Tariffs fallout: The US will struggle to take on Asia over chips

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Suranjana Tewari

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BBC An outline image of the USA filled with microchip parts in greenBBC

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The US has “dropped the game” on chip production over the years, allowing China and various Eastern hubs to heat away. Gina Raimondo, the US Commerce Secretary at the time, said this in a 2021 meeting with me.

Four years later, chips are still a hot topic in the US-China race for tech dominance, and US President Donald Trump wants to reinvigorate a very complicated and sensitive manufacturing process that has taken another regions decades to great.

He says his tax plan will conquer the US business and bring work home, but it is also the event that some of the biggest companies have long struggled with a lack of skilled workers and poor-quality make in their American factories.

What did Trump change, then? And is it even possible for the US to make them on a level, given that Taiwan and different parts of Asia are the masters of producing high-precision cards?

Making computers: the secret soup

Electronics are essential to the power of everything from military planes to electric vehicles to washing machines to smartphones. These small silicon wafers, or cards, were originally created in the United States, but Asia is where the most sophisticated chips are being produced on a massive scale.

Making them is expensive and functionally difficult. For instance, an iPhone may have bits made in the US, made in Taiwan, Japan, or South Korea, and used as natural materials, such as rare rocks, which are primarily mined in China. Second, they might be sent to Vietnam for packing, next to China for legislature and screening, before being shipped to the US for shipment.

Getty Images A woman of Asian appearance wearing a pink top and hat peers over a chip manufacturing machineGetty Images

It is a profoundly integrated ecosystem that has evolved over the years.

Trump has praised and threatened to impose levies on the chip industry. He has told industry leader, Taiwan Semiconductor Manufacturing Company ( TSMC), it would have to pay a tax of 100 % if it did not build factories in the US.

They need to be able to prepare for higher fees and expense calling in the long term, properly beyond Trump’s presidency, given such a complex habitat and fierce competitors. The regular revisions to plans aren’t helping. So much, some have shown a commitment to invest in the US.

The substantial subsidies that China, Taiwan, Japan, and South Korea have given to private businesses producing chips are a major factor in their success.

The US Chips and Science Act, passed into law in 2022 under President Joe Biden’s plan to re-orient the production of cards and extend supply chains, by distributing offers, tax credits, and incentives to encourage local production, was mostly driven by this idea.

Getty Images A TSMC factory in Taiwan. The building is horizontal and silver with the letters TSMC writ large across it in red writing. In the foreground moped riders pass on the road in front of the factory.Getty Images

Some companies like the world’s largest chipmaker TSMC and the world’s largest smartphone maker Samsung have become major beneficiaries of the legislation, with TSMC receiving$ 6.6 billion in grants and loans for plants in Arizona, and Samsung receiving an estimated$ 6 billion for a facility in Taylor, Texas.

Trump and TSMC made a further$ 100 billion investment in the US, in addition to the$ 65 billion pledged for three plants. TSMC also benefits from diversifying chip production, with China repeatedly threatening to overthrow its island.

But both TSMC and Samsung have faced challenges with their investments, including surging costs, difficulty recruiting skilled labour, construction delays and resistance from local unions.

This is not just a factory where boxes are made, according to Marc Einstein, research director at Counterpoint, a market intelligence firm. ” The factories that make chips are such high-tech sterile environments that they take years to build.”

And despite the US investment, TSMC has said that most of its manufacturing will remain in Taiwan, especially its most advanced computer chips.

Did China attempt to rob Taiwan of its talent?

High-quality chips are produced today at TSMC’s plants in Arizona. But Chris Miller, author of Chip War: The Fight for the World’s Most Critical Technology, argues that” they’re a generation behind the cutting edge in Taiwan”.

According to him,” the scale question depends on how much investment is made in the US versus Taiwan.” Taiwan currently has much more capacity.

The reality is, it took decades for Taiwan to build up that capacity, and despite the threat of China spending billions to steal Taiwan’s prowess in the industry, it continues to thrive.

Getty Images Exterior shots of the TSMC chip plant in ArizonaGetty Images

The “foundry model,” in which chip makers took US designs and produced chips for other companies, was pioneered by TSMC.

With the best engineers, highly qualified labor, and knowledge sharing, TSMC was able to compete with US and Japanese giants while riding on the wave of Silicon Valley start-ups like Apple, Qualcomm, and Intel.

” Could the US make chips and create jobs”? asks Mr. Einstein. ” Yes, but will they reduce the size of the chips by a nanometer?” Probably not”.

Trump’s immigration policy, for example, may have a role in limiting the arrival of skilled workers from China and India.

According to Mr. Einstein,” Even Elon Musk has had an immigration problem with Tesla engineers,” referring to Musk’s support for the US’s H-1B visa program, which brings skilled workers to the US.

” That’s a bottleneck and there’s nothing they can do, unless they change their stance on immigration entirely. You can’t just magicalize PhDs out of thin air.

The global knock-on effect

Even so, Trump has doubled down on tariffs, ordering a national security trade investigation into the semiconductor sector.

According to Mr. Einstein, “it’s a big wrench in the machine.” For instance,” Japan’s business plan did not include tariffs in its plan of action,” citing the fact that it relied on semiconductors to revitalize its economy.

The longer-term impact on the industry, according to Mr Miller, is likely to be a renewed focus on domestic manufacturing in many of the world’s key economies: China, Europe, the US.

Some businesses might be looking for new markets. In response to export controls and tariffs, Chinese technology giant Huawei, for example, expanded into Europe and emerging markets, including Thailand, the UAE, Saudi Arabia, Malaysia, and many African nations, even though the margins in developing nations are small.

” China ultimately will want to win – it has to innovate and invest in R&amp, D. Look at what it did with Deepseek”, says Mr Einstein, referring to the China-built AI chatbot.

Everyone will go to them if they make better chips, they say. They can do this right away for cost-effectiveness, and looking forward, they can do it because of the ultra-high-tech fabrication.

Donald Trump speaking into a microphone with his arms out to either side in front of him

In the meantime, new manufacturing hubs may emerge. According to experts who claim there is a greater chance of India joining the chip supply chain because it is geographically closer, labor is cheap, and education is good, India has a lot of promise.

India has indicated its willingness to work with chips, but it also faces challenges related to land acquisition and water, since chip production requires a lot of water of the highest caliber.

Bargaining chips

Chip manufacturers are not entirely free from tariffs. Due to his reliance on and increasing demand for chips from major US companies like Microsoft, Apple, and Cisco, Trump may have to retaliate.

Some insiders believe intense lobbying by Apple CEO Tim Cook secured the exemptions to smartphone, laptop and electronic tariffs, and Trump reportedly lifted a ban on the chips Nvidia can sell to China as a result of lobbying.

Trump responded to a question about Apple products in particular on Monday in the Oval Office, saying,” I’m a very flexible person,” adding that” there may be things coming up, I speak to Tim Cook, I helped Tim Cook recently.

Getty Images Nvidia CEO Jensen HuangGetty Images

Einstein believes that Trump’s ultimate goal is to make a deal, because he and his administration are aware that they can’t just build bigger buildings when it comes to chips.

” I think what the Trump administration is trying to do is what it has done with TikTok’s owner Bytedance. He claims that unless you give Oracle or another US company a stake, I won’t let you run in the US any longer.

