By Tani Thilakaratne
In 2018, the Trump administration accused China of unfair trade practices, intellectual property theft, and forced technology transfers. With a trade deficit of 375 billion dollars in 2017, Trump regarded these actions as evidence of exploitation and pursued to reduce U.S. dependence on Chinese manufacturing. Consequently, the U.S. imposed tariffs on over $ 360 billion in Chinese goods and restricted major technology firms. China retaliated with tariffs on $ 110 billion in U.S. exports and expanded its regional initiatives.
The U.S.-China trade war eventually became a crossroad in the Indo-Pacific Economic order, redefining the region as a field of strategic rivalry rather than mutual growth. This conflict disrupted supply chains, boosted regional trade agreements, and shifted strategic economic ties across Asia. This outcome raises the question of whether Trump’s trade and technology policies accelerated China’s economic diversification and regional influence in the Indo-Pacific. Although these policies were designed to weaken China’s economic dominance, they ultimately reshaped the Indo-Pacific economy into a more multipolar system, while China remained as a pivotal player.
To confront China’s growing economic and technological influence in the Indo-Pacific, the Trump administration introduced the Free and Open Indo-Pacific strategy (FOIP), a framework to link U.S. interests and reform regional trade dynamics. As noted in “FOPI Strategy Free and Open Indo-Pacific (FOIP): A Vietnamese Perspective,” the initiative aims to “maintain and expand its influence in the Indo-Pacific region” by promoting fair trade and reducing dependency on China.
The core of this strategy was to counter China’s export-driven growth and limit its technological rise. Through tariffs, technology bans (restricting technology firms such as Huawei and ZTE), and restoring incentives, the U.S. aims to diversify supply chains, mainly in semiconductors and rare earth elements. U.S. further targets to strengthen economic partnerships with regional allies like Australia, Japan, and India.
China’s Economic Countermeasures
In response to Trump’s strategy, China adopted a series of countermeasures aimed at mitigating U.S. pressure and maintaining its global trade position. Instead of retreating, China used this situation as an opportunity to explore economic partnerships, strengthen regional frameworks, and foster long-term initiatives that reduce reliance on Western markets.
The Belt and Road Initiative (BRI)
A central countermeasure is the Belt and Road Initiative, which serves as both an economic and geopolitical instrument for expanding China’s influence across Asia, Africa, and beyond. According to the Council on Foreign Relations, President Xi Jinping’s vision for BRI involves creating a “vast network of railways, energy pipelines, highways and streamlined border crossings,”. This extensive infrastructure network enhances international use of Chinese currency, promotes regional connectivity, and stimulates development in past neglected western regions. This leads the BRI to effectively offset the loss of access to Western markets resulting from US trade barriers.
Regional Comprehensive Economic Partnership (RCEP)
To increase its power in the Asia-Pacific region, China established an “Anti-American bloc” in 2020 called the Regional Comprehensive Economic Partnership. This is China’s first multilateral trade pact and the biggest free-trade agreement, which also includes 10 member states of ASEAN. It aims to lower non-tariff obstacles to goods and services trade between member nations. This multilateral response that excludes the US reinforces China’s trade centrality to a major extent.
Export controls
China is known to produce around 90% of the world’s rare earth elements that are used across as energy, electronic, and other industries. Since the US consists of one rare earth mine, most of the supply to be used in its industrial sector is provided by China. As another economic countermeasure, China attacks back at US tariffs with export controls on these rare earths. China has weaponized its dominance through this decision and has left American manufacturers and other exporting countries in a difficult position.
Domestic Adjustments
As a strategic realignment, China has also decided to lay out a broad goal in expanding domestic consumption and improving technological self-reliance. Although the approach remains cautious and lacks fiscal commitment, to block the US policies, this can be considered as a strategic response to anchor productivity gains in the future.
Regional Effects and Outcomes
Focusing on the outcomes and regional effects, the US-China trade tensions have led to a partial economic decoupling. However, this decoupling between the two major economies has corresponded with strengthening Asian economic interdependence.
A notable effort is the growth of ASEAN’s relationship with China during the trade war years, leading to a reduction in US imports from China. One instance would be ASEAN becoming the major hub in China’s manufacturing Foreign Direct Investments. Investments made by Chinese firms into the manufacturing sectors of ASEAN member countries are one of those achievements. Although it is evident that this shift has diversified away from the US, it may be slowing down evolving tariff policies are affecting exports from these member countries to Western markets.
Moreover, the U.S absence from regional networks and its withdrawal from major trade deals have limited its influence and weakened its economic leadership.
Instead of marginalizing China, the trade war resulted in Indo-Pacific evolving to a multipolar area interlinked with competing economic orders.
In conclusion, Trump’s tariffs and technology restrictions accelerated China’s economic regionalization, but not in America’s favor. Leveraging U.S. disengagement, China deepened its regional role in the Indo-Pacific- redefining its overlapping interdependence. Future US strategies will face a regionally embedded China and an Indo-Pacific that continues to hedge with the powers rather than taking a definitive side.
Tani Thilakaratne is a postgraduate in International Relations, Leiden University. The views expressed in the above piece are personal and solely those of the author. They do not necessarily reflect the views of Kalinga Institute of Indo-Pacific Studies.
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