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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.
The Graphic Truth: The foreigners who hold US debt
The US is the world’s biggest debtor, with more than $35 trillion of securities outstanding.
About a quarter of that is held by foreign investors, a detail which has drawn considerable attention since Donald Trump began walloping the world with tariffs to rebalance US trade ties and military alliances. That’s because if countries upset – or merely uneasy – about Trump’s policies sell those securities in response, the debt servicing costs for the US rise. This is no small matter on $35 trillion worth of paper.
In fact, one widely held explanation for Trump’s abrupt suspension of the “Liberation Day” tariffs on April 9 was that wary bond investors had begun to sell US Treasuries: In the week of April 11, yields on 10-year US treasuries saw their biggest leap in a quarter of a century, a sign that creditors were dropping US sovereign debt fast.
Could countries weaponize US debt more directly? China, Trump’s biggest trade war target, is the second largest foreign US creditor, officially holding more than $750 billion.
A selloff could be devastating. But analysts say it would be hard to find enough buyers for a sale that is both swift and large enough to catch the US off guard.
And even if it were possible, a seller would risk their own financial security as well global economic health by kneecapping the US. In other words: It would be, in financial terms, the nuclear option.
The graphic above looks at which countries hold the most US sovereign debt. Note that the last official data precede Liberation Day and that they depend on official reporting. Some countries may hold more than what is listed here via third parties.
Chinese President Xi Jinping meets with Cambodia's Prime Minister Hun Manet (not pictured) at the Peace Palace in Phnom Penh, Cambodia, April 17, 2025.
China warns world against harmful US trade deals
Chinese President Xi Jinping launched a tour of Southeast Asia this month, visiting key trade partners and calling for an “open and cooperative international environment” that rejects “tariff abuse.” But given the reliance of countries like Vietnam and Cambodia on US markets, Beijing may need more than words.
What comes next: Major players are kicking off talks with the US, with Japan starting last week and South Korea meant to commence within days, and Vice President JD Vancemeeting with Indian Prime Minister Narendra Modi in New Delhi on Monday.
Keep your eye on smaller players: Kenyan President William Ruto arrives in Beijing Tuesday, as his burgeoning economy faces strain from US aid clawbacks. For economies in the developing world like his, taking Beijing’s side might be the best hedge available.Two DHL delivery vans deliver parcels in Maximilianstrasse in Munich, Germany, on Feb. 20, 2025.
Companies respond to Trump’s trade crackdown
The ripple effects of US President Donald Trump’s tariff policies continue to impact global supply chains. On Saturday, transport company DHL announced it would suspend international shipments over $800 to American consumers, citing that new tariff rules had overwhelmed its processing systems. Automaker Ford said it was “adjusting” its exports of vehicles like the F-150 Raptor, Lincoln Navigator, and Mustang to China, due to the impact of tariffs. And China’s Xiamen Airline reportedly returned a Boeing 737 MAX, freshly painted in company colors – the latest casualty of that country’s ongoing trade war with the US.
Other countries are opting for negotiation over retaliation. Italian Prime Minister Giorgia Meloni visited Washington on Friday hoping to talk EU trade with Trump, but found the US President was “in no rush” to strike a deal. This week, South Korea will enter into tariff talks, hoping to avert the 25% reciprocal tariff Trump announced, and then paused, in early April.
What else is expected in the next few days? On Tuesday, the IMF is set to release global growth forecasts – and is expected to both lower expectations for growth in tariffed countries while raising expectations for inflation. A day later, coordinated purchasing manager indexes from most major economies will be released, offering a first look at the early impacts of tariffs and trade threats on economic activity.US President Donald Trump attends a Cabinet meeting at the White House in Washington, D.C., on April 10, 2025.
China strikes back at the US with massive tariffs of its own
Wednesday’s tariff respite is firmly in the rearview mirror, as China announced on Friday it was raising its duty on US imports to an astronomical 125%, taking effect Saturday. The announcement came less than 24 hours after the White House clarified that the new levy on Chinese imports would be 145%.
With US President Donald Trump’s collision course with the rest of the world on hold — the EU delayed its planned retaliatory levies Thursday — his fully-fledged trade war with China now has the spotlight to itself. Whereas he dropped tariffs on other countries on Wednesday, the commander-in-chief raised them on Beijing three times within one week, with the White House clarifying on Thursday that the rate is now 145%. After a brief delay, China has now responded in kind.