” I believe they’re trying to fandangle something similar here- TSMC isn’t going anywhere, let’s just force them to make a deal with Intel and take a piece of the pie,” he said.

But the blueprint of the Asia semiconductor ecosystem has a valuable lesson: no one country can operate a chip industry on its own, and if you want to make advanced semiconductors, efficiently and at scale – it will take time.

Trump is attempting to establish a chip industry through isolation and protectionism, but the key to its development in Asia was collaboration, which is the opposite.

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Japan must begin a process of strategic decoupling from America – Asia Times

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Over the past five decades, the political landscape has changed significantly. The US’s hasty departure from Afghanistan in 2021, followed by its deepening involvement in the Ukraine conflict, then understood as a grinding proxy fight between NATO and Russia, exposed the boundaries of US influence. &nbsp,

Washington has struggled to stop the Houthis, Iran, and Syria crises in the Middle East while continuing to support Israel’s murder in Gaza. In East Asia, its pledges are becoming more strained by a more confrontational North Korea and a rising China. At home, prices, borders insecurities, and social fragmentation all contribute to the growing awareness that American supremacy is waning both domestically and globally.

No nation is most likely to be impacted by Japan’s equivalent drop. Japan has remained attached to Washington ever since the end of World War II, whether it be physically, socially, or physiologically. Its politics are greatly influenced by British interests, and its protection is largely outsourced. Its media group repeatedly repeats Washington’s utterances.

Washington stumbles, as has the post establishment in Japan, also, obviously incapable of imagining a world in which Washington is no longer the dominant force.

However, that post-Washington world is quickly developing and has already been established in many ways. Japan must begin a process of corporate decoupling from America if it wants to get ready for the fast developing multilateral world. This does not imply a quick and slack compensation of ties; rather, it means making a conscious and deliberate effort to establish autonomy in crucial areas of diplomacy, defense, and economics.

Second, Japan ought to think about engaging in discussions with those who are generally thought to be opposed to the so-called Washington-led progressive international order. These discussions would serve as logical steps in the direction of resolving a long-standing provincial issue as well as a declaration of Japan’s intention to expand its diplomatic options.

For instance, Japanese officials may silently communicate with North Korea. The resolution of the abductee problem, a humanitarian issue that has remained unsettled for decades, would be a key goal.

For far too much, pro-Washington groups within Japan’s traditional formation have relied on the US to guide the abduction conversations. The problem has frequently been enshrined in wider strategic objectives, such as reducing the North’s ballistic missile features or denuclearizing the Korean Peninsula. &nbsp,

But, North Korea has little interest to engage under the current circumstances. The issue is stalemated because North Korea is aware that Washington’s goal is disarmament, so it is important to return the abducted people.

Tokyo and Pyongyang will not meet unilaterally thanks to strong interests in Japan, effectively devaluing the abductee problem by putting it in subjection to Washington’s political prerogative. This treachery by the” traditional” political class in Japan only serves as proof that Japan will not follow an independent path through East Asia.

A strong, Japan-led effort could rekindle the conversation, not just about the abductee case but also about the topic of suppressing diplomatic relations in general, reminiscent of former prime minister Junichiro Koizumi’s approach. North Korea may react to such requests more warmly if Japan made an immediate contact with North Korea without acting as Washington’s styrofoam or message-bringer.

Second, in spite of the current geopolitical tensions, Japan if re-engage with Russia. A calm, logical politics with Moscow might be able to accomplish many goals, including acquiring energy resources, halting economic sanctions, and, most importantly, reopening the dialogue on the status of the Northern Territories. &nbsp,

Recognizing some political challenges, such as Russia’s handle of Crimea and various regions in Ukraine, may seem improbable in terms of achieving a consensus in territorial issues, but they could be used as bargaining chips in discussions that prioritize Japan’s regional interest. Tokyo should never evade sanctions, but more carefully consider whether a gradual shift in Washington’s position was yield strategic advantages.

Third, Japan needs to reevaluate its long-term use of US military installations. A more intelligent security position may be a part of a broader protection plan, even though the alliance with the US remains fundamental to Japan’s security framework in the minds of defense planners in Tokyo.

The pro-Washington formation in Japan needs to learn the word “double containment.” Under the excuse of burden-sharing, Japan may begin by strengthening its administrative control and operational oversight of some bases.

A gradual and clear renegotiation of the foundational structure may lay the foundation for greater autonomy in defense affairs, without causing an unnecessary conflict.

Tokyo may even start a national dialogue on revisiting the Three Non-Nuclear Concepts in parallel. However, it is important to keep in mind that nuclear sharing is certainly a viable long-term purpose. As a pillar of Chinese autonomy, Japan may work toward nuclear weapons.

Third, reevaluating Japan’s financial relationship with the US, especially its position as one of the largest US Treasury Bondholder, is likewise necessary. A steady growth of Japan’s supply assets and a reduction in US debt exposure may provide a long-term hedge against future volatility, even though an abrupt sell-off may be difficult and self-damaging.

Japan is in very risky territory, and the bond markets are in turmoil. Given that Washington appears to have an insatiable appetite for more debt, this is even more concerning. Because of this, Tokyo is now facing a difficult task of reconfiguring the situation for creditor countries like Japan.

Fifth, any adjustment of strategic posture must be accompanied by a national evaluation. To expose the extent to which Japanese politicians, the Japanese media, and other people and institutions worked with Washington during the postwar era, Japan must establish a truth and reconciliation commission.

Washington is Japan’s protector, not its ally. Tokyo has remained a slavish camp follower of Washington’s murderous foreign adventures long after decolonization movements swept Asia, Africa, and Latin America. As a first step toward restoring Japan’s colonial dominance, the Japanese people deserve to know who sold their nation to Washington.

Japan’s strategic separation from Washington won’t just be a military, fiscal, or political exercise. It must also be a time for reflection, an opportunity to reshape Japanese society by telling the truth about the past and allowing the Japanese people to accept the gravity of the crimes their leaders have committed against them.

Jason M. Morgan is the co-author of The Comfort Women Hoax: A Fake Memoir, North Korean Spies, Hit Squads in the Academic Swamp, and is also a research fellow at the Moralogy Foundation in Kashiwa, as well as an associate professor at Reitaku University in Kashiwa, Japan, as well as an editorial writer for the Sankei Shimbun newspaper in Tokyo.

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China’s propaganda coup and the danger of US indecision – Asia Times

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China is a king at twisting the tale.

Dai Bing, the Chinese ambassador to South Korea, claimed on his X accounts that South Korea should be appreciative of the 90-day extension of US levies on Korean exports on April 11. He stated:

The “mutual taxes” have been delayed by 90 days. Is that beneficial? Remember that this 90-day grace period would never have existed if it weren’t for China’s solid deterrence and significant counterattack! Remember that this is only a 90-day joy period.

My response wasn’t fury, even though many South Koreans expressed outrage. It was incredible. They’ve turned tale manipulation into an art form, I thought.

a command pump

However, it’s not all about talent. The US left the door open, in part, to China, who has been able to steal the tale.

The first blanket imposition of tariffs on nations all over the world, including the uninhabited, penguin-inhabited islands close to Australia, has undermined the US’s credibility, both economically and socially.

