A new economic order is emerging, and tariffs play no part in it

China has been quietly working to rewrite the rules of global trade and finds itself in a strong position in the current trade war launched by Washington. A look around the world shows why.

Sara Padovan

A new economic order is emerging, and tariffs play no part in it

The US-China trade war marks the end of the post-Cold War global economic order, but unlike in 1990, when America emerged victorious over a crumbling Soviet Union, today China is well-placed not only to withstand the pressures of tariffs but to emerge as an architect of a new multilateral economic order.

The trade conflict has reached a critical juncture. US tariffs on most Chinese products are up to 145%, with reciprocal Chinese tariffs on US goods not far behind. For all intents and purposes, it is a trade embargo, the effects of which are still to be fully felt.

In matching US President Donald Trump’s measures, Beijing showed that it does not yield to economic coercion, but its more significant response lies in its global engagement. Rather than retreating into defensive isolation, China increasingly champions multilateral trade, strengthening ties with Europe and the Global South.

The Chinese era of globalisation is supported by open trade, infrastructure investment, and de-dollarisation. In contrast to US tariffs and ‘America First’ policies, China is executing a long-term strategy to position itself as the torchbearer of globalisation, quietly stitching together a network of free trade agreements (FTAs) and infrastructure partnerships across the Global South.

This is not opportunism. It is a deliberate global goal: an economic re-ordering to redefine the rules of 21st-century commerce.

Trade with Asia

China’s free trade expansion focus lies in Asia, where the Regional Comprehensive Economic Partnership—the world’s largest trade bloc covering 30% of global gross domestic product (GDP)—came into force in 2022 under the stewardship of the Association of Southeast Asian Nations (ASEAN).

By eliminating 90% of tariffs among Regional Comprehensive Economic Partnership (RCEP) members, China has effectively created an Asian economic bloc with an integrated supply chain that further fuels ASEAN’s manufacturing boom.

In matching US President Donald Trump's tariff increases, Beijing showed that it does not yield to economic coercion

Furthermore, RCEP binds smaller economies to China's supply chains. Vietnam now imports 35% of its intermediate goods from China, as tariff reductions incentivise regional production integration. The ambitious high-speed rail project linking China and Vietnam (financed largely through Chinese loans) strategically binds Hanoi to Beijing's supply chain downstream.

China's investment in Cambodia's Ream Naval Base—ostensibly civilian but with military potential—highlights Beijing's intention: to establish pivotal points of maritime influence that project power far beyond its immediate borders.

The subtle yet deliberate expansion of China's maritime capabilities in Southeast Asia is also a response to the possibility of the US closing off the Strait of Malacca, the main shipping channel between the Indian and Pacific Oceans.

Further, China is negotiating upgrades to its China-ASEAN Free Trade Area (CAFTA), aiming to include digital and green trade. While the US imposes steep tariffs, Asia is coalescing around China's vision of tariff-free, manufacturing-centric trade integration.

Trade with the Gulf

The China-Gulf Cooperation Council (GCC) Free Trade Agreement talks, revived last year, aim to dismantle trade barriers in sectors from petrochemicals to renewable energy. Saudi Arabia and the UAE now see China as their top trading partner, with bilateral trade topping $230bn in 2023.

China's deepening trade with the Gulf is not just about oil, however. It is increasingly powered by algorithms, solar panels, and strategic pragmatism. With petrostates racing to reinvent themselves as global AI and sustainability hubs, China is now a key partner in a new multipolar economic order, where technology and green energy replace outdated models of resource extraction.

The Gulf's AI leap is a perfect match for China's tech ambition. The Shenzhen Smart City blueprint, using AI to optimise energy use and track carbon, has a futuristic counterpart in the LINE, a linear megacity in Saudi Arabia's NEOM project.

Courtesy of Neom
A design for the 500-metre parallel structures, known collectively as The Line, in the heart of the megacity of NEOM on the Red Sea.

Huawei's Atlas 900 AI clusters, now operational in Qatar and Kuwait, provide the raw computing power for Gulf nations to train their own AI models, while Chinese tech firm DeepSeek, whose Arabic-language large language models (LLMs) are being tailored to Gulf dialects, enable everything from AI-driven legal services in Dubai to personalised education platforms in Riyadh.

