A trend in which America, China and Europe all pursue more protectionist trade policies, aiming not to end foreign trade but to capture more of its benefits.
Chinese state planners expect the phrase "China goes global" to define much of 2026. More Chinese companies will open or expand overseas operations, trying to ease trade tensions by creating jobs abroad. Some will distribute fully made-in-China products (such as electric vehicles or high-performance batteries); others will send semi-finished kits to assembly plants far from home, transferring just enough value to be classified as local manufacturers.
Chinese firms are hearing loud demands from European and other governments to transfer more advanced technologies to foreign partners and to source more components from local supply chains. Yet many Chinese businesses aim to keep their most valuable operations at home, citing efficient industrial clusters, low-cost and abundant energy, modern infrastructure, economies of scale, and a workforce where strikes are illegal and workers do as they are told.
The European Union is debating "buy European" local-content rules for public procurement contracts. Western trade officials caution that governments should assume Chinese firms will mostly ship in components for final assembly, rather than build fully localised advanced manufacturing sites.
Jens Eskelund, president of the EU Chamber of Commerce in China, observes that the rationale for Western investment in China has shifted. In the 1990s and 2000s firms sought to profit from low costs and the large domestic market. Today more European companies invest in China "for survival". Among the chamber's member companies, twice as many are moving production into China as are reducing activities there—partly to manufacture "in China, for China" amid geopolitical tensions, but also to stay competitive globally by tapping Chinese suppliers and industrial clusters.
Almost every Western firm active in global trade now faces at least one peer or near-peer competitor from China. Those Chinese rivals gain an edge from hyper-competitive Chinese suppliers. To survive, many Western firms believe they must leverage the same Chinese supply chains.
As Chinese subsidiaries compete with their own parent companies, firms face complaints about cannibalising worldwide sales and causing job losses at home. China-based joint ventures increasingly develop world-class intellectual property or generate valuable data that cannot be shared across borders due to Chinese and Western security laws. The nationality of a global firm is becoming more important but more ambiguous.
Donald Trump has bullied allies into promising huge investments in America. In South Korea, insiders worry about a political backlash: new American plants may profit Korean carmakers, but South Koreans need to see visible gains for their country.
On April 2nd 2025 Donald Trump imposed sweeping tariffs, briefly pushing America's effective tariff rate above 20%. Even after falling back to 10.5% it was at its highest since the 1940s. The share of global trade conducted on non-discriminatory terms—the global system's core principle—slipped from 80% to 72% over the following year, according to the WTO.
Yet global trade grew by nearly 5% in 2025, faster than the world economy. America's tariff wall proved porous, riddled with exemptions; roughly half of goods imports still entered duty-free. America's goods deficit widened to more than $1.2trn, or 4% of GDP. The tariffs changed where America bought rather than how much: punitive duties against China all but choked off direct trade, with imports from China falling over 40%, but imports from Thailand and Vietnam rose by more than 40%. Taiwan, the world's leading producer of advanced chips, saw exports to America rise by more than 80%.
Rather than erect tariff walls of their own, partners opened up—seeking new markets, striking new deals and deepening mutual ties. All told, tariff increases touched only about 11% of global trade. Between May and December 2025, trade among Britain, Canada, the EU, Japan, South Korea and Switzerland rose by 12% compared with the same period a year earlier, even as their exports to America fell by 6%.
The EU finalised deals with Mercosur, Australia, India and Indonesia. Switzerland, through the European Free Trade Association, reached its first agreement with South America. Britain signed a trade deal with India. India itself struck deals with Oman and New Zealand in addition to those with Britain and the EU—a higher tally than in the previous decade. More than 15 deals involving Britain, Canada, the EU and others were struck over the past year, covering over $400bn in trade. A digital-trade pact agreed on March 28th 2026 by 66 countries, including Australia, Britain and Singapore, set common standards for data flows and digital commerce. Countries lowering trade barriers accounted for more than a quarter of global imports, compared with less than an eighth for America.
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