(April 3): Donald Trump’s decision to boost tariffs on almost every country will deal a blow to China’s economy. 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 Beijing faced its third round of US levies, this time longstanding American allies such as Japan, Australia and the UK were also hit 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 globalisation, which are anchored by the robust foundation of cooperation.”

Beyond spurring a selloff in markets around the world, Trump’s unprecedented decision to impose punitive tariffs on everyone risks alienating the US from a global economic system that it help build in the wake of World War II, further testing alliances that have endured since then. Many countries in the region already have 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 incentivising 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 countries from Denmark to Japan 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.

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.

In a statement issued 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 so far 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 also 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.

Chinese officials will likely wait to see how other countries respond, said Zhu Feng, executive dean of Nanjing University’s School of International Studies. Although economists projected the tariffs to eliminate the bulk of US-China trade and hit the 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.

The question in Beijing is “how the world will respond”, he said. “China is not in a hurry to roll out its retaliation measures.”

Xi will have a chance to make further inroads with the region later this month on his first overseas trip since Trump’s return. The Chinese leader will reportedly head 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 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, where it’s locked in a bitter territorial dispute in the South China Sea. The Philippines was one of the few governments to welcome Trump’s US 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. While tensions still linger over Xi’s support for Vladimir Putin following his invasion of Ukraine, Bloomberg has reported that 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.

Efforts to portray China as a reliable partner will likely be met with skepticism in some parts of Europe, said Christopher Beddor, deputy China research director at Gavekal Dragonomics.

“I think 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.”

Beijing will also need to tread carefully with emerging markets, as some countries are still concerned about Chinese goods flooding their economies 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.”

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