Escalating US-China Trade War and Global Impact

The US is imposing high tariffs on Chinese goods under Donald Trump's presidency, significantly reducing trade between the two countries. As a result, alternative destinations for Chinese goods are being considered, with South-East Asia potentially being affected by both increased Chinese imports and US tariffs.

Wells Fargo warns that despite temporary tariff relief, the latest escalation in the US-China trade war still poses a risk to the US agricultural sector, particularly soybean exports, which were the most affected by China's retaliatory tariffs. China was the leading export market for US soybeans in 2024, accounting for over 52% of exports. Although soybean futures rose after President Trump reduced tariff rates for 90 days, the subsequent increase in US tariffs on Chinese imports to 145% and China's retaliatory measures could offset any gains. The analyst expects government subsidies to likely offset the impact, with the White House considering aid to farmers, but the size of any additional aid package is uncertain.

Mainland Chinese manufacturers at the Global Sources Hong Kong Trade Show are looking to diversify their customer base to the Middle East due to the impact of US tariffs imposed by the Trump administration. Firms such as Doogee, a consumer electronics manufacturer, are seeking to reduce their reliance on traditional markets like the US and Europe, and are already exporting products to the Middle East, with Doogee exporting 200,000 tablets annually to the region.

US President Donald Trump stated that the US and China are engaged in trade talks and expressed confidence that a deal on tariffs will be reached soon. Trump claimed that top Chinese officials have reached out to Washington multiple times, and the two sides have had productive discussions, but more work remains to be done. He estimated that an agreement could be reached within the next three to four weeks, although he declined to comment on potentially increasing the current tariffs on Chinese imports.

The US and China have shown signs of willingness to engage in trade negotiations, with US President Donald Trump claiming talks are underway and a deal on tariffs could be reached soon. However, Chinese analysts say meaningful progress hinges on greater "sincerity" from Washington. The two economies have been locked in a tit-for-tat tariff battle, with each imposing levies of at least 125% on the other. China has maintained working-level communication with the US, but only under conditions of equal terms and mutual respect. Trump initially sparked the trade war by announcing "reciprocal tariffs" on almost all US trading partners to address the "trade imbalance".

India and China are improving their relations due to concerns over President Donald Trump's unpredictable diplomatic and trade moves, including his tariffs on Chinese goods, marking a shift in their decades-long adversarial relationship over their disputed Himalayan border.

Japan and South Korea are navigating a delicate balance in the U.S.-China trade war, as China attempts to exploit the situation and drive a wedge between them and their security ally, the U.S. However, Tokyo and Seoul are currently focused on persuading the Trump administration to roll back the tariffs imposed by President Donald Trump.

Chinese Premier Li Qiang has urged officials to promote positive market expectations to counter the impact of the escalating US-China trade war. At a State Council meeting, Li called for a "strong synergy in society to cope with risks and challenges." Vice-Premier He Lifeng reassured US companies that China remains a fertile ground for foreign investment and trade, encouraging them to invest in the country. The US and China are engaged in a tit-for-tat trade war, with the US imposing tariffs of up to 245% on certain Chinese exports. Despite a 5.4% GDP growth in the first quarter, China's economic future is uncertain due to the trade war.

China missed several key targets from its 10-year "Made in China 2025" plan to become self-sufficient in technology, according to a report by the European Chamber of Commerce in China. The country achieved technological dominance in only three of the ten strategic sectors identified: shipbuilding, high-speed rail, and electric cars. Despite not meeting all targets, China has advanced rapidly and is now a direct competitor with European and U.S. manufacturing in many areas, driving 29% of global manufacturing value add. The plan fostered unhealthy industrial competition, increasing global trade tensions, and China's self-sufficiency efforts have been driven by U.S. restrictions on high-end tech. China's companies have made significant strides in tech development, with Huawei releasing a smartphone with an advanced chip and increasing its R&D spending to 20.8% of revenue. However, the intense competition has led to overcapacity and security concerns, with many industries experiencing "involution" or cutthroat price wars, prompting the Chinese government to call for efforts to halt this trend.

Chinese President Xi Jinping visited Cambodia, strengthening ties between the two nations as the US imposes tariffs on Cambodian exports. Xi was greeted with giant red banners and oversized portraits, and a boulevard and other infrastructure projects in Cambodia bear his name or those of other Chinese Communist Party leaders. China is Cambodia's largest trading partner and foreign investor, and Xi's visit comes as the US is abandoning aid projects and threatening tariffs on Cambodian goods. Cambodia has also unveiled a Chinese-refurbished naval base, which the government denies is a Chinese military outpost. Xi's visit is seen as part of China's charm offensive in Southeast Asia, where it is competing with the US for influence. The Cambodian government is trying to balance its relationships with both superpowers, but its ties with China are growing stronger, with Chinese investment and aid being seen as more reliable and less conditional than that from the US.

