PRC seeks EU cooperation while hitting back at U.S. tariffs

Panama formally exits Belt and Road Initiative

Welcome back to What’s Happening in China, your weekly update on the latest news and developments from the country.

The gloves are coming off.

After Chinese officials had their Lunar New Year break interrupted by Trump’s announcement last weekend of “a 10% tariff on China for the illegal fentanyl that they have sourced and allowed to distribute into our country,” Beijing hit back with what experts described as a measured response. On Tuesday, it announced tariffs, including a 15% levy on coal and liquefied natural gas, as well as a 10% tariff on crude oil, agricultural machinery, large-displacement cars, and pickup trucks, effective Monday, February 10—on top of other measures.

Following the PRC’s retaliation, a scheduled call between Trump and Xi on Tuesday was abruptly canceled. “I’m in no rush,” Trump said. “We’re going to do very well against China and against everybody else.”

Meanwhile, Mexico and Canada secured a 30-day pause on Trump’s tariffs after promising to address his concerns over border security and drug trafficking.

Europe may be next. Calling U.S.-EU trade “an atrocity,” Trump is creating new tensions with the bloc. In his Watching China in Europe newsletter, Noah Barkin, a visiting senior fellow in the Indo-Pacific Program at the German Marshall Fund of the United States, warned that “Europe is tentatively preparing to pivot.” He further cited an EU official stating, “We are not saying we will jump back into bed with China. But it is a signal to the US that they can lose Europe.”

What is Trump trying to accomplish? Is he genuinely trying to correct trade imbalances? Increase revenue? Or is he using tariffs as leverage for other geopolitical goals? He risks isolating the U.S. while alienating allies. Perhaps, as Mary Gallagher wrote in an analysis piece on recent cuts to USAID, “This is part of a more fundamental shift toward a U.S. foreign policy that will be more like China’s, emphasizing hard power over soft power, interests over ideology and territorial control over cooperation with allies.”

Noah Barkin cautions, “If the Trump administration isn’t careful, Europe could come to view Washington as a greater threat than Beijing.”

Before we dive in, a quick reminder: to celebrate the Year of the Snake, I’m offering 25% off subscriptions for one year. This special offer runs until February 12—upgrade today and save 25%.

Now, let’s jump into it.

— PC

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Keywords: Spring Festival • Trump 2.0 • trade war • tariffs • Shein • Temu • Decathlon • Panama • BRI • Philippines • South China Sea • Indonesia • DeepSeek • Asian Winter Games • bulk procurement program • drug prices • healthcare system • Chang’e-7 mission

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Through the Lens

An old building in Xizhou, a historic town north of Dali Old Town in Yunnan.

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In Focus

I. “Young Chinese engineers focus on homegrown innovation, drawn by fewer visa hurdles and the chance to build a future on their own terms.”

American companies hire Chinese interns with strong engineering or data-processing capabilities to work on AI projects, either remotely or in their Silicon Valley offices, a Chinese AI researcher at a leading U.S. tech company told Rest of World. “Chinese students do very solid work,” said the researcher, who asked to remain anonymous because he was not authorized to speak to the media.

But when given full-time offers, many of them have chosen to go back to China, he said. “What has surprised me is many Chinese students are not that interested in full-time jobs in America,” the researcher said. Worries over anti-immigration policies have also deterred some Chinese engineers from moving to the U.S. in recent years.

Although earlier generations of elite Chinese tech workers preferred Silicon Valley jobs for higher salaries and a chance to work alongside the world’s top innovators, a growing share of young AI engineers are choosing to stay home. There are also more opportunities for them as China’s domestic AI industry expands, with tech giants like Alibaba, and also startups such as StepFun, Minimax, and 01.AI.

Read: China’s AI talent fueled DeepSeek’s rise, challenging U.S. dominance (Rest of World)

II. Shop till you drop—no more

One day after US president Donald Trump’s new tariffs on Chinese imports kicked into effect, shipping companies have already started charging higher import duties and processing fees, bewildering American consumers. Over the past 24 hours, US shoppers have reported receiving notices from UPS and DHL stating they owed between $20 to over $50. Some small business owners, meanwhile, say the new fees are forcing them to temporarily halt sending orders to the US completely.