Washington has allowed Beijing to stand out as the only child in the room by acting without proper quality. China now asserts that it is absorbing the impact of US tariffs and that its retribution is the catalyst for the temporary restraint it has been receiving from companions like South Korea.

And then, countries like South Korea are trapped in a complicated middle earth. Because Washington’s steps have been difficult to defend, China’s tale has some validity.

Beijing can give a twisted kind of clarity as a result of this kind of corporate ambiguity. Beijing’s information instantly seems more reasonable even when allies are uncertain whether Washington is a friend or a rival. Understanding eventually gains strength.

Eisenhower’s teaching

Examine the approach of today to that of former US president Dwight D. Eisenhower during the Cold War. Eisenhower understood the risks of provoking autocratic adversaries to join their economic crisis and, possibly, into their hands. In his 1984 publication The Pacific Alliance, professor William S. Borden wrote about it.

Secretary of State John Foster Dulles remarked to his listeners at a crucial cabinet meeting on August 6, 1954, that Japan had chosen the defense development route” to getting control of their own businesses and their own components.” He claimed that if the US offered tariff reductions,” Japan had very quickly move bankrupt” if it were to remain on our side. He urged all organizations to back these agreements.

Eisenhower reaffirmed his position, saying that” this kind of business should not only be allowed but encouraged, especially as Japan is concerned with the surrounding Red locations in Asia.” He reaffirmed that” We can’t force them back past the point of no return.” If we do, they likely declare,” To Hell with you, we’ll come Communist.” That is the focus of this. We had either hang Japan for the free earth or engage in a war to keep it there. This issue is global. We must work on a large top. We must do a lot of knowledge.

Eisenhower reaffirmed his country’s domestic economic worries, saying,” Don’t let us allow Japan get to the point where they want to ask the Kremlin into their nation.” In the presence of such a danger, whatever else fades into meaningless.

The Eisenhower management understood that making financial sacrifices in the short run was a necessary step toward long-term American ideology and stability.

In contrast, the recent tariff strategy places a premium on short-term political magnification over strategic coherence. Worse, it runs the risk of undermining the very partnership that is required to combat China’s growing anger.

Supporters and adversaries may begin making plans for a world where American administration is conditional, momentary, and transactional if the US appears to be unreliable in its commitments.

The trust divide

What the alliances are currently learning is a risky lesson: that Washington might cure them similarly to its rivals without much notice or diversity.

The most important lessons for US partners from this price war is not about industry; rather, it’s about confidence.

America has demonstrate that its management is trustworthy if it wants to be successful. China is filling the void where the quality in the US may be. More companions are likely to look abroad for security unless Washington shifts its international monetary policy to long-term alliance-building, as Eisenhower once did.

The price of solitude

The universe is strongly monitoring. Friends are figuring out dangers. America’s greatest threat is not China’s advertising; it’s the solitude created when allies believe they have no one to depend on. China pushes its edition of the truth, too.

Washington requires more than just solid policy if it wants to maintain its position in the world order. It requires consistency, faith, and the courage to handle its friends like friends, not just when it’s simple but when it’s difficult.

Hanjin Lew, a political commentator with a focus on South Asian issues, is a previous foreign official for conservative South Asian events.

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Trump tariffs: US orders from Chinese small businesses on hold

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Exactly fifty days previously
Laura Bicker

China editor

Reporting fromGuangzhou

” Trump is a mad man,” says Lionel Xu, who is surrounded by his agency’s mosquito repellent products, many of which were once bestsellers in American Walmart businesses.

If President Donald Trump doesn’t lift his 145 % taxes on all Chinese items bound for the US, those items are currently stored in boxes in a Chinese inventory and will be there.

He continues,” This is so difficult for us.”

His business Sorbo Technology sells approximately half of its goods to Americans.

By Chinese requirements, it is a small business with about 400 employees in Zhejiang province. They are not the only ones who are affected by this financial war.

” We are concerned. What if Trump doesn’t make a change of heart? That will be hazardous for our factory, according to Mr. Xu.

Amy is assisting in the Guangdong Sailing Trade Company’s hall in selling ice cream makers. Walmart, one of her main customers, is likewise based in the US.

” We have already stopped generation,” she claims. ” All the products are in the storehouse,” the statement reads.

The sprawling Canton Fair in Guangzhou, the trading gateway of China, had the same tale at almost every hall.

When Mr. Xu speaks with the BBC, he is getting ready to serve some Asian customers with breakfast. They are hoping to lower the price because they are looking for one.

He refers to the taxes as” we will see.” He thinks Trump did back down.

” Maybe it will improve in one or two weeks. Mr. Xu adds with his hands crossed as possible.

Xiqing Wang / BBC A man with a tan wearing a black and white short sleeve shirt with a satchel over his shoulder holds an item on display in a booth which has electronics on white shelves, and posters with information on a red background to the sideXiqing Wang / BBC

After world stock markets fell and a sell-off in the US bond market, President Trump briefly halted the vast majority of tariffs last year.

However, he continued to levy transfer taxes on Chinese products when they were being shipped to the US. Beijing reacted by imposing its unique 125 % taxes on American goods.

More than 30 000 companies who have displayed their products at the annual fair in show rooms the size of 200 sports pitches have been perplexed by this.

From washing machines to fall dryers, electric razors to juicers and crepe makers, companies displayed everything in the homewares part. Clients from all over the world visit the stores to try them out for themselves and close deals.

However, the cost of a food blender or vacuum cleaner from China is currently very great for the majority of American businesses to pass it on to their clients.

China’s imports are accumulating on factory floors in the country’s two largest economy, creating an impasse.

Kitchens and living rooms across America will probably experience the effects of this business warfare, where consumers will now be forced to pay higher prices for these items.

China has continued to be stubborn and has pledged to fight this trade dispute “until the end.”

It’s a voice that some people use at the good also. Hy Vian, who wanted to purchase some energy furnaces for his business, resisted the effects of taxes.

” Let them delay if they don’t want us to trade.” We currently have a local market in China, and we will place orders for the best goods in China first.

Xiqing Wang / BBC Lionel Xu looks directly into the camera, wearing a polo t-shirt with his company logo on it and a purple lanyard around his neck. He stands in front of electronics on a white shelf with a wooden backgroundXiqing Wang / BBC

China does include a 1.4 billion people, which is theoretically a robust domestic market.

Chinese politicians have also been attempting to encourage consumers to invest in an effort to encourage further progress in a slow economy.

But it isn’t working. Many of the middle classes in the nation have spent their money on house purchases, only to see property prices decline over the past four years. They now want to keep money rather than use it.

China may be better positioned than additional nations to weather the storm, but its economy is also primarily dependent on exports. Export accounted for roughly half of the country’s economic growth next year.

China continues to be the world’s manufacturer, with Goldman Sachs estimating that between 10 and 20 million Chinese people may be focusing solely on US-bound imports.

Xiqing Wang / BBC People walk down a wide red carpet which runs in between stalls selling goods in a massive room. There are signs for different companies, most of which are illuminated. The closest one is for Turkiye, Turkish Home appliances Xiqing Wang / BBC

Some of its employees are currently experiencing the suffering.

There are labyrinths of sessions in Guangdong making clothing, shoes, and bags close to the Canton Fair. Shein and Temu are the two companies ‘ production centers in this area.

Workers will work for 14 hours a day in some factories located on different floors in each tower.

