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Containers on a cargo ship are seen at an industrial port in Tokyo, Japan April 3, 2025.
Beijing tries to woo an uninterested Tokyo over joint tariff fight
Chinese Premiere Li Qiang sent Japanese Prime Minister Shigeru Ishiba a letter asking that they “fight protectionism together,” according to local reports Tuesday, as both countries face potentially disastrous US tariffs.
“I don’t know what the equivalent in Japanese for ‘chutzpah’* is, but I think the Japanese bureaucrats will snicker a bit to themselves,” says David Boling, Eurasia Group’s director for Japan and Asian trade. “China has a tendency when relations with the US are not going well to suddenly become much more positive in their approach to Japan.”
China is Japan’s largest trading partner but a highly distrusted neighbor from a national security perspective. Japan launched trade talks with the United States last week, and Boling says Tokyo is determined to strike a deal.
“The United States is just too important as an ally and trading partner, and even if talks break down, they’re not going to look to China first,” he says.
What’s more, Ishiba faces a crucial election in the upper house of the Diet, Japan's legislature, in July, right around when the US tariff pause is due to expire. With his political life on the line, we’re watching for an agreement in principle to be sealed with the US soon.
*Chutzpah is 厚かましさ (astukamashi-sa), if you were curious.
US President Donald Trump attends a bilateral meeting with China's President Xi Jinping during the G20 leaders summit in Osaka, Japan, June 29, 2019.
China vows retaliation as US tariffs take effect
With the Trump administration’s reciprocal tariffs taking effect on Wednesday, the US’s largest trading partner, China, has signaled that it is not backing down from a trade war. Beijing has promised to “fight to the end” after Donald Trump imposed 104% levies on China. Sure enough, the Mainland Kingdom announced on Wednesday that it would impose an additional 50% tariff on US imports, matching Trump’s latest hike.
According to Eurasia Group China expert Lauren Gouldeman, unofficial government-linked sources have indicated that Beijing is prepared to implement six other measures in retaliation, including:
- Halting collaboration on fentanyl-related efforts
- Limiting agricultural exports from the US
- Imposing restrictions on US poultry imports
- Blocking the sale of American services in China, such as design, consulting, financial, and legal services
- Banning US films (Sorry, “A Minecraft Movie”)
- Launching investigations into the intellectual property practices of American companies
These steps aren’t just reactionary — they reflect a strategic shift. “Beijing has been preparing for decoupling for years,” says Gouldeman. “So it will continue to follow its playbook of stepping up support to safeguard the domestic economy and finding alternative markets for trade and investment.”
The EU, meanwhile, has said it is open to working with China to stabilize the global economy, a sign that trade alliances could be realigning to circumvent the US. However, the bloc is also concerned about Chinese products flooding their markets.
Speaking of markets, stocks slid back down the slippery slope on Wednesday. Japan’s Nikkei closed nearly 4% down, Europe’s Stoxx 600 dropped 3% Wednesday morning, and futures on US indices also headed backward. Tuesday’s brief respite seems like a fever dream.
There is still room to maneuver: Beijing has reiterated its openness to negotiations, provided the US first removes its unilateral tariffs. But the Trump administration has signaled that it will stay the course to reshore supply chains. Going even further, the US president announced yesterday that he will soon announce “major” tariffs on pharmaceutical imports, which had been exempt from the “reciprocal” rates announced on “liberation day.”
We’ll be watching to see whether bilateral trade survives, but in the meantime, China has a well-stocked arsenal of memes going viral, making fun of the American dream of re-industrialization.How DeepSeek changed China’s AI ambitions
But when the Chinese startup DeepSeek released its AI models in January, claiming they matched American ones in performance at much cheaper prices to develop, the US lead was suddenly called into question. If DeepSeek can be believed, they achieved a huge technological advance without unfettered chip access — an affront to the US government’s export controls that, it thought, were keeping China at bay.
After DeepSeek, China is emboldened
Now, the Chinese tech industry seems emboldened, with a slew of new releases from startups and incumbents alike. This breakthrough has jumpstarted AI development across China that has, in an instant, changed global tech competition and reshaped Beijing’s tech strategy.
