context: US tariff hikes which jolted global markets and caused pushback at home, appear to have halted after two rounds of negotiations. Despite rising tensions, the PRC and the US remain somewhat interdependent, constraining the scope of further drastic decoupling measures, at least in the near term. Tariffs have nonetheless accelerated moves by Chinese firms to expand their supply chains across third-country hubs. Apart from blanket tariff hikes, Beijing is more likely to throttle choke-point exports like rare-earths, chip chemicals, batteries and metals.
Tu Xinquan 屠新泉 University of International Business and Economics WTO Research Institute director shares his insights on the latest PRC–US trade frictions
- global economic re-ordering and the PRC’s strategic response
- structural PRC–US ‘decoupling’ trend makes expanding cooperation extremely difficult
- mutual trade shares keep sliding
- focus moving from expanding co-operation to risk management
- toward a dual-engine world economy
- trade webs diffuse outward
- direct PRC–US trade keeps shrinking as shipments detour through third-country ‘connector’ economies
- political upside
- reduced direct dependence eases great-power anxiety
- trade webs diffuse outward
- fundamentals of the world economic loop
- US partners resist its pressure to ‘choose sides’
- as the largest supplier of intermediate and capital goods, the PRC also has bargaining power
- US partners resist its pressure to ‘choose sides’
- structural PRC–US ‘decoupling’ trend makes expanding cooperation extremely difficult
- playbook for the PRC
- step up outbound FDI
- outbound FDI-to-GDP ratio growth still flat
- factory moves must keep core tech and critical supply-chain nodes under PRC control
- tighter risk-screening and export-licence rules
- aim
- diversify exposure while blocking strategic know-how leakage
- prioritise investment over trade liberalisation
- logic
- slowing global growth shrinks the ‘pie’, turning trade into a zero-sum fight
- outbound PRC capital and know-how can enlarge the pie instead
- room for new tariff cuts is limited
- the remaining high-duty lines yet to be liberalised are politically sensitive and small in volume
- logic
- main tasks
- upgrade legacy bilateral investment treaties with Africa and Central Asia to lock in wider market access and stronger investor protection
- revive the EU–PRC comprehensive agreement on investment model
- to drive rules alignment and streamlined approval procedures
- pursue an enhanced PRC–Japan–Korea investment pact as a faster win while the trilateral free trade agreement stalls
- embed tighter risk-management and sustainability clauses to ease partner security concerns
- step up outbound FDI