A dozen workers were squatting down to chat and smoke on a road close to some foot companies.

One who was afraid to name his name says,” Things are not going well. His colleague reprimands him to cease speaking. In China, discussing financial issues can be difficult.

” We’ve had issues since the Covid crisis, and now there’s a business conflict. I used to be paid 300-400 yuan ($ 40-54 ) a day, and now I will be lucky if I get 100 yuan a day”.

Xiqing Wang / BBC A man works at a table in a leather factory. He is wearing a brown tshirt and a red apron, with a fingerless white glove on his right hand. He is surrounded by what appear to be white shoe soles, one of which he is holding in his non-gloved handXiqing Wang / BBC

The employee claims that these days it’s challenging to find job. Other shoe manufacturers on the street even stated that they only had enough money to live a simple lifestyle.

While some people in China take pride in their goods, others are hurt by the rise in tariffs and know how the issue will stop.

China is dealing with the loss of a trading partner that annually purchases more than$ 400 billion ( £302 billion ) worth of goods, but economists are also concerned that the US could experience a recession.

President Trump, a renowned brinkman, is just one more factor in the confusion. He has continued to push Beijing, but it has refused to step down.

However, it has stated that it will not increase the country’s current 125 % tax rate on US products. They may also engage in various retaliation, but it gives the two parties some breathing room after a week-long economic war.

Washington and Beijing apparently have little in common, and neither part seems eager to approach the table for a deal any time soon.

Some businesses are attempting to find new areas at the Canton Fair in the interim.

Amy hopes that the course of her ice cream makers will change.

” We intend to introduce the new European industry. She goes on to mention Russia as well as Saudi Arabia.

Some people think there is still money to be made in China. Mei Kunyan, 40, claims to make around 10,000 rmb per month at his foot company, which sells to Chinese clients. Many of the world’s leading boot manufacturers have relocated to Vietnam, where labor is less expensive.

The Americas are very challenging, according to Mr. Mei, who has also realized something that other businesses are now discovering.

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Can China’s stimulus response offset Trump’s tariffs? – Asia Times

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Donald Trump’s problem is more apparent in China’s optimistic “around 5 %” development goal this year.

Every day the US senator raises taxes for coast products — 145 %, at least for today— he makes it harder for Xi Jinping to prevent Beijing’s death in 2022 and 1990. China has just twice in the past 35 years missed its goal for gross domestic product.

However, as long as his Communist Party organizes a dual-focused reaction to Trump’s one-man tax arms race, there is every reason to believe Xi may accomplish the seemingly unthinkable in 2025.

The first is a collapse of well-targeted signal to mitigate monumentally strong winds zooming China’s manner. The second is encouraging Xi’s 1.4 billion plus individuals to save less and invest more.

Goal No. 1 is undisputed. The only doubt is the size of the signal Team Xi is ready to unleash to raise usage, maintain the housing market and end deflation.

The need to strengthen is growing. For instance, Goldman Sachs predicts that Xi’s economy will grow only 4 % this year. Beijing’s actions to day, the Wall Street investment bank problems, aren’t enough to “fully offset the negative impact of the taxes”.

Tao Wang, an economist for UBS, predicts that China will experience only 3.4 % growth this year and 3 % in 2026 as Trump’s tariffs stifle exports.

According to Wang,” The price shock presents unprecedented challenges to China’s exports and does cause significant adjustments to the local economy as well.”

China’s client saving, it’s usually believed, amounts to roughly US$ 7 trillion. The US export of the country each year total about$ 450 billion.

If Trump’s tariffs were to eliminate, let’s say, half of that amount, Xi would have to depend primarily on home use to make up the difference. That’s feasible, many academics agree, so long as Beijing acts immediately and confidently.

Analyst Zhang Di at China Galaxy Securities anticipates a stimulus jolt of between 1.5 trillion yuan ($ 205 billion ) and 2 trillion yuan ($ 275 billion ) to turn the tables this month. Citigroup’s researchers gravitate more toward the 1.5 trillion yuan number.

” We see a greater possibility that domestic stimulus may be brought forwards”, Citi experts write. We believe that macroeconomic policies should cause domestic desire to rise in the face of external shocks.

On Wednesday, when most economists anticipate a 5.1 % growth level will be announced in the first quarter of this year, owners will get a new snapshot of the Chinese economy.

Increased governmental spending may be complemented by slashes in standard interest rates and supply need ratios. A higher budget deficit target of around 4 % of GDP, up from 3 % in 2024, was unveiled by Xi’s team last month.

The wider deficit will help the outlook for the economy, but we still don’t know how significant the fiscal impulse may be or whether it will effectively boost underlying domestic demand, warns Jeremy Zook, an analyst at Fitch Ratings.

Fitch, Zook says, still views Beijing’s 2025 GDP target as “ambitious” and predicts the economy will end up growing 4.3 % this year “due to headwinds from subdued domestic demand, lingering property-sector stress and rising external challenges“.

That leaves Xi’s top priority pumping up consumption. According to Zook, “public expenditure is projected to increase by 1.4 percentage points to 30 % of GDP,” but consumption-focused measures are still relatively low.

Roughly 300 billion yuan is allocated to a consumer goods trade-in program, up from 150 billion yuan last year.

However,” we think most policies are still centered on supply-side measures, such as investing in industrial advancement,” according to Zook. It is unknown if the amounts involved will be significant, but local governments will be able to use bond proceeds to purchase idle land or vacant housing units.

At the same time, many economists expect monetary policy to be eased via official rate cuts and RRR reductions. &nbsp,

According to Pinpoint Asset Management’s president, economist Zhiwei Zhang,” Deflationary pressure is persistent.” Making matters worse, he says, “policy uncertainty in the US is still elevated”.

According to Julian Evans-Pritchard, head of China economics at Capital Economics,” a lot of fiscal spending is still being devoted to expanding the supply side of the economy,” “while policymakers have signaled a willingness to do more to support domestic demand.”

Evans-Pritchard continues,” It seems unlikely that consumption support will be sufficient to fully offset weaker exports.” As such, overcapacity looks set to worsen, exacerbating downward pressure on prices”.

A desire to keep the yuan exchange rate stable is just one more aspect of Xi’s balancing act. This will be particularly challenging as Trump’s chaotic White House and the PBOC ease.

This year alone, the dollar is down 9.6 % versus the euro and nearly 9 % versus the yen.

This pattern may give Beijing the opportunity to tolerate a weakened yuan without being called a currency manipulator by Trump’s Treasury Department. However, fewer people generally believe that Xi is using a lower exchange rate to boost exports.

For one thing, notes HSBC strategist Joey Chew, a yuan devaluation could “weaken” consumer confidence and “risk capital flight” at the worst possible moment for Beijing.

Oversea-Chinese Banking Corp strategist Christopher Wong points out that policymakers may prefer to maintain some degree of measured yuan stability. A softer increase in the dollar-yuan fix should ease sentiments toward the yuan and give Asian currencies a boost.

Dan Wang, China director at Eurasia Group, warns that Xi using the yuan as a trade war weapon might be “inviting financial crisis on its own”.

Team Xi is veering the other way by acing to the contrary by promising to protect the yuan from inflation. In other words, speculators who short the yuan do so at their own risk.

Yet Xi’s government has a bigger challenge on its hands: Goal No 2, which is shifting China once and for all away from exports and debt-financed investment toward a domestic demand-led growth model.