Alibaba, Tencent, and Baidu, along with newcomers like Manus AI, have since released their own advanced models. Many of these are available for free as open-source software, unlike the subscription models of OpenAI and others.
“DeepSeek shifts the narrative — not by immediately putting China ahead, but by undermining America's AI dominance and forcing Silicon Valley giants onto the defensive much sooner than anticipated,” said Tinglong Dai, professor at Johns Hopkins Carey Business School.
“DeepSeek did two things: increase confidence in China's ability to innovate and convince policymakers to push hard on tech advancement now,” said Kenton Thibaut, senior resident China fellow at the Atlantic Council's Digital Forensic Research Lab.
At a press conference earlier this month, Chinese Foreign Minister Wang Yi wrote off America’s strict export controls. “Where there is blockade, there is breakthrough,” he said. “Where there is suppression, there is innovation; where there is the fiercest storm, there is the platform launching China’s science and technology skyward like the Chinese mythological hero Nezha soaring into the heavens.”
Beijing’s shifting focus
After DeepSeek, Thibaut notes, the Chinese government has signaled it will expand support to finance technological innovation — increasing its relending program budget, establishing a new national venture capital fund, allowing unprofitable firms to go public, and increasing mergers and acquisitions in the Chinese tech sector.
This is a major shift from just a few years ago when Beijing sought to put the explosive domestic tech sector in its place — infamously sinking the IPO of the rideshare giant Didi and closing a key loophole for companies going public on foreign markets in 2021.
Beijing’s incentives are now “aligned” with developing the domestic tech sector, Thibaut said, “Both are aligned on the understanding that companies have major incentives to localize — i.e. using domestically produced chips, even if they aren’t as good as NVIDIA’s — in the long term because of just how uncertain and unpredictable chip availability is and will be.”
And China's embrace of open-source AI models, which are freely available for the public to download and modify, has also raised eyebrows because it stands in contrast with the mostly closed Western models, with Meta’s Llama as a notable exception. If China can get its open-source models to be commonly used by Western developers, it could make an important stake in the global AI space. That said, the open-source model could hinder the economic benefits of AI in China — at least, in terms of making money directly off of these advancements.
For now, we’re witnessing a moment of confidence for China — one shared by both its government and tech sector. “Xi Jinping surely feels emboldened,” Dai said, “viewing this as tangible evidence of Western vulnerability and China’s rising trajectory.”
The DeepSeek logo is displayed on three cell phones in front of a computer screen showing the Chinese national flag.
China announces a state-backed AI fund
Chinese officials on Thursday announced a new state fund to invest in cutting-edge technology, including artificial intelligence.
Zheng Shanjie, chairman of the National Development and Reform Commission, the country’s economic planning agency, told reporters that the “state venture capital guidance fund” will bring in $138 billion over 20 years from local governments and private firms.
The fund comes two months after the Chinese firm DeepSeek unveiled its R1 artificial intelligence model, which quickly became one of the world’s top-performing systems — essentially China’s first model that can compete with those from Silicon Valley firms like Anthropic, Google, Meta, and OpenAI. Since then, Chinese tech giant Alibaba has released its own model, called QwQ-32B, to rival DeepSeek and other major players.
The United States has tried to cut off China from its top AI chip companies, but the country still has managed to build AI models — either from smuggled chips or through, as DeepSeek claimed, efficient new means. A new and emboldened China now wants the world to know it’s ready to publicly write big checks to spur its domestic AI industry.
China warns AI executives over US travel
Chinese national flags flutter near Tian'anmen Square ahead of China's annual sessions of its top legislature and political advisory body, known as the "Two Sessions," on March 3, 2025, in Beijing.
Viewpoint: China’s annual NPC meeting to address lackluster economy and Trump threat
A sluggish economy and new headwinds created by Donald Trump’s return to the White House will be prominent themes when the nearly 3,000 delegates of China’s National People’s Congress, or NPC, convene in Beijing starting Wednesday. The legislative session will run for about seven days (time not fixed) in parallel with that of the National Committee of the Chinese People’s Political Consultative Conference, or CPPCC. The so-called Two Sessions represent China’s biggest annual political gathering and provide insight into the leadership’s priorities for the year ahead.
