Despite persistently high US tariffs, China achieved a record trade surplus by reorienting trade flows. Olga Ponomareva and Vladimir Sedalishchev, experts at the Economic Policy Foundation, spoke to RBC about mechanisms behind this adaptation and possible countermeasures from other countries.
According to Olga Ponomareva, Chinese suppliers flexibly utilize preferential trade regimes. "China's trade relations with many countries, including EU member states, are based on the World Trade Organization's (WTO) most-favored-nation status, with tariff rates rather low and not exceeding 5-10%, as well as within preferential trade regimes (regional trade agreements), with zero tariffs for most goods. For example, this is how China trades with the Association of Southeast Asian Nations (ASEAN)," the expert noted. This allows Chinese companies to use these channels despite tariff pressure, including by establishing production hubs in third countries, where products are no longer classified as Chinese.
Moreover, a significant portion of goods enter the US market through a back door. "This “sham reorientation” could concern the supply of intermediate goods, parts, and components, as establishing such chains with new partners takes a very long time, which makes circumventing higher tariffs through third-party markets feasible in the short term," Olga Ponomareva believes.
She noted that China has already used similar schemes in 2017–2020. However, the expert believes that the risk of a complete halt of exports to the US is minimal, as this market is too important. She attributes the decline in exports there to uncertainty and temporary imposition of prohibitive tariffs.
Olga Ponomareva emphasized that the European Union is taking a hardline stance, criticizing Chinese state subsidies and imposing anti-dumping duties, as in the case of electric vehicles. "Considering the tone set by US trade policy in recent years, the EU could very well realize the voiced threats to potentially impose higher duties," the expert admitted.
Vladimir Sedalishchev, commenting on the risks of retaliatory restrictions against Chinese exports, agreed with their existence, but emphasized that they would most likely be targeted and sectoral.
"Most governments, even if they express dissatisfaction with the influx of Chinese products, are unlikely to impose broad and synchronized barriers: such a strategy would create the threat of escalating the global trade war, disrupt established production chains and increase inflationary pressure," he explains. Therefore, measures will be introduced selectively, i.e. in those sectors where domestic businesses face the strongest competition from Chinese imports and where regulators have legally justified grounds for restrictions (for example, in the form of anti- dumping investigations or tariff adjustments)," the expert explained.