The Politburo meeting in the middle of this month could represent Xi’s decisive push for higher value-added industries. Building bigger social safety nets to encourage households to spend more and save less is a crucial component of that transition.

Xi’s inner circle has been telegraphing moves to do everything from reducing regulations, boosting the birthrate, upping subsidies for some exports and devising a stabilization fund to shore up its stock market.

However, the real focus needs to be on developing the social safety nets that the municipal and central governments have been promising for years.

However, doing so is simpler said than done. In the medium term, for example, Xi’s land reforms that benefit China’s 477 million rural residents could just lead to higher rural savings unless they’re paired with substantial improvements in rural social welfare, says economist Camille Boullenois at Rhodium Group.

Rural residents had an&nbsp, implied savings rate of just 13.7 % in 2023, according to Boullenois, compared to 33.8 % for urban residents, probably because they have much less income to save.

Any increase in rural income would likely be set aside as precautionary savings to prevent future uncertainties, she says, “at the very least given the severe gaps in public services and social safety nets in rural areas.”

Generally speaking, Boullenois adds, Chinese households already bear a disproportionate share of basic service costs. In comparison to the Organization for Economic Cooperation and Development ( OECD ) nations, which had only 13 % of total healthcare expenditures in 2021, out-of-pocket, was responsible for 35 % of all out-of-pocket costs in China.

Similar to households, households spent an average of 7.9 % of their annual budgets on education, far exceeding the 1 % to 2 % seen in Japan, Mexico, and the US.

” Meaningfully boosting consumption requires structural reforms&nbsp, to address the rural-urban divide, the precarious position of migrant workers, and the misallocation of capital by state-owned enterprises and banks”, Boullenois says.

Many of these issues were addressed in China’s 2013 reform plan, but many of them have largely remained unresolved because of political and financial constraints.

According to Boullenois, the bottom line is that” substantial fiscal resources will be required.” &nbsp, Tens of trillions of RMB – likely around 30 % of China’s GDP – would be needed to fund both one-time investments, such as social infrastructure and financial stabilization measures, and ongoing expenditures to support social transfers and public services”.

That would require drastic changes to China’s tax system, increased central government borrowing, and reallocation of government resources.

Additionally, it implies more local government incentives to make sure that new fiscal resources are used for social spending rather than growth driven by investment.

Along with the necessary resources and financial commitments, moving toward a fundamentally new model requires big changes in the Communist Party’s mindset.

Although they are called “welfarists,” China’s ruling party bigwigs tend to have an aversion to being “welfarist,” which historically aligns with China’s tendency to view its citizens as a source of labor and tax revenue rather than as human resources to be cultivated and provided when in need, according to economist Thomas Duesterberg&nbsp at the Hudson Institute.

This, Duesterberg&nbsp, adds, “has resulted in a social safety net that considerably lags international standards, especially those of developed and even middle-income countries”.

According to Duesterberg, China’s local governments are burdened by high debt, and declining birthrates, marriage rates, and aging populations all contribute to the decline in government finances.

These issues contribute to the Chinese households ‘ growing financial vulnerability and raise significant issues for upcoming generations, he says. ” Families often shoulder the costs of caring for their elderly, educating their children and paying for healthcare”.

Duesterberg points out that China’s public healthcare spending is low, with only 7 % of GDP going to the national system.

Families typically cover at least 27 % of their total health expenses to cover gaps in their health insurance, compared to only 11 % in the US.

Part of the challenge, notes Erik Green, research associate at the International Institute for Strategic Studies, is Beijing overcoming “officials ‘ deep-seated risk aversion and consequent unwillingness to implement reforms and innovate policy solutions. These difficulties are likely to continue to hinder the progress of China’s economic, social, political, and military reforms despite the development of plans to address them.

Even in the midst of a global trade war that is getting worse every day, switching economic engines at the most insular is difficult.

The best-case scenario is for Trump to be chastened by recent chaos in global markets– and trillions of dollars of losses– and go easier on the tariffs. After all, according to Citigroup economist Xiangrong Yu, “any escalatory moves beyond the already prohibitive tariffs may carry more symbolic meanings than actual impact.”

By now, Trump is aware that Xi isn’t going to give in to his arms-trade tariffs. The official Xinhua News Agency reports that Beijing will continue to take “resolute measures” to safeguard its economic interests. That includes its retaliatory decision to increase US goods ‘ tariffs to 125 %.

Regardless of what Trump does, there is no defense in launching an economic offensive to revive domestic demand for Xi’s China. This month’s Politburo meeting is an ideal opportunity to pivot at long last toward consumer-demand-led growth.

Follow William Pesek on X at @WilliamPesek

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Trump’s in-the-know plan to demolish the US economy – Asia Times

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The fear that Trump’s actions, including deportations, saw destruction of national agencies by people barely in their teens, are being heard in the press regularly, which raises the alarm even louder.

The naive shriekers Bill Ackman, Larry Fink, Larry Summers, and numerous others are unaware that there is no risk because Trump’s strategy was always put forth in public before the election, which he has not publicly disclosed.

We now know this from a 64-minute “infomercial” produced by stock producer Butler Stansberry on April 1 in a staged interview with renowned Trump inside and investment advisor Brad Thomas. &nbsp,

His most powerful conclusion:” The left-wing advertising have the most appropriate read on his ideas… Trump does want to destroy the economy, they’re actually correct” ( minute 14: 30 of the video stream ).

Thomas describes himself as a “dyed in the sheep Trump nationalist” and a dependable consultant who has been strongly linked to Trump’s real estate interests for many years. At Mar-a-Lago, he and Trump discussed the destruction strategy.

Trump’s acknowledgment that fixing America’s utterly untenable finances may result in massive losses regardless of who is in charge is at the heart of the plan he reveals. Trump and his near personal advisers came to two conclusions.

First, it is preferable to carry out” a controlled destruction of the financial markets” similar to a managed forest burn to “get rid of dead lumber” than to allow a careless collapse as in previous recessions. Next, it is preferable to front-run the unavoidable fall so that he can bear all the consequences. &nbsp,

This is a repeat of Ronald Reagan’s effective campaign to reclaim his victory in the election year’s first. Similar to this strategy, this one ensures that” Trump’s son J D Vance ascends to the throne in 2028.”

Only by identifying three distinct groups of Trump supporters: &nbsp, can one understand the current controversies in the economic hit?

* The person at the heart of the business who was aware of the program.

* The opportunistic traders and financiers who backed Trump predicted a smooth economic recovery that would sustain the economy.

* Those associates of the electorate who voted for Donald Trump out of frustration over woke philosophy and immigration.

The inner core knew the strategy and moved their assets, probably shorting the areas that were currently in need of destruction. &nbsp,

The other two are merely fools. No one wants to believe that their person, who they put their faith in, would do this, as Thomas Thomas asserts. It appears to be a travesty of every promise he made on the campaign road, but Trump” don’t say it before the election because no one would have voted for him if he hadn’t.”

They may suffer severe financial loss. This sweeping discovery explains the increasingly contentious disagreements between Trump’s camp members over the past few weeks.

