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

A recent report highlights the intensification of the U.S.-China trade war and its far-reaching impacts on the global economy and supply chains, underscored by the policy approach of newly-elected U.S. President Donald Trump. Zhu Guangyao, China’s former vice finance minister, warns that Trump’s “new playbook”—a combination of heightened tariffs and a strategic adoption of stablecoins—aims to undermine the World Trade Organization (WTO) system and further entrench U.S. dollar dominance. These moves represent a seismic challenge to the international trade and financial system, compelling China to develop urgent responses.[para. 1][para. 22][para. 23][para. 24]

The effects of this policy are already rippling through global commerce. Notably, companies that formerly contributed significantly to China's export growth are relocating production to countries like Vietnam to maintain access to the U.S. market and capitalize on tariff relief. However, the rush to Vietnam is pushing up labor and real estate costs, creating competitive and profitability challenges for these businesses, which may become more acute if U.S. trade policy shifts again in the future.[para. 2][para. 13][para. 14][para. 15]

One immediate illustration of trade friction outcomes can be seen in the rare earth market. China Northern Rare Earth (Group) High-Tech Co. Ltd., the world's largest producer of certain key minerals, reported a nearly 2,000% jump in net profits for the first half of 2025, as Chinese export controls and the tariff war have driven prices and demand higher. The firm saw a 45% increase in revenue, reaching 18.9 billion yuan. Enhanced export controls, particularly on strategic minerals like didymium, have both raised prices and boosted sales, leading to significant stock market gains for the company.[para. 4][para. 5]

The U.S. has also taken tough steps to restrict strategic Chinese industries—most recently by revoking “validated end-user” authorization for three semiconductor facilities, including a Samsung plant in China. Companies now must secure special licenses to continue operations, but they are barred from expanding or upgrading their production. This move has prompted strong objections from China's Ministry of Commerce, citing risks to global supply chains.[para. 6][para. 7]

Another key recent policy change is the end of the U.S. “T86 exemption,” which had allowed duty-free import of packages worth under $800. As of August 29, 2025, all such shipments are subject to tariffs. Combined with the new tariffs announced in April, this development threatens the margins and revenues of Chinese air freight operators and could disrupt global e-commerce at scale.[para. 8][para. 9][para. 10]

Amid the tariff environment, China is bolstering foreign direct investment (FDI) outflows, especially to partners along its Belt and Road Initiative (BRI), seeking to shore up resilience in global supply chains. As of 2024, China was the third-largest source of global FDI outflows, with its stock exceeding $3 trillion, accounting for 7.2% of the global total—behind the U.S. and Japan.[para. 17][para. 18][para. 19]

Chinese renewable energy firms, facing tariff and regulatory pushback in the U.S. and Europe, have shifted to diversify their business models. They are investing abroad and supplying components to Western companies, thereby maintaining supply chain control while ostensibly complying with local regulations. Analysts note that rather than reducing Chinese influence, these trade barriers are prompting more sophisticated responses from Chinese companies.[para. 20][para. 21]

In summary, Trump’s return to the presidency in 2025 has intensified U.S.-China friction, fueling a shift in global manufacturing, financial strategy, and supply chain dynamics. Both governments and industries are actively adapting to a new, more confrontational era in international trade.[para. 1][para. 2][para. 4][para. 6][para. 8][para. 13][para. 14][para. 17][para. 20][para. 22][para. 23][para. 24]