We asked Eurasia Group expert Lauren Gloudeman what to watch out for.
What are the NPC and CPPCC?
The NPC is China’s highest governmental organ and national legislature. It usually convenes just once a year to advance legislation and approve national policy plans; the smaller Standing Committee of the National People’s Congress meets more often to continue the body’s legislative work. The CPPCC unites about 2,000 representatives of different social and political groups, giving them the opportunity to make their views known to the country’s leadership. Its role is more symbolic than anything else.
How does the NPC fit into China’s broader governance framework?
On the one hand, you have organs of government such as the NPC and the State Council, which implements legislation passed by the NPC and supervises the bureaucracy. On the other hand, you have the Chinese Communist Party, with its decision-making bodies such as Politburo and the Central Committee. The relationship between the government and the party has changed over time. Xi Jinping – general secretary of the party and president of the Chinese state – has made it a priority to assert the party’s authority over the government. Li Qiang, the party’s No. 2 official is premier of the State Council; Zhao Leji, the party’s No. 3 official, heads the NPC.
Are the Two Sessions’ proceedings open to the public?
The first couple of days will be open-door sessions of public speeches, reports, and press conferences. Li will present his so-called government work report. Like the US president’s state-of-the-union speech, the work report reviews the achievements of the past year and identifies key tasks ahead for the government. It usually sets economic targets. In addition, Xi will give remarks and the Ministry of Finance will give a budget report. Then there will be several days of closed-door sessions, during which not much information will emerge. At the end, different ministries will follow up with press conferences about their plans to advance policies discussed at the NPC.
What do you expect will be the main topics of discussion?
One major topic will be what to do about weak consumer spending, which has been a challenge for years now – especially since the COVID-19 lockdowns, when some people couldn’t leave their homes for months. Nonetheless, we’re not expecting a sea change in the policy approach to stimulating spending. More likely is an expansion of existing trade-in programs that offer subsidies for consumers to trade in their old EVs, household appliances, and other consumer goods for new ones.
What else would you highlight?
On a related note, officials will discuss measures to promote private enterprises. One of the reasons consumer spending is weak is that so many businesses struggled during the pandemic and continue to struggle, which has affected hiring. Authorities aggravated these problems in the private sector with an aggressive regulatory campaign against major companies they thought were insufficiently aligned with the party’s national development strategy. Now they are trying to repair the damage. Xi met last week with the leaders of 20 or 30 companies to reassure them that the government cares about stabilizing the private sector, and the NPC is expected to discuss a so-called private economy law. This measure could, for example, codify into law that private companies have equal rights and status with state-owned companies and offer guarantees of payment for private companies doing business with local governments.
How do you expect tensions with the Trump administration – which has slapped new tariffs on China and threatened more – to play into the NPC discussions?
The NPC is not an event that reacts to or is calibrated around recent events. That said, since Trump took office, we’ve been seeing the party’s high-level talking points acknowledging “external uncertainty” – which is code for Trump-related risks. Its response has been to make it clear to the country that it is committed to increasing support for the domestic economy to boost confidence. I expect these themes to be prominent at the Two Sessions.
Edited by Jonathan House, senior editor at Eurasia Group.
Prime Minister of the Cook Islands Mark Brown, seen here at the White House in Washington, in 2023.
China cooks up trouble in the South Pacific
The Cook Islands’ recent entry into a strategic partnership with China has spawned protests in front of Parliament, angered long-time ally New Zealand, and this week, nearly toppled the islands’ government.
On Wednesday, Cooks Prime Minister Mark Brown survived a 13-9 no-confidence vote. Opposition legislators were angry that Brown did the deal with Beijing in secret, jeopardizing the country’s long-standing relationship with Wellington, which New Zealand Foreign Minister Winston Peterssaid will now have to be “reset.” Brown’s partnership with China also follows an unsuccessful pitch last December to create a Cooks passport and citizenship, which also did not sit well with both Kiwis and islanders.