Looking back to earlier overbuilding of railway in the 19th centuries and fiber optics in the 20th, which, after their accidents, led to solid economic growth, one may say the plan draws inspiration from the Schumpeterian concept of creative destruction. &nbsp,

There is no official record of this, according to Stansberry, but those in the inner circle, like Brad, are aware of what is about to happen. Thomas contends that “what’s on the other side of this economic reset is, in my opinion, the greatest period of wealth creation that America has ever seen.”

The extended sales pitch provides a lot of insightful analysis, noting in particular that Biden’s “booming economy” was solely fueled by skyrocketing debt. Real wages were actually declining. ( The claim that wages were increasing was based on nominal wages. )

The inner core accepts with utmost certainty that the planned actions could “decimate millions of investors,” but that” there is no other option, because America is on the precipice.” Tens of millions of people will experience financial chaos.

Some of the most profitable companies of today will be” crushed,” while a select few will make millions following a reset. What will occur on the other side of this crisis will result in greater wealth than anyone could have imagined ( should infomercial watchers adhere to the presentation’s instructions )?

There will be two ways for this to occur:

* recommending investments in businesses that Stansberry advises are poised to rise in the new policy environment of deregulation, degreening, and redirected federal financial flows.

* Interest rates will decline as a result of the market crash, easing the purchase of the assets that were impacted by the crash by those with cash and credit. Trump will be able to force the Fed’s hand ( to lower interest rates ) by crashing the economy right now. &nbsp,

The presenters ‘ advice to avoid making up their minds about what is about to happen and to:

* Sell all assets immediately in case of panic because you are not comfortable holding them. Stansberry mentions Boeing and &nbsp, Apple, while Thomas specifically mentions overpriced AI and technology. Get cash right away!

* Purchase the six organizations Stansberry suggests buying from ( the infomercial’s pitch ):” Trump’s secret companies,” which are Trump’s friends who made money for him and are now about to collect.

*” The big money will be made in the under-resourced businesses that Trump’s inner circle and his powerful supporters, people he won’t let suffer during the coming reset, will support”

A” controlled demolition” or” controlled burn” is only typically carried out after establishing barriers or firebreaks and ensuring that no one is in danger of harm’s way. &nbsp,

People who might be affected by the market crash that is currently being engineered may want to pay close attention to how carefully planned and meticulously executed Trump’s plan is. In any case, it is Irving Kristol’s famous insight about contemporary America:

There is nothing wrong with this nation, which couldn’t be resolved by a protracted, painful depression.

After co-authoring a a classic study   of warfare, Jeffrey Race spent 50 years researching and teaching economics, political science, and technology transfer in Asia. He currently oversees a Boston-based electronics design firm. &nbsp,

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The coming US-China financial divorce – Asia Times

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The United States and China’s economic ties no longer pose a hazard in the future. It is formalized, moving, and deeply disruptive around. Understanding this novel time is crucial for investors because it is not recommended.

More than just a business skirmish, the broad tariffs on Chinese imports have now been passed into law. They represent a traditional shift in the world’s supply chains, scientific ecosystems, and capital flows.

It’s not just about economy here. Control and financial power are both at play here. Investors may then adjust to a world where the fundamental principles of international commerce are being restored quickly and under pressure.

President Trump signed a broad common 10 % tax on all imports on April 2, which would increase to an extraordinary 60 % on Chinese products. These new taxes are atop an already formidable 85 % tax roof, which results in total costs of 145 % on Chinese exports to the US.

Beijing launched the initial volleys of retaliation, including banning the trade of crucial minerals that are vital to the American tech and aerospace sectors, as soon as supply chains started to splinter, and cost pressures raged across industries.

The two largest economy of the world are currently at odds with one another structurally, not in terms of strategy. Although the term” Cold War” is frequently overused, it is becoming more difficult to ignore the parallels. Realizing this is the end of the long-held notion that economic integration would act as a buffer against political issue.

What do a full-fledged economic divorce entail?

First, cash flows will become more and more polarized. Will more and more restrictions and attention been placed on dealings between American and Chinese entities, which were once thought to be routine. Actions with a dollar denomination may be restrained. US pension finances, university endowments, and index-linked ETFs could confront direct restrictions or growing political pressure to sell from Chinese goods.

This could lead to a flood of delistings from US exchanges, more stringent CFIUS reviews, and more inbound investment controls aimed at specific industries. Trump’s officials are now sending out clear warnings that the US government should not be “funding China’s fall.”

Next, the technological gap may grow and grow bigger. Firms like Huawei, ZTE, and DJI were put under a lot of stress in the past. Focus is now turning more and more toward AI, semiconductor manufacturing, clean energy platforms, and the next-generation industries. Washington is moving to wall away full innovation ecosystems, not just to limit exports.

Hope tighter registration standards, more stringent investment restrictions, and more drastic sanctions against Chinese businesses as well as those of allies that have close ties with Beijing. This is about granting China access to fundamental capabilities while imposing technical dominance.

Third, the very foundation of international funding is being challenged. The dollar-based method has been the natural arbitrator of global commerce for decades. That independence is diminishing.

China is aggressively promoting the yuan internationalization in anticipation of limits on its currency’s exposure. Its Cross-Border Interbank Payment System ( CIPS) is being touted as a SWIFT alternative, aiming to make a competing financial system less reliant on Western sanctions.

The development of parallel financial systems will alter the flow of capital, restructure trade agreements, and add new layers of complexity to currency markets.

This transition may bring volatility but even opportunity for investors.

On the one hand, nations that are close to the United States will be a source of corporate capital. As businesses expand their manufacturing operations away from China, there are already important outflows from India, Vietnam, Mexico, and some parts of Eastern Europe.

Reshoring and friendshoring, once considered commercial words, have evolved into obvious government policy, supported by strong economic bonuses and political will. On the other hand, China is repositioning rather than retreating.

President Xi Jinping’s effective romance of the Global South highlights Beijing’s plan to strengthen relationships with developing countries that are under pressure from American isolationism.

Through partnerships in 5G, AI, clean energy, and superior production, Xi’s new visits to Vietnam, Malaysia, and Cambodia, which are nations that are directly impacted by Trump’s tariffs, highlight Beijing’s effort to integrate these nations into its sphere of influence.

Buyers must be aware that this is no longer about military tariff fights or headline-driven ruckus.

It’s about a fundamental restructuring that will affect every aspect of index content, foreign exchange approach, ESG frameworks, and capital allocation. The outdated notion that industrialization was a push invincible is being broken down in front of us.

The speed behind the economic divorce suggests it is about to become inevitable, even though it is not yet final. And like with any sloppy isolation, fortunes will be made not by those who react physically, but by those who anticipate where assets, impact, and opportunities may flow when the ancient household is split.

The discerning investment will be guided by a mastery of the fresh rather than a return to the old.

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In Trump we do not trust – Asia Times

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We must then add a monetary problems, one capable of making the others little, much worse, to a political crisis and an economic crisis. President Donald Trump abruptly retreated from his tariff policy to the worst version, a retreat that any ordinary leader would have found humiliating. This was because he and his Wall Street supporters realized that by midweek US economic markets were on the verge of disaster, a disaster that could rival or even surpass the 2007-08 crash.

Trump was persuaded to move back a few feet from the rock’s border to which he had taken America and the world, but that threat has been for the time being. However, the mountain is still standing and is still standing. Trump’s business war has caused a loss of faith in US government bill, but that is where the biggest danger lies.

