Global Realignment

In a round of talks held in Geneva and London in May and June, China and the US reached a temporary truce in the trade war as both countries scaled back tariffs and export controls on certain products. But beneath the uneasy peace, trade tensions between the two countries are far from defused.　

In July, US President Donald Trump showed renewed appetite for tariffs, sending tariff letters to dozens of countries, including ASEAN members and many long-standing US allies such as the European Union, Japan, South Korea, Mexico and Canada. He threatened yet again to impose sweeping hikes of 20 to 50 percent unless they offer major concessions in talks with the US before August.　

By contrast, China is stepping up diplomatic efforts to fortify ties with trade partners around the globe from Southeast Asia to Europe and the Gulf to the Pacific, positioning itself as a more reliable and pragmatic partner.

Trump has also threatened an additional 10 percent tariff on any country “aligned’ with the BRICS group. This could impact several ASEAN countries including Indonesia, which became a full BRICS member in January, as well as Thailand, Malaysia and Vietnam, all BRICS partner nations.　

“Across the world, tools once used to generate growth are now wielded to pressure, isolate and contain,” said Malaysian Prime Minister Anwar Ibrahim, this year’s ASEAN chair, at the ASEAN Foreign Ministers’ Meeting on July 9. “As we navigate external pressures, we need to fortify our foundations, trade among ourselves, invest more in one another.”　

Meanwhile, China and ASEAN are elevating economic ties. In late May, China and ASEAN announced the conclusion of negotiations for the ASEAN-China Free Trade Area (ACFTA) 3.0 upgrade, set to be signed in October. The agreement expands cooperation beyond traditional goods to include the digital economy, green energy and cross-border investment.　

China and ASEAN countries are also strengthening political ties on some sensitive issues, which will lay a good foundation for closer business ties. During his visit to Kuala Lumpur, Wang reaffirmed China’s support for regional stability and deeper integration, and expressed China’s willingness to sign the Protocol to the Treaty on the Southeast Asia Nuclear Weapon-Free Zone, also known as the Bangkok Treaty.　

Signed by the 10 ASEAN states in 1995, the Bangkok Treaty aimed to ensure that Southeast Asia remains free of nuclear weapons. All five nuclear-weapons states under the Non-Proliferation Treaty, namely the US, Russia, China, the UK and France, are invited to sign a protocol pledging to respect the zone and not to use or threaten to use nuclear weapons against parties to the treaty. China is the only one that has expressed willingness to sign it without reservations so far.　

In addition, China is accelerating consultations with ASEAN countries on a Code of Conduct in the South China Sea, Wang said on July 11 at the ASEAN Plus foreign ministers’ meetings. In a briefing on July 12, Wang, also a member of the Political Bureau of the Communist Party of China Central Committee, told media that both sides agreed to conclude the consultations and reach agreement on the Code of Conduct as scheduled next year, which is expected to be effective, substantive and consistent with international law, including the United Nations Convention on the Law of the Sea.

Despite being the US’s closest allies in Asia, both Japan and South Korea received letters from the Trump administration with threats of 25 percent tariffs. In response, Japan’s Prime Minister Shigeru Ishiba said that he won’t “easily compromise” and will “protect what must be protected in talks with Washington, while South Korea said that it would intensify trade talks with the US “to reach a mutually beneficial result.”　

Both Japan and South Korea are members of the Regional Comprehensive Economic Partnership (RCEP), the world’s biggest trade bloc that also includes the 10 ASEAN member states, China, Australia and New Zealand. Due to the intensifying tariff threats from the US, both countries have quietly expanded cooperation with China thanks to the low tariffs under the RCEP　

At a trilateral economic dialogue held in March, the trade ministers of the three countries agreed to “closely cooperate for comprehensive and high-level” talks on a long expected trilateral free trade agreement deal to promote “regional and global trade,” according to a statement released after the meeting.　

Both Prime Minister Ishiba and South Korean President Lee Jae-myung, who took office in October last year and June this year respectively, are known for adopting a more pragmatic approach toward China than their predecessors.　

During a call with Chinese President Xi Jinping, Lee said that he attaches great importance to South Korea-China relations and is willing to work with the Chinese side to promote friendly relations between the two countries. According to South Korean media, Lee invited the Chinese leader to visit South Korea within the year.　

Trade relations between Australia, another US ally and RCEP member,and China have also improved. On July 12, Australian Prime Minister Anthony Albanese embarked on a six-day visit to China. Since taking office in 2022, Albanese has adjusted Canberra’s rhetoric toward China and helped stabilize the bilateral relationship, previously strained due to Canberra’s calls for an inquiry into the origins of Covid-19 in China, among other issues. China, in response, lifted trade sanctions on Australian products. In 2024, Australia had a trade surplus of US$41.5 billion with China.　

Albanese’s trip to China came at a sensitive time as Canberra faces greater pressure from Washington. Although Australia has a trade deficit with the US, it was still subject to a 10 percent “baseline” tariff when Trump launched his sweeping “reciprocal” tariffs in April. While Canberra was spared a tariff letter in Trump’s renewed trade war, his threats to raise tariffs up to 200 percent on pharmaceuticals and a 50 percent tariff on copper imports, exposes Australia to further risks.　