And just like that. These extraordinary levies are already affecting businesses. US firms have started canceling orders and some Chinese companies are putting staff on temporary leave. Trans-pacific shipping bookings have plunged. The March inflation figures released Thursday suggested that US price growth was easing, but the data was taken before the new China tariffs were implemented. With the levies accelerating skyward, it’s only a matter of time before US prices follow suit.
Markets suffer again. The laws of gravity applied to the markets Thursday — before China announced its latest retaliation — with stocks reversing again as the reality of Trump’s new world trade order set in for investors. The S&P 500 dropped 3.5%, the Dow Jones Industrial Average fell 1,000 points, and the dollar lost ground against the major Asian currencies. On top of all this, Democrats are now questioning whether the president and his allies engaged in insider trading this week. Wednesday’s comeback looks like a fever dream.
The dust won’t settle. Trump acknowledged Thursday that there would be “transition problems” with the markets, while retaining his unfailing optimism that stock would turn around. The former “Apprentice” star added that he was open to extending the 90-day tariff pause on countries that aren’t China, but with Beijing further escalating the trade war, investors will remain unsettled.
President Donald Trump speaks as he signs executive orders and proclamations in the Oval Office at the White House on April 9, 2025.
The Truth will set tariffs free
With stock markets plunging and US Treasury yields reaching new heights, US President Donald Trump finally reneged on parts of his widescale tariff plan on Wednesday, declaring a 90-day pause to the far-reaching “reciprocal” levies that he introduced just one week ago while leaving a 10% across-the-board duty in place. He also escalated the already-burgeoning trade war with China by increasing the tariff on their imports to 125%.
“I have authorized a 90 day PAUSE, and a substantially lowered Reciprocal Tariff during this period, of 10%, also effective immediately. Thank you for your attention to this matter!” Trump declared on Truth Social.
Trump’s announcement brought some much-needed relief to the countries facing these tariffs.
“This is a much smaller tariff wall. It is less disruptive. It has the potential for landing in a better place with most of the US trading partners,” said Eurasia Group’s geoeconomics expert Jens Larsen.
All in a day. The S&P 500 index surged more than 9% within a few hours of the announcement, bringing some rare good news to the American markets in an otherwise-tawdry week. The Nikkei jumped 9% on Thursday, recording its second-best ever day. As for China, Trump said the 125% tariff would be implemented immediately, before expressing optimism that the two superpowers could reach a deal. Beijing had announced earlier on Wednesday that it was imposing an additional 50% tariff on US imports, matching the extra duty that Trump had placed on Chinese imports on Tuesday and bringing the total levy to 84%.
Not out of the woods yet. Though stocks rose following Trump’s pause, Treasury yields haven’t fully recovered from the sharp moves of earlier this week, reflecting some potential damage to the US economic brand. The dollar has continued falling, too. The political ramifications of this are potentially more widespread than any market drops, as the higher yields make it more difficult for small businesses to access loans, with knock-on effects for the US economy.
“Fundamental uncertainty remains. Not only could tariffs be implemented in the future, but the predictability and credibility of US economic policy has taken a serious hit,” Larsen added. “And at the end, we still end up with a more rapidly fragmenting world.”
EU and Chinese flags in an illustration.
The EU extends a hand toward China
European leaders have much to worry about when it comes to trade and economic growth. In March, Donald Trump imposed 25% tariffs on steel, aluminum, and cars coming from Europe. Last week, he added a 20% tariff on virtually everything else that Europe exports to the US. On Wednesday, the EU responded by announcing tariffs on a broad range of US-exported products that could affect about $23 billion worth of goods. Then, later on Wednesday, Trump suddenly included the EU among those who would see tariff rates fall back to 10%. The whiplash from Washington continues.
But European leaders are also concerned about China, which continues to flood the EU with goods, particularly electric vehicles, that undercut European manufacturers on price. That’s a problem that could get worse quickly if Chinese goods normally destined for the US are diverted by Trump tariffs toward Europe – a problem that looked even more serious after Trump’s Wednesday announcement that he would raise the “tariff charged to China by the United States of America to 125%, effective immediately.”
European Commission President Ursula von der Leyen held a call with Premier Li Qiang earlier this weekand said afterward that EU and Chinese leaders should work together toward a “negotiated resolution” to any trade conflicts between them and provide “stability and predictability” for the global economy.
There is also an opportunity here for President Xi Jinping. China has a strategic interest in helping to divide the US from Europe. Demonstrating to European leaders that China can become a force for economic stability at a time when Trump is waging a trade war on allies and rivals alike would further that goal.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.