Analysis

Trump’s trade war is reshaping China’s economy, but not in ways that the US planned for. In response to the US’s announced tariffs, Chinese tech conglomerates are facilitating exporters in China to refocus on domestic sales and alternative markets. Companies like Alibaba, JD.com and Tencent are enacting directives from the central government to help companies source domestically and boost incentives for companies that switched from exporting their goods to instead supplying Chinese alternative buyers. Despite tech giants claiming that these decisions were taken preemptively in the name of “political sensitivity” rather than by government directive, the move shows strong alignment between the CCP and tech companies and illustrates the broader fusion of government and corporate interests in China. 

China’s increasing corporate nationalism will likely spill over into a broader push for consumers to prioritize domestic Chinese goods over foreign–particularly US–substitutes. Moreover, new regulations by the People’s Bank of China that cross-border transactions be conducted in RMB, rather than US dollars, further underscores a shift in how China envisions its increasingly dominant position in the world economy. For US companies still operating in China, this will spell challenging times ahead. As the CCP commands corporate compliance among China’s private sector, not to mention its steering of state-owned enterprises, it will apply political pressure to source and sell to domestic partners over foreign competitors. China’s capacity to exploit economic levers in the name of political ambitions is far more powerful than the US government’s efforts to corral its own business leaders. 

The current trade war presents a challenging time for the CCP. Dramatic economic shifts will likely cause short-term systemic shocks that China’s struggling economy can ill afford. The CCP’s reactions thus far also tell foreign partners that they will always be subordinate to domestic entities in the Chinese market, which is a tricky sell when China is hoping to replace US trade with alternatives. In the long run, however, this pivot to prioritizing Chinese goods and services helps to insulate the economy against external shocks, like tariffs, while reducing the US’s ability to use economic leverage or to wield a strong negotiating position against Beijing. Companies therefore need to understand how top-down attempts at US-China decoupling will disrupt their specific industries and supply chains on the ground. However insulated a company may think it is, US-China tensions signal challenging times ahead.

Analysis

The Trump Administration’s China strategy continues to combine demonization of China, realpolitik, or superpower camaraderie, depending on whom you ask and when. As The Economist succinctly put it, foreign policy has split into three factions: “primacists” focus on re-establishing US hegemony; “prioritizers” who argue we should target China above all; and “restrainers” who concentrate on the homeland over foreign engagement. Within the first two categories, the influence of China hawks appears to be on the wane, despite continued anti-China rhetoric among these factions. 

An increasingly influential faction appears to be pushing for closer relations with Beijing either for economic reasons, or because Xi Jinping’s “strongman” status is attractive to some in the Administration. A potential US-China trade deal, for example, may be in the works, according to hints by Treasury Secretary Scott Bessent and other senior Trump Administration officials. Bessent told a closed-door investor meeting that the US cannot sustain a tariff standoff with China and that a workaround will be required, although his comments were quickly walked back and the Trump Administration stressed that there were currently no negotiations to end the US-China trade war (before then announcing that it was considering slashing tariff rates against China). 

If a trade deal goes through, economics and market pressures will take priority over national security concerns. Removing tariffs is one thing; granting China access to key US industries beyond its current engagements would make it extremely challenging for US businesses to outcompete Chinese rivals, who can flood the market with heavily subsidized goods and services. But regardless of which option the administration selects, with continuing tensions currently the most likely continuing, persistent uncertainty in the Trump Administration’s dealings with China poses political and economic challenges for US companies. 

One unforeseen consequence of the Trump Administration’s rhetoric on tariffs is that it is also pushing its closest partners towards China. What was previously almost unthinkable–trade deals and closer partnerships between China, Japan, and the EU–now appear as practical responses to Washington’s unpredictability. Adding to companies relocating to new markets, particularly India, global supply chains entered one of the most dramatic periods of change in recent years. Companies would do well to monitor how a drive to decouple the US and China is therefore reshaping markets worldwide in unforeseen ways.

Analysis

In the wake of April’s tit-for-tat, US-China tariffs, global economies are facing ever-diminishing growth prospects. US projected economic growth was downgraded from its January projection, from 2.7% to 1.8%, following Q1 tariff uncertainty. China’s Q1 economic growth, however, beat analysts’ expectations to reach 5.1%, but economists fear this was due to temporarily increased consumption in anticipation of US tariffs that are set to wreak havoc in Q2. (As always, PRC economic data must be viewed skeptically, given well-known reporting discrepancies and politicization.) The IMF further revised down global economic forecasts, from 3.3% to 2.8%, citing “extreme” global trade tensions. In short, no one is benefiting from this tariff conflict.

Amid these extreme trade tensions, South Korea is coming to play a more prominent role. One the one hand, the Chinese government reportedly warned the South Korean government not to export products containing Chinese-produced rare-earth metals onward to the US. When asked about this request, Guo Jiakun, a Chinese Ministry of Foreign Affairs spokesperson, said he was unaware of such a communication; the South Korean government says it has not received any relevant communication from Beijing. 

