With growing trade agreements of big economies in recent times, such as the US knocking China in trade wars initiated by the US, the US-UK trade deal, and recent dealings of Japan with the US, the crucial role of trade negotiations leading to conclusive trade deals to mitigate economic sanctions and tariffs is evidenced. Effective trade agreements can open up new markets, increase exports, and drive economic growth by reducing tariffs, quotas, and other barriers, allowing countries to expand their businesses’ reach and create more opportunities. US tariffs and the shift towards diversifying supply chains away from China are altering the global trade dynamics. While the primary aim of these tariffs has been to safeguard domestic industries and address trade imbalances, their long-term impact includes changes in global manufacturing trends and the creation of new trade partnerships. It is, therefore, important to assess the recent US-China trade trends, US trade strategy shifts and impact on third countries, and finally the mitigation strategies as strategic responses beyond tariffs and retaliation.
Overview of Recent US-China Trade Trends
The quarterly trade data analysis starting in 2022 indicates an increase in China’s global exports from $907.02B in 2022-Q2 to a peak of $957.00B in 2024-Q4, before dipping to $844.54B in 2025-Q1. This pattern suggests steady growth punctuated by seasonal slowdowns, particularly noticeable in the first quarter of each year. This shows a generally upward trend with seasonal dips, particularly in Q1s of each year. Among China’s major trade partners, the US remained the top export destination, though trade with the US showed marked volatility. Exports dropped significantly from $154 billion in 2022-Q2 to $111.82 billion in 2023-Q1, rebounding to $143.02 billion by 2024-Q4 and declining again in early 2025. In contrast, Hong Kong displayed steady and consistent growth as an export destination for China, reflecting its role as a stable re-export hub, with exports increasing from $72.38 billion to $78.68 billion before a small dip in 2025. Vietnam and India have emerged as key export growth markets, with Vietnam’s exports climbing from $40.21 billion to $43.86 billion and India maintaining an overall upward trend, peaking at $32.73 billion in 2024-Q3. On the other hand, exports to Japan and South Korea remained largely flat or declined slightly, suggesting maturing trade relations. South Korea, in particular, saw a notable drop from $43.87 billion in 2022-Q2 to $33.28 billion in 2025-Q1. Germany, Malaysia, and Thailand exhibited modest and mostly stable figures with minor fluctuations, while Russia stood out for its significant growth. Chinese exports to Russia have more than doubled, rising from $13.09 billion in 2022-Q2 to $32.35 billion in 2024-Q4, although a sharp drop to $22.69 billion in 2025-Q1 suggests recent trade disruptions.
Overall, China’s export landscape is characterized by steady global growth led by emerging trade partnerships in Southeast and South Asia and periodic volatility in key markets like the US and Russia. On a monthly basis, as per the latest numbers of April 2025, Chinese shipments to the US fell by 21% compared to the previous year, while exports to the Southeast Asian bloc, ASEAN, increased by 21%. These figures highlight the significant impact of US tariffs on China in terms of reshaping the global trade order.
US Trade Strategy Shifts: First Moves in the Trade Standoff with China
Firms like Goldman Sachs had forecasted a 45% chance of a US recession within the next 12 months, attributing this risk primarily to the ongoing trade tensions with China. JP Morgan, on the other hand, had raised it to 60%, up from 40%, in response to the Trump administration’s imposition of steep tariffs. For respective countries’ GDP, estimates for China’s GDP growth were placed at 4% in 2025 and 3.5% in 2026 and 0.3% contraction in US GDP for 2025.
The escalating tit-for-tat effectively mirrored a de facto trade embargo between the world’s two largest economies—an economically unsustainable scenario over the long term. Given the mutual interdependence and the broader implications for global supply chains, a recalibration was inevitable.