The lira sovereign debt crisis of 2010 appears to be much more recent. US Treasury securities have been viewed as the safest of all economic assets, just like German government bonds were back then by the most reliable of governments. Interest has turned to the now shattered believe as a result.

    to America’s$ 36 trillion common loan, which is four times as large as Japan’s loan and is 12 times as large as Italy’s.

  • to how a good recession would affect that debt,
  • to the resulting increase in interest expenses, and
  • to whether the Trump presidency might use the US dollar and public debt as negotiations leverage.

Additionally, the fact that Trump has already declared a total siege against imports from China by imposing a 135 percent price may increase the chances that China may dump its US Treasuries in answer, even if it would suffer a significant reduction in doing so. China is one of the largest foreign holders of US Treasuries. The$ 759 billion of US Treasuries it held at the end of 2024 represent an obvious weapon since Beijing has stated it is willing to fight the trade war” to the end.”

Trade taxes are bad enough, but this economic collapse poses a serious threat to consumers. Businesses are incredibly dependent on the endurance and great belief of the counterparties with whom business is conducted, many of whom have looked powerful because of their holdings of US Treasuries. When healthy assets begin to appear illegal, all financial institution risk factors start to change, and one’s financing costs start to rise.

A similar trend may be occurring in America today, just as the decline of the Lehman Brothers investment bank in 2008 led to a number of other crises. The US Federal Reserve Board can still be relied upon to help the financial structure by purchasing Treasuries, just as the European Central Bank did by promising to get German bill after 2010; however, the country’s chaotic state makes it impossible to rely on the US Treasury and White House in the same way.

Several fundamental information about Trump must be kept in mind. He has filed for bankruptcy four days to mistake on his debt as a business. He is a globe expert at using energy for self-advancement and knowing everything about international trade and finance.

Sad to say, he is capable of deciding that forcing a renewal of its debts would be wise for America and of overriding experts who might have been averse to do so.

This leaves America and the rest of the world dealing with three difficult realities: one about trade, one about confidence and uncertainty, and one about how the countries ‘ current relationships are becoming at least as significant as their interactions with the world’s most powerful nation, the United States.

Trump’s tax surrender has essentially changed the label for his trade policy from “disastrous” to “hugely damaging.” The imports tax of 10 %, which will now be applied to virtually all nations but China, is also three times as high as it was when he took office, and the additional tariffs he has placed on steel, aluminum, and cars also indicate that the general barrier he is putting in place is higher than America has been for a century.

The doubt that the plan is creating is also devastating. No big business, whether domestic or international, can easily plan long-term investments in the United States with the understanding that Trump might have major changes at any time.

Just weeks after declaring that the 90-day “pause” did not reduce tariffs on Chinese goods, he abruptly announced that all exports of phones and other electronic items would gain from the delay, before confirming that this digital deduction would only be for a short period of time. 80 % of Apple’s smartphones are built in China. Nobody is aware of their position.

The deterioration of the rule of law through attacks on courts and big law firms also raises the risk of conducting business in America. Trump may believe that his trade legislation will encourage hordes of businesses to set up factories inside his tax walls, but the doubt and lack of trust are actually causing a lot of people to leave.

The rest of the world is becoming distant from America, who was once a powerful ally and significant business for everyone, both politically and economically. An separation is not always permanent, as in a relationship, but it fundamentally alters behavior and leaves behind long-term harm.

Second fact: This alienation must be resolved by developing new associations with others. Countries must look for ways to establish and maintain international organizations without the influence of America.

Because trade blocs like the European Union, Mercosur in Latin America, and the Trans-Pacific Partnership in Asia now exist and you bargain collectively, that is fairly simple. China won’t get a full participant of those groups, but discussions with it will be simpler than they currently are with Trump’s United States, because typical interests will be simpler to get.

Because the US dollar will be the world’s major reserve currency and the importance of British banks may be difficult and costly to tremble off, the task is more difficult and takes longer. Making sure our personal financial institutions are strong enough to survive a problems is what must be the first task. Countries will need to consider ways to reduce their dependence on the US dollars and reduce their risk of being exposed to American economic bullying over the long term.

Prior to the US’s restrictions, countries like China, Russia, and Iran felt threatened about this. We are certainly in a completely new world.

Bill Emmott, who was previously The Economist’s editor-in-chief, is already president of the&nbsp, Japan Society of the UK, the&nbsp, International Institute for Strategic Studies, and the&nbsp, International Trade Institute.

This post, which was previously published in La Stampa in Italy on April 12, has been republished with kind agreement.

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Thai PM promotes dad’s hometown in Chiang Mai

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PUBLISHED: 14 Apr 2025 at 18: 39

Prime Minister Paetongtarn Shinawatra and her father Thaksin join a traditional Thai New Year event in San Kamphaeng district, Chiang Mai, on Monday. (Photo: Pheu Thai Party)
On Monday, Prime Minister Paetongtarn Shinawatra and her dad Thaksin attend a traditional Thai New Year celebration in the San Kamphaeng city of Chiang Mai. Pheu Thai Party in pictures

The Pee Mai Muang San Kamphaeng celebration will be attended by Thais and tourists, according to Prime Minister Paetongtarn Shinawatra, and get to know the Lhong Him Khao group in Chiang Mai’s atmosphere.

Lhong Him Kao, a vibrant crafts group in San Kamphaeng area, showcases classic Lanna arts, crafts, and tradition. Visitors to regular and annual craft businesses like Kad Chamcha and Kad Ton Yon pull from the neighborhood’s homes, which have become cafes, homestays, and craft stores.

It serves as a design for promoting hospitality through soft power through activities like Heart Space, a co-working location for young artists.

According to government official Jirayu Houngsub, the prime minister participated in significant Lanna New Season customs like paying regards to elders and pouring spiritual water during a standard service.

Along with her parents Thaksin, her father Pitaka Suksawat, and Deputy Finance Minister Julapun Amornvivat, the PM welcomed nearby residents and enjoyed the festivities.

At Wat Rong Wua Daeng, she participated in a water pouring meeting with regional mothers while wearing a classic north dress and gave a bouquet to the statue of the Luang Pho Somprattana Buddha.

Additionally, Ms. Paetongtarn and her parents planted a Tung Lanna symbol to honor her birth time in a bid of good fortune.

Ms. Paetongtarn said her return to San Kamphaeng, her husband’s home, gave her a sense of comfort and nostalgia. During her visit, she reflected on her personal link to San Kamphaeng.

She said,” My father was raised below, and I used to hear stories about him selling coffee and shaving ice in one of the properties.”

She urged Thai workers to spend time with loved ones and recover before going back to work, wishing them a pleasant and secure Songkran.

The PM enjoyed the local goods like handwoven fabric, indigo-dyed clothes, silverware, and pottery. While her parents did some shopping, native boys put on a display for the PM.

” The setting was warm and welcoming, and Ms. Paetongtarn was delighted to greet guests and taking photos with them,” said Mr. Jirayu.

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China holds more trade war cards than Trump thinks – Asia Times

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There was one notable exceptions to Donald Trump’s pivotal decision to impose eye-watering levies on trading partners around the world.

While the rest of the world may be given a 90-day relief on more responsibilities beyond the new 10 % taxes on all US business associates, China would think the squash even more. Trump increased the Chinese goods price to 12 % on April 9, 2025.