What is the Cooks’ connection with NZ? The Cooks became partially independent in 1965, but its 15,000 residents receive NZ citizenship and passports and use the NZ dollar. New Zealand has also committed over US$57 million in aid since 2022 and supports both foreign affairs and defense.
What did China offer? Beijing pledged a five-year “action plan,” including $4 million for education, the economy, infrastructure, fisheries, disaster management, and, most controversially, seabed mining for nodules rich in nickel and cobalt.
China’s larger agenda The Cooks are just the latest South Pacific nation to sign a deal with Beijing. Kiribati has signed a series of development agreements in recent years, even hosting Chinese police stations, as have the Solomon Islands. China has also persuaded both countries, as well as nearby Nauru, to switch diplomatic recognition from Taiwan to the mainland.Biden tightens China’s access to chips one last time
Throughout Joe Biden’s presidency, the Commerce Department has gradually tightened its chokehold on China’s access to semiconductors needed to access, train, and build artificial intelligence. On Dec. 2, Commerce Secretary Gina Raimondo announced what she told reporters amounted to the “strongest controls ever” meant to restrict China’s access to AI for military applications. Today, China responded with its own new restrictions, sending a strong signal to the incoming US president.
The new US controls announced Monday, the third order in as many years, apply to 24 types of semiconductor manufacturing equipment, three types of software tools, and high-bandwidth memory, or HBM, an interface often used in producing AI chips. The department also added 140 Chinese companies to its Entity List, which requires regulatory approval should a US company wish to sell to a member of the list. “By adding key semiconductor fabrication facilities, equipment manufacturers, and investment companies to the Entity List, we are directly impeding the PRC’s military modernization, WMD programs, and ability to repress human rights,” said Matthew Axelrod, assistant secretary for export enforcement at the Commerce Department.
In response, on Dec. 3, China banned shipments of certain materials using gallium, germanium, and antimony to the US, as well as super-hard materials such as diamonds. These items can be used both for military and semiconductor applications. “China firmly opposes the US overstretching the concept of national security, abuse of export control measures, and illegal unilateral sanctions and long-arm jurisdiction against Chinese companies,” said Lin Jian, a Chinese Foreign Ministry spokesperson.
Jacob Feldgoise, an analyst at Georgetown University’s Center for Security and Emerging Technology, said the new US order plugged holes in the previous year’s rules. It requires a license for many more exported tools, focuses on high-bandwidth memory “because HBM is used by nearly all of the most capable AI chips” and strengthens the US’s grasp beyond its borders. “Notably, this set of controls is newly extraterritorial: It will impose licensing requirements on certain foreign-produced tools so long as they contain US technology,” Feldgoise said.
Xiaomeng Lu, director of Eurasia Group's geo-technology practice, noted that the US excluded the Chinese semiconductor company ChangXin Memory Technologies from the Entity List to appease the Japanese government. CXMT has been buying materials from Japanese suppliers to make its memory chips. “With the Trump administration on its way, they are expected to take a more unilateral approach and will be less likely to make concessions per requests of allies,” she said.
Jeremy Mark, a nonresident senior fellow at the Atlantic Council's GeoEconomics Center, said it’s difficult to judge how significant these new rules are because of the looming change of guard in the White House. Had they come ahead of the transition to a Kamala Harris administration, “they would continue making life complicated for Chinese semiconductor companies and US companies that rely on the China market for a significant portion of their sales.” However, Mark said that Donald Trump could strengthen or weaken export controls when he takes office, so it’s “impossible to say” what the legacy of this final move will be.
For Biden, it marks the end of an era of success: While his restrictions on China could have been tighter or less porous, he leaves office with China still searching for AI breakthroughs. The US, at least under Biden’s watch, is still on top.
But China’s next-day retaliation shows that it is ready to play hardball ahead of the incoming Trump administration. Beijing understands that diplomacy alone might not do the trick, and that to succeed in getting America to the bargaining table it needs to safeguard its own crucial resources. “This is a step up in China’s reaction to US technology sanctions,” Lu said. “China is very frustrated with the lack of communication channels with the incoming administration. They are trying to send a shot across the bow to get attention from the Trump team.”