape. The current situation presents a unique moment for Beijing to advance its interests and reshape the global order.