Donald Trump’s move to boost tariffs on all countries will hit China’s economy particularly hard. But it’s also handing Xi Jinping a rare opening to deepen relationships across the board, including with key US allies in Asia and beyond.
Chinese officials moved quickly on Thursday to align with other nations after Trump unveiled America’s steepest tariffs in a century, saying the US had been “looted, pillaged, raped, and plundered by nations near and far, both friend and foe alike.” While it was the third time Beijing got hit with levies since Trump took office again, this time longstanding American allies such as Japan, Australia and the United Kingdom were also smacked with tariffs as high as 24%.
Speaking at the London Stock Exchange on Thursday for the launch of China’s first green sovereign bond sale, Vice Finance Minister Liao Min — one of Xi’s negotiators in the first trade war — hailed the issuance as demonstrating Beijing’s commitment to deeper integration with the international market.
“Protectionism doesn’t work — it’s not a solution,” he said. “China and the UK understand the benefits of globalization, which are anchored by the robust foundation of cooperation.”
Beyond spurring a selloff in markets around the world, including the worst day for American stocks since the depths of the pandemic, Trump’s unprecedented tariffs risk alienating the US from a global economic system that it help build in the wake of World War II.
See also: Asia bears brunt of Trump tariffs, needs to ease, economists say
‘Golden Opportunity’
Many countries around the globe have already seen China overtake the US as their largest trading partners, and the latest tariffs may further increase their dependence on Beijing.
“Liberation Day isolates America from the rest of the world by incentivizing all other countries to trade with each other instead of America,” said Frank Tsai, an adjunct professor at the Emlyon Business School’s Shanghai campus. “China now has a golden opportunity to beat America at its own game.”
That represents an abrupt shift from the past few years, when President Joe Biden’s administration convinced partners in Europe and Asia to back US export controls designed to isolate China, citing concerns that Beijing’s military build up posed a global threat. China’s diplomatic support for Russia’s war in Ukraine further pushed many in Europe to view Xi’s government with increasing scepticism.
See also: Frenzied rollout marks Trump tariff push that put world on edge
Trump has now given Europe and other US allies little reason to cooperate in isolating China, both with his friendlier approach to Russia and the latest tariffs. Japanese Prime Minister Shigeru Ishiba on Thursday called Trump’s duties “very disappointing,” while the European Union threatened retaliation and France warned it could target US tech firms.
“The Trump tariffs do amplify the message that US is no longer the benevolent hegemon it was and the global order is bound to shift as the result of it,” said Yun Sun, director of the China program at Washington-based think tank Stimson Center. “Beijing feels blessed that it is not singled out as the only country to face more US tariffs,” he said, adding that “China will deepen ties with US allies and partners to advance its own alternative world order.”
Hours after Trump’s announcement, China’s Commerce Ministry noted that “many trading partners have expressed strong dissatisfaction.” Chinese state media reinforced that message: CCTV proclaimed that the US was divorcing from free trade, CGTN released an AI-generated song about “American workers in tumult,” and the People’s Daily published a commentary by a Brazilian scholar accusing Trump of “tariff blackmail on global scale.”
Xi has responded with caution to Trump’s earlier rounds of tariffs, taking a more strategic approach than during the first trade war as China’s economy faces a property crisis and deflationary pressures. His government indicated it would respond to the latest tariff hikes, which raise average US tariffs on China to at least 65%. Options include targeting a major American company such as Apple Inc., or tightening exports to the US of critical minerals.
Although economists projected the tariffs to eliminate the bulk of US-China trade and hit the world’s second-biggest economy more than the first trade war, the benchmark CSI 300 Index of onshore stocks closed 0.6% down and government bonds rallied as speculation emerged that Chinese authorities may step up monetary easing.
Chinese officials will likely wait to see how other countries respond, said Zhu Feng, executive dean of Nanjing University’s School of International Studies.
“China is not in a hurry to roll out its retaliation measures,” he said.
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TikTok Deal
Trump on Thursday reiterated that he’d be willing to offer tariff relief for China if Beijing approved the sale of the US operations of ByteDance Ltd.’s TikTok social video app. The service is facing a Saturday deadline for divestment, unless Trump offers an extension as part of his efforts to broker an agreement.
“I think that maybe China will call and say, ‘well, we’re upset with the tariffs,’ and maybe they want to get something a little bit in order to get TikTok approved,” Trump told reporters, while cautioning he had “no knowledge” that Beijing would seek that approach.
Xi will have a chance to make further inroads with the region later this month on his first overseas trip since Trump’s return, reportedly heading to Cambodia and Vietnam — two of the countries worst hit by Trump’s tariffs — as well as Malaysia. He’ll likely carry a message of economic stability to countries that had previously been careful to balance ties between the world’s largest economies.
Yet while Xi has an opening to improve ties with other countries, many in the region are still wary of China’s territorial ambitions and use of economic coercion to achieve its geopolitical aims.
The People’s Liberation Army this week held two-day military drills around Taiwan, the self-ruled island Xi has vowed to control some day. That came weeks after Chinese warships encircled Australia for the first time.
China also announced Thursday it had arrested three alleged spies from the Philippines, a US ally it has clashed with repeatedly in the South China Sea. The Philippines was one of the few governments to welcome Trump’s tariffs, with Trade Secretary Cristina Roque saying she viewed the 17% levy with “guarded optimism.”
The European Union will likely also be cautious of embracing China, even as some leaders in the bloc want to take a more lenient approach in light of Trump’s return. Spanish Prime Minister Pedro Sanchez, among the most dovish in the group, will visit China and Vietnam next week.
‘Jury’s Still Out’
Efforts to portray China as a reliable partner will likely be met with scepticism in some parts of Europe, said Christopher Beddor, deputy China research director at Gavekal Dragonomics.
“The jury’s still out on how well that pitch will work,” he said. “In private, European officials are often quick to note that whatever their disagreements with Trump, they still have serious complaints about China’s economic policies.”
China will also need to tread carefully with emerging markets, as the latest tariffs will amplify concerns about Chinese goods flooding the world and taking away jobs in sectors like garments. But as countries around the world grapple with a US trade war, they have less incentive to impose fresh duties on China.
Ultimately, Trump’s tariffs will bring trading partners together at the expense of the US, said Henry Wang Huiyao, founder of the Center for China and Globalization research group in Beijing.
“Trump’s move will drive 80% of the world population or economy to trade more among themselves, and it’s going to isolate the US,” said Wang. “In the long run they are going to drive up all the cooperation among countries.”