On July 12, the day Albanese arrived in China, the Financial Times reported that the US demanded that Australia and other US allies, including Japan, should clarify what role they would play if the US and China went to war over Taiwan, which caught Canberra “off guard.” In response, Pat Conroy, Australia’s defense industry minister said that Australia will refuse any US’ request to join a “hypothetical” conflict with China over Taiwan and will not make any advance commitment.

The Gulf nations council, comprising Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates, has long been tightly bound to the US through security and oil ties. But it is increasingly looking East for economic partnerships and is an active participant in China’s BRI, which has yielded significant dividends.　

In June, the second China-Central Asia Summit was held in Astana, capital of Kazakhstan, with participants agreeing to deepen cooperation under the BRI, and particularly to accelerate progress in transcontinental land transportation and logistics infrastructure.　

In April, construction on the Kyrgyzstan  section of the China-Kyrgyzstan-Uzbekistan Railway broke ground, marking a major development in the landmark project that will greatly enhance infrastructure connectivity among the three countries.　

In July, Chinese Premier Li Qiang attended the BRICS summit held in Brazil, calling on the bloc to become the vanguard in advancing global governance reform. During Li’s trip, China and Brazil signed numerous cooperation documents in fields including infrastructure, pharmaceuticals, new energy, artificial intelligence (AI) and development strategy alignment.　

Brazil now faces the highest tariffs among countries that received a tariff letter from the Trump administration, which threatened to raise tariffs on Brazilian products to 50 percent from 10 percent on August 1.　

China has also sought to improve ties with the European Union, which now faces a 30 percent tariff from the US on August 1. The two sides have conducted frequent diplomatic interactions in recent months. However, given the disputes regarding the Russia-Ukraine conflict, China’s rare earth export controls and the EU’s tariff on electronic vehicles remain thorny issues, it is unclear how far China-EU cooperation can go.　

In response to European Commission President Ursula von der Leyen’s remarks that rebalancing the EU’s economic relations with China should be a priority, Mao Ning, a spokesperson from China’s Foreign Ministry called on the bloc to “form a more objective and rational perception of China, and pursue a more positive and pragmatic China policy.”　

“We hope the EU realizes that what needs rebalancing at the moment is the EU’s mentality, not China-EU economic and trade relations,” Mao said.　

By and large, China’s latest efforts to diversify away from the US market have paid off. While China’s goods trade with the US fell sharply by 9.3 percent in the first half of this year according to data released by the Chinese government, China’s total goods trade rose to 21.79 trillion yuan (US$3t), a 2.9 percent year-on-year increase.　

China’s exports expanded to 13 trillion yuan (US$1.8t), a record high for the same period and a 7.2 percent year-on-year rise, despite a decline in imports. China also increased imports and exports with more than 190 countries and regions for the first half of the year. Trade with BRI countries increased by 4.7 percent and accounted for over half of China’s total foreign trade. More specifically, China’s exports to the EU, Africa, Central Asia and ASEAN increased by 3.5 percent, 14.4 percent, 13.8 percent and 14.3 percent respectively.

So far, only the UK and Vietnam have successfully concluded trade negotiations with Washington, each securing a deal that imposes a 20 percent tariff on their exports to the US. However, both agreements have come under scrutiny for reportedly including “poison pill” clauses designed to restrict deeper trade engagement with China.　

In May, Beijing issued strong warnings against such a provision after the UK-US trade deal emerged. The UK responded by insisting the deal does not grant the US any veto over Chinese investment.　

In June, Chinese Vice Premier He Lifeng and British Chancellor of the Exchequer Rachel Reeves held the ChinaUK Economic and Financial Dialogue in London, pledging to inject new impetus into the bilateral economic cooperation. A more recent meeting between Wang Yi and British National Security Adviser Jonathan Powell held on July 14 reaffirmed both sides’ commitment to strengthening bilateral ties.　

Amid Trump’s renewed tariff threats, reports suggest that the US is pressuring South Korea to align with its efforts to curb China���s growth in the global shipbuilding industry in exchange for reduced tariffs. On July 11, South Korea’s trade policy director, Chang Sung-gil, confirmed that cooperation against China’s shipbuilding sector is one of the preconditions set by the US for finalizing a trade deal aimed at avoiding high reciprocal tariffs.　

“China supports parties in handling economic and trade issues through dialogue and consultation, but no deals or talks should harm the interests of any third party,” Foreign Ministry spokesperson Mao Ning said at a press conference on July 11.　

“Sovereign equality and non-interference in domestic affairs are important principles of the UN Charter and basic norms in international relations. Tariffs should not be a tool of coercion, bullying or interference,” she added.　

As the Trump administration has postponed its self-imposed deadline on trade negotiations, it remains unclear how countries will react to the mounting pressures from the US for major concessions, including their relationships with China.　

But China has made it clear that in contrast to the US’s transactional and increasingly coercive approach, China adopts a long-term stance as a defender of multilateralism, offering continued economic access and certainty.　

Speaking during the Munich Security Conference held in Germany in February, Wang Yi said that China maintains a stable and consistent foreign policy, and does not easily flip-flop or reverse the policy, which “demonstrates its strategic resolve as well as international credibility as a major country.”