China's DJI dominates the Gulf's drone market, with Saudi Arabia using its surveillance and logistics drones to secure Vision 2030 projects, while in 2023, Saudi Aramco signed deals with Chinese robotics firms to automate oil refineries—a symbolic fusion of old and new economies.

The Gulf's green transition also relies on Chinese technology. Saudi Arabia's 2030 target to derive 50% of its energy from renewables uses Chinese solar panels (which comprise 80% of the Kingdom's photovoltaic imports), whereas Dubai's Mohammed bin Rashid Solar Park—the world's largest single-site solar facility—uses Chinese inverters and battery storage from CATL, a Chinese battery manufacturer.

Even more striking is the hydrogen production alliance. Chinese firms are turning Oman and the UAE into hydrogen production hubs. This is globalisation with a green tint—and Beijing holds the paintbrush.

Trade with Africa

China-Africa trade reached $290bn in 2024, doubling since 2015, and as the West clings to outdated models of aid and loans in Africa, China is investing in its most valuable assets: its people and its industrial potential. From tech hubs in Rwanda to e-commerce platforms connecting Lagos to Shanghai, Beijing is there for more than just the continent's natural resources.

Over 12,000 African students now study in China annually under fully-funded scholarships, while Chinese-sponsored institutes teach Mandarin and technical skills in 48 African countries, but the real game-changer is vocational training in manufacturing that the American industrial workforce no longer takes pride in.

For instance, China partners with Ethiopia's local colleges to train engineers in advanced manufacturing, teaches coding at Kenya's Huawei ICT Academies, solar panel maintenance at Zambia's CHINT Electric Skills Centres, and e-commerce logistics at Alibaba's Digital Talent Programme, producing a young workforce ready to power African and Chinese industry. 

Saudi Arabia and the UAE now see China as their top trading partner, with bilateral trade topping $230bn in 2023

China focuses on infrastructure and industrial zones, such as Tanzania's Bagamoyo Port. Though delayed, this site is designed to attract hundreds of factories into its special economic zone (SEZ), modelling Shenzhen's rise from fishing port to economic powerhouse.

The China-Africa Cooperation Forum is a good place to see the future of China-Africa trade. It has evolved into a platform for tariff reductions on 97% of African exports to China, including cocoa, coffee, and minerals. Only 30% of trade is now resource-based. Technology and manufactured goods dominate.

Nobody thinks this is altruism. Rather, it is strategic symbiosis. Both Africa and China benefit. Africa's middle-class is expected to number 1.1 billion by 2060, meaning that China gains a market for its electric vehicles, a manufacturing hub, and a diplomatic ally, while Africa gains the power to pivot from aid recipient and raw materials exporter to industrial producer and tech collaborator.

Trade with Latin America

China is Latin America and the Caribbean's second-largest trading partner and the largest trading partner for countries such as Chile, Brazil and Peru. China's bilateral trade with the region surged to $450bn in 2023, with Beijing having reached free trade agreements with Chile, Peru, Costa Rica, Nicaragua and Ecuador (it is in talks with Uruguay).

China says it is building "digital silk roads" such as in Brazil, through commercial 5G (fifth generation) wireless technology partnerships, and in Argentina, through space monitoring stations, while the China-Community of Latin American and Caribbean States (CELAC) also promotes e-commerce and fintech integration.

Traditional US allies such as Panama and the Dominican Republic have recently sided with Beijing over issues such as Taiwan (the US says it is a sovereign state, whereas China says it is a breakaway region). It is likely that these diplomatic U-turns are propelled by the lure of Chinese market access.

Beijing's $1.3bn development of the Port of Chancay in Peru (primarily funded and developed by COSCO Shipping Ports, a Chinese state-owned enterprise) underscores China's intent to establish a critical logistical hub that cements its position in Latin America and enhances its access to the Americas.

Sara Padovan

Yet the US is taking the fight to China, not least over the Panama Canal. Two crucial ports at either end of the canal have long been owned by Hong Kong-based conglomerate CK Hutchison, but a sale of the firm's entire ports portfolio to American private equity groups in March is now stalled, subject to Chinese regulatory review.