While the journey to reach the present times for the US-China 90-day trade truce was awaited in the interest of global trade disturbances, what emerges as prominent holds strategic significance. While the US imposed tariffs and reciprocal tariffs, it was the first to bring negotiations to the table with China, and that also outlines how other global actors were affected. This year, the US’s 145% tariff on Chinese imports, heavily targeting electronics, steel, textiles, and rare earths, was the highest among all countries. Canada faced 25% tariffs on steel and aluminum and 10% on other goods, affecting its steel, auto, and retail sectors. Mexico was subject to 25% tariffs on non-USMCA goods, hitting auto parts, electronics, and produce. The EU received 25% tariffs on steel, aluminum, and cars and 10% on other goods, impacting the automotive, aerospace, and agriculture sectors. Japan faced 25% tariffs on autos and 24% on general imports, affecting autos and industrial machinery. Lastly, India was hit with a 26% tariff, with expected effects on pharmaceuticals, textiles, automobiles, and jewelry. While the trade war originated between the US and China, it instigated extensive macroeconomic instability on a global scale.
Mitigation: Strategic Responses to US Tariff Impacts
Countries are exploring various strategies to insulate themselves from the effects of the US-China tariffs and to reduce their dependence on Chinese manufacturing. These include diversifying supply chains, entering into new trade agreements, reshoring production, and investing in technology. While China remains a crucial player in the global economy, these steps reflect a broader trend toward economic resilience and diversification in the face of global trade uncertainties.
Firm-led supply chain reconfigurations are increasingly appearing insufficient as standalone strategies for insulation against systemic global disruptions. Japan’s case is often cited as a noteworthy example of executing the shift-away strategy from China. Since 2018, Japan has accelerated efforts to reduce its economic dependence on China. This included actions like banning Huawei from its telecommunications infrastructure, restricting semiconductor equipment exports to China, and enacting policies to bolster domestic resilience, partly influenced by US decoupling strategies. Despite these efforts, China remains Japan’s largest trading partner, with a trade imbalance in favor of China. In response to risks associated with overreliance on China, many Japanese companies adopted the “China plus one” strategy, diversifying production to Southeast Asia. Japan’s 2022 Economic Security Promotion Act (ESPA) aimed to enhance national security and economic stability by securing supply chains and fostering innovation, aligning with global efforts like the US CHIPS Act. Companies in Japan, the US, and Europe are increasingly adopting “friend-shoring” and onshoring practices to reduce vulnerabilities.
Corporate shifts also reflect Japan’s decoupling from China, with major companies like Nintendo and Sony relocating production to countries like Vietnam and Thailand. Nippon Steel notably exited a joint venture with China’s Baoshan Iron & Steel and pursued an acquisition of US Steel. The Japanese government supported these moves through exit subsidies to help companies relocate. Japanese businesses increasingly scaled back operations in China with reduced investment and employment and greater focus on ASEAN countries and India for future growth.
However, the recent US tariffs on Southeast Asian exports have complicated this approach. The imposition of US tariffs, particularly on automobiles and metals, led Japan to declare the situation as a “national crisis.” The Japanese government’s strategy to fight tariffs comprised support to small businesses and engaging in diplomatic talks with the US.
As the trade war between China and the US unfolds, countries must prioritize resilience, diversification, and diplomacy. By adapting their trade strategies, investing in technology, and fostering economic self-sufficiency, nations can reduce their vulnerability to the consequences of the ongoing trade tensions. Ultimately, finding a balance between competition and cooperation will be critical for countries to navigate the shifting dynamics of global trade and ensure long-term stability. Investing in technological independence is an essential strategy in the current trade environment. As both the US and China are major players in technology, focusing on strengthening domestic research and development capabilities allows countries to reduce their reliance on foreign technology. Collaborating with other nations, such as the EU or Japan, to develop next-generation technologies will further strengthen the countries to minimize their dependence on Chinese or US tech companies. The world cannot do without the US or China, but the cost of the tensions and their solutions are often borne by the third countries. The traces of trade war have now penetrated every country, irrespective of its level of development and global presence. As the ongoing trade tensions between China and the US remain uncertain as ever, countries must adapt their strategies to safeguard their economies and maintain stability. A key response to these trade tensions is diversifying economic partnerships. Seeking new markets and trade agreements is the way out to building resilience in the volatile global landscape.