According to Trump, the decision was motivated by Beijing’s “lack of regard for international markets.” But the US senator may well have been smarting from Beijing’s apparent determination to fight US tariffs head-on.

Beijing took a different tack than some nations, choosing to favor negotiation and dialogue over Trump’s now-delayed mutual tariff increases. It immediately and steadfastly reacted.

On April 11, China dismissed Trump’s moves as a” joke” and raised its own tariff against the US to 125 %. Trump after raised his tariffs on China to 145 % in reprisal before granting an exemption for some devices.

The two markets are currently tangled up in a massive, high-intensity industry conflict. And China is showing no signs of backing over.

And I wouldn’t expect China to, as an analyst on US-China relationships. China now has much more leverage than the first US-China business war during Trump’s first word, when Beijing eagerly sought a deal with the US.

However, Beijing believes it can wreak at least as much harm on the US as evil opposite, while at the same time expanding its international location.

A modified mathematics for China

There is no denying that China’s export-focused companies, particularly those in coastal regions, are subject to severe tariff consequences for American consumers.

Man with a flag behind him.
Amid taxes, China’s President Xi Jinping sensations a traditional option. Photo via Getty Images: Carlos Barria

However, a number of actual financial factors have considerably altered Beijing’s math since Trump initially increased tariffs on China in 2018.

Critically, the importance of the US business to China’s export-driven market has declined considerably. US-bound export made up 19.8 % of China’s full imports in 2018, the first trade war started.

That percentage had dropped to 12.8 % in 2023. The tariffs perhaps more enable China to expand its “domestic need development” strategy, unleashing the spending power of its consumers and strengthening its local economy.

China entered the 2018 trade war during a period of robust economic growth, but the current situation is completely different. The Chinese economy is experiencing a persistent slowdown due to the slowness of the real estate markets, capital flight, and Western “decoupling.”

Perhaps counterintuitively, this prolonged downturn may have made the Chinese economy more resilient to shocks. Even prior to the impact of Trump’s tariffs, it has pushed businesses and policymakers to take into account the already harsh economic realities.

Trump’s tariffs on China may also give Beijing a useful external scapegoat, allowing it to spread the blame for US aggression and win over public opinion.

China also understands that the US cannot easily replace its dependency on Chinese goods, particularly through its supply chains. Although China’s direct US imports have decreased, many products now coming from third countries still rely on Chinese-made components or raw materials.

By 2022, China was almost four times as dependent on China as of the same time, compared to the same period in which China was almost four times as dependent.

There’s a related public opinion calculation: Rising tariffs are expected to drive up prices, something that could stir discontent among American consumers, particularly blue-collar voters. Beijing, in fact, thinks that Trump’s tariffs could cause the country’s otherwise robust economy to recede.

Two men sit side by side at a conference.
Donald Trump, the president of the United States, examines Chinese President Xi Jinping during the G20 Summit’s plenary session on July 7, 2017, in Hamburg, Germany. Photo: Mikhail Svetlov / Getty Images via The Conversation

Potent tools for reprisal

China also has a number of strategic tools to use retaliation against the US in addition to the altered economic environments. It dominates the global rare earth supply chain – critical to military and high-tech industries – supplying roughly 72 % of US rare earth imports, by some estimates.

On April 9, China added 12 American companies to its list of countries that are subject to export control on March 4. Many US high-tech companies or US defense contractors rely on rare earth elements in their products.

China also retains the ability to target key US agricultural export sectors such as poultry and soybeans – industries heavily dependent on Chinese demand and concentrated in Republican-leaning states.

About 5 % of US exports of poultry and soybeans are made up of China. Beijing revoked import authorizations for three significant U.S. soybean exporters on March 4.

And on the tech side, many US companies – such as Apple and Tesla – remain deeply tied to Chinese manufacturing. Tariffs threaten to significantly lower their profit margins, which Beijing believes can be used as a leverage against the Trump administration. Beijing is reportedly planning to retaliate by imposing regulations on US businesses operating in China.

Meanwhile, the fact that Elon Musk, a senior Trump insider who has clashed with US trade adviser Peter Navarro against tariffs, has major business interests in China is a particularly strong wedge that Beijing could yet exploit in an attempt to divide the Trump administration.

Two mini flags side by side.
Chinese and American flags fly at a booth in Shanghai during the first China International Import Expo on November 6, 2018. Photo: Johannes Eisele / AFP via Getty Images

A strategic opening for China?

Beijing believes it can withstand Trump’s significant tariffs on a bilateral basis, but it also believes that the US broadside against its own trading partners has given rise to a generational strategic opportunity to replace American hegemony.

This shift may have a significant impact on East Asia’s geopolitical landscape. Already on March 30 – after Trump had first raised tariffs on Beijing – China, Japan and South Korea hosted their first economic dialogue in five years and pledged to advance a trilateral free trade agreement.

Given how diligently the US worked under the Biden administration to combat regional influence from China, the move was especially remarkable. Trump’s actions, in Beijing’s opinion, give the US a chance to directly erode its influence in the Indo-Pacific.

A model dragon is seen through a shop window.
Could China’s dragon economy slay Trump’s tariffs? Wang Zhao / AFP via Getty Images/ The Conversation

Similar to how Trump’s severe tariffs on Southeast Asian nations, which were a significant strategic regional priority during the Biden administration, may aggravate those nations ‘ relationship with China.

Chinese state media announced on April 11 that President Xi Jinping will pay state visits to Vietnam, Malaysia and Cambodia from April 14-18, aiming to deepen “all-round cooperation” with neighboring countries.

Notably, the Trump administration targeted all three Southeast Asian countries with their now-paused reciprocal tariffs, which included 49 % on Cambodian goods, 46 % on Vietnamese exports, and 24 % on Malaysian products.

Farther away from China lies an even more promising strategic opportunity. Trump’s tariff plan has already prompted China and European Union officials to consider strengthening their own, previously strained trade ties, which might sour the transatlantic alliance that had been trying to break up with China.

On April 8, the European Commission president spoke with China’s premier to discuss trade protectionionism in which both sides jointly condemned US trade protectionism and supported free and open trade.

Coincidentally, on April 9, the day China raised tariffs on US goods to 84 %, the EU also announced its first wave of retaliatory measures – imposing a 25 % tariff on selected US imports worth over 20 billion euros– but delayed implementation following Trump’s 90-day pause.

Officials from the EU and China are currently negotiating with each other over the current trade barriers and considering holding a full-fledged summit in China in July.

China also believes that Trump’s tariffs could potentially affect the US dollar’s reputation abroad. Widespread tariffs imposed on multiple countries have shaken investor confidence in the US economy, contributing to a decline in the dollar’s value.

The dollar and US Treasury bonds have traditionally been viewed as haven assets, but recent market turmoil has questioned that status. Soaring tariffs have also undermined investor confidence in both the US economy and US Treasurys, raising questions about the viability of the country’s economy and the sustainability of its debt.

While Trump’s tariffs will inevitably hurt parts of the Chinese economy, Beijing appears to have far more cards to play this time around. It has the means to seriously harm US interests, and Trump’s comprehensive tariff war offers China a rare and unexploited strategic opportunity.

Auburn University’s PhD candidate in political science is Linggong Kong.

This article is republished from The Conversation under a Creative Commons license. Read the text of the article.

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