“I am now stuck with $30,000 of items I can’t move across the border, the lifeblood of my business,” says Leslie Brown, the owner of a Canadian secondhand clothing company that sells to US shoppers on eBay and Poshmark. Yesterday, Brown published a blog post on Medium titled “Donald Trump Will Kill My Business.”

US customers who placed orders on shopping websites like the popular Chinese fast-fashion platform Shein have been particularly impacted, even if they made their purchases long before the tariffs were announced. They are now forced to either pay hefty fees—in some cases, more than the value of the items inside—or have their packages sent back.

Read: US Shoppers Face Fees of Up to $50 or More to Get Packages From China (WIRED)

Related: Trump signs order delaying tariffs on de minimis imports from China (SCMP)

III. “Biden’s China strategy will not have staying power.”

For all its worthy elements and the positive progress that it generated, Biden’s China strategy will not have staying power. Elements of Biden’s approach may endure, such as efforts around export controls and tariffs. Two of the core pillars of Biden’s China strategy—alliances and investments at home—are unlikely to find favor in the new Trump administration. This is not because Biden’s strategy lacks merit, but rather because it does not align with Trump’s conviction that economic growth is spurred by tax cuts and deregulation, and war is best averted through direct diplomacy with China’s leaders. As a result, Biden’s strategy will mostly be remembered as the interregnum between Trump’s two terms. This is not an indictment on the talented members of the Biden administration who built and executed the strategy, but rather a recognition of the reality that American politics has rendered.

Read: How will the Biden administration’s China policy be remembered? (Brookings)

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Politics & Society

As trade war threats rain down, Premier Li says China must ‘turn pressure into motivation’ (SCMP)

With the United States slapping an additional 10 per cent tariff on all Chinese goods this week, Beijing is looking to anchor market confidence as worries intensify over the potential fallout from a ramped-up trade war.

The Chinese government’s return fire featured a slew of retaliatory measures, including 10-15 per cent tariffs on some American goods – a move backed by China’s growing reliance on its domestic market, rapid tech progress embodied by the release of DeepSeek’s artificial intelligence (AI) model, and the nation’s strong manufacturing capability.

“We must strengthen confidence, work together and view external changes objectively,” Premier Li Qiang said during a plenary meeting of the State Council on Wednesday – the first working day in the Year of the Snake.

“Coordinated measures are needed to address domestic economic problems and respond to external challenges,” said Li, China’s No 2 political figure and a major caretaker of the national economy.

“We must turn pressure into motivation [to move forward].”

With US funding freeze, China nonprofits are facing extinction. They need emergency assistance (The Strategist)

An entire ecosystem of vital China-related work is now in crisis. When the Trump administration froze foreign funding and USAID programs last week, dozens of scrappy nonprofits in Hong Kong, Taiwan, and the US were immediately affected. Staff are losing their jobs; some organizations face imminent closure due to lack of funding; others are paring back their programming.

In many cases, these organisations provide our last window into what is actually happening in China. They do the painstaking and often personally risky work of tracking Chinese media censorship, tallying local protests, uncovering human rights violations, documenting the Uyghur genocide, and supporting what remains of civil society in China. They provide platforms for Chinese people to speak freely; they help keep the dream of democracy in China alive. I’m not listing the names of any specific organisations at this time, because some prefer not to disclose that they receive foreign funding. Beijing believes funding that supports free speech and human rights is interference by ‘hostile foreign forces’.

As China’s President Xi Jinping has squeezed Chinese civil society and expelled journalists, information from inside China has got harder and harder to access. The 2017 Chinese foreign NGO law crushed US and other foreign nonprofits based in China. Some moved to Hong Kong or elsewhere. The spending freeze may deal them a death blow.

The research and other work done by these nonprofits is invaluable. It largely isn’t replicated by think tanks, universities, private firms, or journalists. If it disappears, nothing will replace it, and Beijing’s work to crush it will be complete.