China is mobilizing researchers to develop a strong historical narrative to reinforce its borders, driven by escalating rivalry with the US and tensions with neighboring countries. The effort aims to ensure local stability, secure relations with neighbors, and promote a strong Chinese consciousness in ethnic communities. China's land borders span over 22,000km and are shared with 14 countries, with nine provinces and autonomous regions along its frontier occupying around 62% of its land area. Researchers are being enlisted to build indigenous expertise in borderland governance and challenge Western theoretical discourse on China's borderlands.

The founder, chairman, and CEO of Shanghai-based Advanced Micro-Fabrication Equipment (AMEC), Gerald Yin Zheyao, has renounced his US citizenship and reinstated his Chinese nationality, according to the company's annual report. This move comes amid an escalating tech war between the US and China, with the US Department of Commerce having rolled out restrictions on US persons' involvement in China's semiconductor industry in 2022. Yin, 81, had previously identified as a US citizen in AMEC's annual reports from 2020 to 2022. Two other AMEC executives with US citizenship stepped down from their positions last year, citing the new US restrictions.

Nvidia CEO Jensen Huang visited Beijing to meet top Chinese officials, conveying the company's commitment to maintaining business ties with China despite US restrictions on semiconductor exports. Huang met with Chinese Vice-Premier He Lifeng, stating that Nvidia would deepen its presence in the Chinese market due to its positive economic prospects. The visit came after the US tightened export licensing rules, which Nvidia expects will cost it $5.5 billion. Huang's visit aimed to reassure Chinese officials and clients that Nvidia intends to continue investing in the country.

The US plans to impose port fees on Chinese ships to revive its shipbuilding industry and challenge China's dominance. Starting mid-October, Chinese ship owners and operators will be charged $50 per ton of cargo, increasing by $30 per ton each year for three years. The fees will be based on cargo weight, number of containers, or vehicles onboard. The US Trade Representative said the move aims to counter China's dominance, which has disadvantaged US companies and workers. The fees are lower than initially proposed and some ships, such as those carrying bulk exports or operating between US ports, are exempt. The move is expected to raise prices for US consumers and may disrupt global trade, which is already affected by Trump's tariffs.

The Trump administration announced fees on Chinese-built vessels docking at U.S. ports, citing China's "unreasonable" dominance in the shipbuilding industry, which manufactures 75%-80% of the world's fleets. The fees, which will be charged once per voyage, will start at $0 and increase to $140 per net ton by 2028 for Chinese-owned vessels, and $18-$33 per net ton for non-Chinese-owned operators with Chinese-built vessels. Vessel owners can be eligible for a remission of the fees if they order a U.S.-built vessel. The policy aims to bring more ship manufacturing back to the U.S. and has bipartisan support.

China has stopped buying liquefied natural gas (LNG) from the United States after imposing a 15% tariff on American LNG shipments on February 10. China's LNG imports from the US had already declined significantly before the tariff, and instead, China expanded its purchases from Russia, which supplied four times as much LNG as the US last year. Chinese energy firms had been buying LNG from the US but were reselling it to Europe at a higher price, and the tariff has not significantly affected this trade flow. However, the tariffs could still hurt the American LNG industry, particularly if broader US tariffs dampen global economic growth and depress demand for gas.

The US is implementing new port fees on China-built vessels as part of an effort to revive its shipbuilding industry and reduce Chinese dominance. The fees, which will be introduced in 180 days, will be linked to the weight of cargo or number of containers on board, and can be waived if the owner orders a US-built ship. The fees will start at $18 per net ton or $120 per container, and will be assessed up to five times a year. The move is part of a broader effort to revitalize the US shipbuilding industry, which has declined significantly since its post-WWII peak and now accounts for less than 1% of global output. The original proposal had sparked concerns among US industries and the global shipping community, prompting the Office of the US Trade Representative to scale back the penalties.

The US has introduced new port fees on Chinese-built and operated ships to boost its domestic shipbuilding industry and reduce China's dominance in the sector. The fees, which will apply to each Chinese-linked ship's US voyage, will be assessed up to five times per year and can be waived if the owner orders a US-built vessel. The fees will start at $18 per net ton or $120 per container for Chinese-built ships, and will gradually increase over subsequent years. The move is part of a broader effort to curb China's influence and is likely to escalate tensions in the ongoing trade war between the US and China.

Asian markets traded mixed on Friday with Japan's Nikkei 225 rising 1.03% after the country's inflation rate came in at 3.6% year on year in March, above the Bank of Japan's 2% target. South Korea's Kospi and Japan's shipping stocks also rose after US President Donald Trump's administration imposed fees on ships built in China. US markets closed mixed overnight, with the S&P 500 up 0.13%, the Nasdaq down 0.13%, and the Dow Jones down 1.33%. Several regional markets were closed for Good Friday.

Japan's inflation rate was 3.6% in March, exceeding the Bank of Japan's 2% target for the third consecutive year. The core inflation rate, which excludes fresh food, was 3.2%, while the "core-core" rate, which also excludes energy, rose to 2.9%. The data comes as Japan is engaged in trade talks with the US, with tariffs imposed by the US potentially constraining the BOJ's ability to raise interest rates. Analysts at Nomura revised their forecast to expect only one rate hike by the BOJ, in January 2026, due to the potential impact of US tariffs on Japan's GDP.