On the other hand, Chinese companies are increasingly shipping goods first to South Korea, then onward to the US, and claiming they are of South Korean origin to avoid tariffs. According to the Korea Customs Service, the total value of falsely shipped goods from South Korea in Q1 of 2025 is approximately US$20.7M–a value equal to 85% of the total 2024 value–and 97% of which was sent to the US. This, too, is distinct from Chinese companies’ additional efforts to thwart US tariffs by creating US-based LLCs and underpaying estimated taxes. As one example of what is likely a larger strategy by Beijing, we find China fighting the trade war on at least two fronts: in the form of official government-enacted export controls and unofficial corporate circumvention of US-imposed tariffs. 

China is also making targeted interventions to restrict US companies’ access to key industries, especially rare earth metals. In response to the Trump Administration’s April 2 tariffs, China suspended the export of six heavy rare earth metals and the powerful magnets they are used to make; China is only supplier of these specific metals and makes 90% of the relevant magnets. This move further challenges US supply chains, which lack the necessary diversity to withstand a Chinese reduction of exports. MP Materials operates the US’s only rare-earth mine and, while it has received government support to develop its production, it is far from able to supply all of the US’s needs. Furthermore, companies typically do not hold significant stockpiles of such expensive materials. This means that, if trade does not resume in the coming months, industries from EVs to aerospace–including the broad range of defense-related products they produce–will come to grinding halt. 

While President Trump has recently hinted that he may significantly reduce US tariffs on Chinese goods, there is also no reason to think that Chinese companies will relent in their search for loopholes or the Chinese government will resume exports of rare earth metals given the remaining US export controls. This means that current restrictions on and risks of Chinese goods slipping into supply chains will persist for the foreseeable future.

Analysis

No industry has been more targeted by the fragmenting US-China relationship than the tech sector. Yet despite the ongoing fusion of tech and national security in both the US and China, several Chinese tech companies are pursuing listing on US exchanges. This is in part because China’s “DeepSeek Moment” has inspired a global rush towards Chinese tech companies that appear to be leading in AI and other sector innovations. This sets up a potential clash between investors looking to Chinese companies as good investments ahead of sector innovation, versus the Trump Administration (continuing a similar logic from the Biden Administration) looking to decrease US support for Chinese technology. 

Although Chinese IPOs in the US are not limited to tech, recent listing by tech companies demonstrates that despite tensions between Washington and Beijing, Wall Street still maintains a healthy appetite for Chinese firms and investments that will likely undermine political attempts at decoupling. Perhaps the most pressing question for investors is therefore the extent to which the Trump Administration is able either to pressure the markets to shut out Chinese tech companies, or to rule their listings illegal. Recent musings from the White House, for example, include a potential plan to kick Chinese companies off US stock exchanges. 

While this represents a drastic move, and the Trump Administration will more likely opt for blacklisting or export controls instead of delisting, the administration’s entertainment of a range of levers against China means that discussion of delisting will likely continue, even while investors continue to flock to Chinese tech companies. Corporations, even those not involved in tech investments, therefore need to be aware of how, in an age of growing economic nationalism, corporations are becoming increasingly associated with countries, with potential ramifications for not only engagements in the US, but also importantly for how US corporations are treated abroad.

Analysis

As AI innovation accelerates, with potentially unmatched strategic advantages to whoever innovates first, AI data centers are particularly vulnerable to espionage and sabotage from Chinese bad actors. These data centers are often poorly defended against cyber attacks and insider threats, which uniquely threaten not only AI companies profits and IP, but also US national security. As the tech sector becomes increasingly intertwined with national security concerns in both the US and China, tech companies need to recognize that their ambitions no longer lie outside the government’s purview. A report circulated around the Trump Administration this week that highlighted not only the risks to AI data centers, but also that the government’s intentions to counter these threats through a future “Manhattan Project for AGI” may be crippled by unsecured data centers before the project has even started. 

For many tech companies, the risk of inaction is increasingly outweighing the costs of securing physical facilities, digital infrastructures, and staffing. As the US federal government shrinks offices responsible for ensuring corporate security, this burden is increasingly shifting to private companies to ensure their own security. The challenge is that tech companies are not battling hacking groups or other similar companies; they are battling the entire force of the Chinese government acting through proxies to attack US corporations. The scale and sophistication of this threat–ranging from open-source offensive security tools to blind spots in network visibility, including in firewalls, IoT devices, and the cloud–is constantly evolving. 

Despite the seeming insurmountability of China’s unprecedented attacks against US corporations, companies can mitigate the risks of cyber attacks and data center infiltration. Responsive and comprehensive cybersecurity plans, securing against insider threats, tightening supply chain diligence, and purple and red teaming to consider physical and cyber threats holistically will all become increasingly vital to protecting company IP and preventing becoming a corporate pariah.