The US has targeted several ASEAN countries with tariffs as part of its broader trade strategy, particularly in response to trade imbalances and concerns over unfair trade practices. The case in point has been the solar panels. The US had imposed significant tariffs on solar panel imports from Southeast Asian countries, including Cambodia, Vietnam, Malaysia, and Thailand. Some of these tariffs are as high as 3,521% and were introduced following a petition by US solar manufacturers who accused these nations of benefiting from unfair government subsidies and engaging in below-cost selling, leading to what they consider unfair competition. This highlighted how the often-cited solution of supply chain shifts also can no longer come as a rescue option to mitigate risks of the US-China trade war.
While the US-led tariff war was mainly to target China, the world suffered, and the US could not continue with the acid test for long. The US claimed to be talking to China even when China denied such developments. Finally, with US and China’s week of negotiations, media is abuzz with the US-China Economic and Trade Meeting in Geneva held on 12th May 2025 and how global developments have become less uncertain for 90 days. The US has stated it will drop tariffs by 115% by bringing them down from 145% to 30% on Chinese goods, with China reducing them from 125% to 10% on US goods. Reports also talk about how the US and China agree to slash tariffs but are not drawing much reference to the baseline tariffs (20%) on Chinese goods prior to the imposition of reciprocal tariffs since 02nd April 2025 than the rate applicable during the 90-day truce period. While the use of more tariff threats with countries is forcing them to negotiate with the US, China is not restrictive in its outreach space in strengthening relationships with other parts of the world. With the joint statement by the US and China announced on 12th May 2025, the very next day China announced the launch of five programs of cooperation between China and Latin American and Caribbean (LAC) countries. While the Ministry of Foreign Affairs of the PRC states China and LAC trade to have crossed the US$ 500 billion mark in 2024, the deepening of ties with LAC countries ensures China’s secured supply chain of vital raw materials like copper and lithium, along with investment by Chinese companies in mining and energy projects in Chile, Peru, and Ecuador; a strategic geopolitical foothold in Costa Rica and Nicaragua through weakening Taiwan’s diplomatic presence and competing with the US; secured trade and investment frontiers amid disruptive global developments such as trade wars, along with diplomatic support in global platforms such as the UN, etc.
The rules of the game have evolved over time. The case of Japan illustrated the strategy of reducing dependence on China and the importance of the China plus 1 shift to insulate the economy from both China’s economic coercion and external challenges faced by China in terms of economic sanctions, including tariffs from the Western world. The lessons to be drawn from the recent dealings of select economies with the US and also that of China to fight the trade/tariff war are through its growing FTAs with the rest of the world.
The time is now for trade agreements to address trade imbalances by ensuring fairer terms that protect domestic industries while promoting international trade. Trade negotiations are crucial towards concluding the agreements so as to encourage foreign investment, as investors are more likely to commit to a country with clear, stable, and favorable trade relations. On a political and diplomatic level, trade negotiations strengthen ties between countries, creating channels for cooperation, addressing common interests, and resolving conflicts, which fosters stability in international relations. Countries are now relying more on trade negotiations to ensure their supply chains remain efficient and cost-effective by addressing cross-border issues like tariffs, logistics, and regulations. Additionally, negotiations help harmonize standards and regulations, making it easier for businesses to operate across borders, covering areas such as intellectual property, labor rights, environmental regulations, and product safety. Finally, during economic or geopolitical crises, trade negotiations offer mechanisms for resolving disputes and easing tensions, helping avoid trade wars and maintaining stability in global markets. In today’s world, trade negotiations and agreements are fundamental in creating opportunities for economic expansion, improving market access, fostering international cooperation, and ensuring fair and balanced trade practices across borders. Consequently, global trade actors must familiarize themselves with and adapt to the shifting regulatory, geopolitical, and economic paradigms that now define the international trading environment.