Both America and China want to control one of the world's most vital maritime transit passageways, and the main route between Asia and the Americas, with 5% of global trade passing through the canal annually. It is especially important for the transit of grain, fuel, vehicles, consumer electronics, and raw materials. The outcome of the proposed port sale will be pivotal to the canal's future.

Trade of the future

Donald Trump's second term of office has shown that the 20th century trade rulebook is now obsolete. As digital services, artificial intelligence (AI), and technology infrastructure redefine global commerce, a new paradigm is emerging—one centred on intangible assets and collaborative diplomacy.

Yet while Trump seeks to 'wall off' markets, China is building bridges and binding the Global South to its vision of trade, because 21st century trade is frictionless, algorithmically optimised, and meritocratic. While Trump is reviving the job-rich industries of the 20th century, unifying technology standards is becoming the ultimate commercial power.

For instance, China's Huawei has built a 4G wireless infrastructure across 70% of Africa and in 165 countries globally, embedding its technical protocols. By setting norms for AI ethics, data governance, and cybersecurity, adopting nations integrate into China's tech-led economic ecosystem, creating a dependency far subtler than debt: a reliance on Chinese tech updates, training, and interoperability.

This is also the age of digital money. In 2023, China completed its first cross-border crude oil settlement in digital yuan via the Shanghai Petroleum and Natural Gas Exchange (SHPGX) using blockchain to settle transactions instantly. This 'petro-yuan algorithm' nexus bypasses the Western-dominated SWIFT banking system, reducing any exposure to potential US sanctions.

The digital yuan, piloted in cross-border trades with Saudi Arabia and Iran, further erodes the dollar's global dominance. Smart contracts automate compliance, while AI-driven platforms such as PetroChina's Energy Blockchain optimise supply chains. By merging energy trade with digital innovation, China is crafting a decentralised financial order where blockchain—not SWIFT—mediates transactions.

In part as a tariff response, China is encouraging trade transactions in yuan and bilateral local currencies, particularly among developing economies. With more countries moving from dollar-denominated trade to reduce their exposure to US economic pressure, one of America's most powerful economic levers is showing cracks.

While the US imposes steep tariffs, Asia is coalescing around China's vision of tariff-free, manufacturing-centric trade integration

Tools of today

Increasingly, the US continues using outdated trade tools. Tariffs on steel and semiconductors are one thing, but digital intangibles—such as TikTok's AI-driven content, Tencent's cloud services, or DJI's drone software systems—are quite another. These tech services flow across borders undeterred by customs.

Washington's response has been incoherent, including its order to restrict ASML exports to China. ASML is a Dutch company that designs and manufactures lithography systems, which are crucial for chip manufacturing. Its equipment is used by companies like Intel and TSMC to create the chips that power today's technology.

Yet America has also seen how Chinese AI tools are being picked up by the emerging world, not least DeepSeek's low-cost AI assistant—one of the most-downloaded mobile AI apps in around 140 markets. Likewise, when the US banned Huawei, south-east Asian nations simply rerouted 5G contracts through Chinese cloud providers, while Temu's AI-powered e-commerce platform outsells Amazon in 18 countries.

AI models and data clouds—not goods—are the linchpins of global trade today. This informs China's approach, as does its need for pragmatism in the face of US protectionism. By expanding free-trade agreements (FTAs) and infrastructure networks, Beijing is steadily reducing reliance on US markets.

It is also setting standards, from digital trade to green technology. Chinese norms are becoming the default in many countries. While Trump's tariffs aim to bring manufacturing and employment to America, the world order is increasingly being shaped by China's technology and economic initiatives, leading to more and more states falling in-line behind Beijing's diplomatic priorities (such as Taiwan).

The US risks economic isolation, diminished influence, and a loss of leadership in both technology and trade, as the neoliberal world order gives way to a new era of globalisation, one that is state-backed, infrastructure-anchored, and digital-centric. New rules are being rewritten—not in Washington, but in algorithms and emerging alliances.

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