Going a Courting: China Woos Neighbors to Beat US Trade War

Chinese leader Xi Jinping took his first overseas trip of this year, arriving in Vietnam on Monday before heading to Malaysia and Cambodia for meet-and-greets with Southeast Asian leaders.  

The long-scheduled trip was aimed at discussions on investment and infrastructure, and also to remind China’s smaller neighbors who the heavyweight in the region is. 

Instead, in the wake of steep US tariffs imposed on China, the trip turned into a charm offensive to woo these countries into deepening their relationships with China in order to isolate the United States.  

“The fact that Xi Jinping is coming to visit these countries is very significant,” Lynette Ong, professor of Chinese politics at the University of Toronto, told Bloomberg. “I would read it as Xi’s attempt to form alliances to fight back against the United States in the trade war.” 

Last week, US President Donald Trump rattled markets worldwide when he imposed steep tariffs on US trading partners around the world. After then pausing most tariffs for 90 days, he instead raised levies on China to 145 percent to punish the country after it retaliated by hiking tariffs on US goods.  

The trade war and the tariffs, despite the reprieve, have left Southeast Asia rattled, say analysts. All three countries face steep tariffs: Vietnam, 46 percent tariffs; Malaysia, 24 percent; and Cambodia, 49 percent. As a result, the three nations, which have long tried to balance their relations between China and the US, face an impossible choice: Cut off trade with one of their biggest trading partners, China, or face tariffs that could cripple their development.  

Enter Xi to present a way out.  

Xi’s visit is intended to show these countries that it is a “responsible superpower in a way that contrasts with the way the US under President Donald Trump presents to the whole world,” Nguyen Khac Giang, a visiting fellow at Singapore’s ISEAS–Yusof Ishak Institute, told the Associated Press. At the same time, “The trip to Vietnam, Malaysia, and Cambodia is all about how China can really insulate itself from Trump.”  

After arriving in Vietnam, Xi told his hosts that China, the world’s second largest economy, is a more stable choice than the US under the current administration and that together, both Vietnam and China could prosper to new heights.  

“There are no winners in trade wars and tariff wars, and there is no way out of protectionism,” Xi wrote in an editorial in Nhan Dan, a Vietnamese daily close to the government, on the day of his arrival. “We must firmly defend the multilateral trading system, sustainably maintain the stability of global production and supply chains, and sustainably maintain an open and cooperative international environment.” 

“It is necessary to strengthen coordination,” he added, “to create more and more stability and positive energy for today’s volatile world.” 

Vietnam has a tricky relationship with China, its largest trade partner. On the one hand, there is deep distrust due to territorial disputes in the South China Sea. On the other, Vietnam is dependent on Chinese supply chains, especially for components and raw materials.  

Still, Xi didn’t leave empty-handed. The two sides signed a series of memorandums, whose details were not made public, but likely involve deepening Chinese support for technology transfer, infrastructure projects, and manufacturing. And, China and Vietnam agreed to accelerate the construction of an $8 billion railway project connecting the two countries. 

But Vietnam, like Cambodia and Malaysia, remains caught between both the US and China, as they have all helped China to bypass prior US tariffs for Chinese exports in the past.  

“We will want to hear from countries including Cambodia … and Vietnam that you will stop allowing China to evade US tariffs by trans-shipping exports through your countries,” wrote Peter Navarro, Trump’s senior adviser for trade and manufacturing, in the Financial Times. 

Vietnamese officials said last week the country was taking “urgent steps” to address the issue, with the trade ministry now set to “review and strictly control” the origin of goods to “prevent any unfortunate incidents from happening.”  

Still, Vietnam worries like other countries in Southeast Asia that Chinese goods otherwise bound for America will now be dumped on them to the detriment of domestic manufacturers.  

In Malaysia, meanwhile, Prime Minister Anwar Ibrahim is trying to negotiate with the US over the tariffs even as he has created closer ties with China, and especially Xi: Last year, the two countries pledged to deepen economic ties, renewed a five-year trade and investment agreement, and agreed on a joint $10 billion rail project.  

However, Malaysia exports slightly more goods to the US than to China, and tariffs could bite, especially regarding Malaysia’s semiconductor exports. Nonetheless, as World Politics Review noted, the country was already preparing for such a trade war. 

“In January, Malaysian Prime Minister Anwar Ibrahim told lawmakers that the country must prepare by diversifying its export markets and taking ‘proactive steps … to aggressively open a wider network of trading partners,’” it wrote. “(It) also predicted that it was possible to ride out the ‘initial shock’ of the Trump administration’s policies.”  

With Cambodia, Xi knows he has a solid friend. The country has long been pro-China and depends heavily on China for investment, trade, and funding for infrastructure: For example, China helped fund its new international airport in the capital of Phnom Penh, which is slated to open this summer. Its economy is also highly intertwined with China’s. 

Still, the US announcement of the tariffs was devastating to Cambodians: They would decimate the country’s garment industry, which accounts for more than half of the country’s export revenue. Cambodia sells most of its goods to the US.  

As a result, the Cambodians welcomed Xi’s visit. 

“We are a small state, punished by the US,” one Cambodian official told the Economist. “And now Xi Jinping, as the leader of the second-largest economy, comes to us. So that helps to build our confidence. It is very emotional.” 

China says it will “fight to the end” in the trade war. It certainly will impact the country, however. The spat comes as China struggles with deflation, a housing bust, and demographic woes. For years, it has encouraged weak consumption and “exported its overcapacity, swamping the world with goods.” 

Still, analysts say now that with trade deals and moves to enhance cooperation with other trading partners such as the European Union, South America and elsewhere, China can likely weather the trade war without making concessions, even if it hurts its economy in the short term.  

“Unlike the first US-China trade war during Trump’s initial term, when Beijing eagerly sought to negotiate with the US, China now holds far more leverage,” wrote Linggong Kong of Auburn University in the Conversation. “Indeed, Beijing believes it can inflict at least as much damage on the US as vice versa, while at the same time expanding its global position.” 

“In a trade war with the US, China holds a lot more cards than Trump may think,” he added. “In fact, it might have a winning hand.”  

Regardless, analysts say to expect more displays of Chinese soft power in the future.  

“What Xi is trying to do now is to go there in person – instead of fear and pressure, Xi is going to show them love, maybe some ‘souvenirs’ along the way,” Wen-ti Sung, a non-resident fellow at the Atlantic Council, told CNN, referring to new trade deals and other enticements. “All these are ways for China to show that I’m on your side. It’s safe to hang out with China, especially if you’re concerned about the US.”