Trade War Monitor, Sept. 1: Trump’s New Playbook to Target Global Trade and Financial Systems

A former high-ranking Chinese finance official, Zhu Guangyao, has issued a strong warning about U.S. President Donald Trump’s new strategy regarding global trade and finance. Zhu asserts that Trump’s combination of a new tariff regime and promotion of stablecoins is deliberately designed to weaken the World Trade Organization (WTO) and reinforce U.S. dollar dominance. He stresses that this is part of a broader “playbook” to subvert international economic rules, urging China to develop urgent countermeasures and strategies to cope with these systemic changes [para. 1][para. 19][para. 20][para. 21].

The immediate global effects are already being felt, especially among companies that previously relied on China as an export hub. Many are relocating to Vietnam to maintain their access to the U.S. market, seeking to benefit from tariff relief and lower labor costs. However, this exodus is not without problems; rising costs for labor and industrial sites are squeezing profit margins, making it increasingly difficult for firms to stay competitive even as they hedge against U.S. tariffs. The situation is precarious—gains from the tariff gap may disappear with a shift in U.S. policy [para. 2][para. 24][para. 25].

One major outcome of the tariff war has been a dramatic rise in rare earth mineral prices. For example, China Northern Rare Earth (Group) High-Tech Co. Ltd. saw its net profit jump by nearly 2,000% year-on-year in the first half of 2025. Revenue increased by 45% to 18.9 billion yuan, driven by both Chinese export controls and surging demand for materials like didymium [para. 4][para. 5]. Reflecting this, the company’s stock has surged, underlining a broader trend of price increases for critical supply chain materials.

Additionally, the U.S. has intensified its restrictions on technology transfers, revoking “validated end-user” accreditation for three major semiconductor firms, including Samsung’s China plant. Companies now require new licenses to operate, and no permissions for expansion or upgrades will be granted. China’s Commerce Ministry has strongly opposed the move, citing risks to the stability of global supply chains [para. 6][para. 7].

Washington’s decision in August 2025 to eliminate the “T86 exemption”—which allowed duty-free entry for packages under $800—has disrupted global e-commerce and air freight. Chinese air cargo operators are particularly affected as new tariffs squeeze revenues further and force route adjustments on cross-Pacific exchanges [para. 8][para. 9].

Despite these headwinds, China’s industrial sector is showing modest signs of recovery. In August, the manufacturing PMI rose to 49.4, and non-manufacturing activity edged up to 50.3. Still, profitability across industry segments remains under stress [para. 12]. Meanwhile, an appeals court has found that previous Trump-imposed tariffs exceeded legal authority, though the tariffs remain in force pending Supreme Court review [para. 13].

Facing tariffs and growing trade protectionism, China is redirecting foreign direct investment (FDI) toward Belt and Road Initiative (BRI) partners, seeking to secure global supply chains. Currently, China is the world’s third-largest source of FDI outflows, with over $3 trillion in outward FDI stock at the end of last year, comprising 7.2% of the global share [para. 27][para. 28][para. 29][para. 30].

Chinese renewables companies, meanwhile, are diversifying their strategies by investing abroad and supplying components to Western firms, thus maintaining influence despite trade barriers. Consultants report that rather than diminishing China’s role, tariffs are leading to more complex supply chain structures that enhance the appearance of compliance while retaining control [para. 32][para. 33][para. 34][para. 35].

Overall, President Trump’s renewed tariffs and financial maneuvers are triggering far-reaching shifts in the global trade landscape, with both China and multinational corporations scrambling to adapt [para. 1][para. 19][para. 20][para. 21].