Tariffs, Trade and Wider Implications

29/04/25

Equity markets are currently trying to put in a bottom — perhaps the beginnings of a deal or understanding are emerging. Even if that proves to be the case, what began as a multilateral tariff conflict has hardened into a direct U.S./China confrontation — one centred not on trade deficits, but on control over infrastructure and flows defining commerce.

Ports, shipping lanes, infrastructure control, and regulatory pressure are the real levers of power. With formal tariff escalation likely close to the point of diminishing returns — would a 208% tariff meaningfully hurt more than one already at 104%?

Absent détente, focus will shift toward more opaque and harder-to-measure tools of influence: logistics access, commodity flows, digital disruption, and non-tariff retaliation. Previously a trade skirmish, this has become a campaign for economic primacy.

Like a sumo match deep in the shikiri phase, both sides are posturing, throwing symbolic moves, and testing psychological boundaries before full contact. The outcome, as in sumo, may be determined before the first push — in ritual, intimidation, and strategic control of the ring.

China's Expanding Non-Tariff Arsenal

• Export Controls: China has begun restricting outbound flows of critical minerals (gallium, germanium, graphite), asserting leverage over global clean tech and defence supply chains.

• Currency Positioning: Tolerance of yuan weakness to absorb tariff shocks and maintain export competitiveness.

• Surplus Dumping: Strategic oversupply of sectors like solar, EVs, and steel to flood foreign markets, triggering defensive trade policy in Europe and the U.S.

• Digital Commerce Platforms: Expansion of ultra-low-cost channels like Temu and Shein disrupt Western retail while bypassing traditional import gatekeeping.

• IP and Cyber Operations: Continuing grey-zone pressure on Western tech ecosystems, now often state-tolerated or tacitly enabled.

• Informal Trade Leakage: Passive tolerance of counterfeit flows remains a pressurerelease mechanism that offsets formal restrictions.

The U.S. Toolkit and Escalation Path

• Tech Export Controls: Continued tightening on semiconductors, AI hardware, and design tools.

• Selective Platform Crackdowns: TikTok divestment threats signal intent to limit Chinaorigin influence in the digital public square.

• More Tariffs: Aluminium and steel tariffs have returned; further escalation may target EVs, solar panels, or medical supply chains.

• Dollar Clearing & Sanctions Pressure: Threats of secondary sanctions on banks or firms supporting sanctioned Chinese entities.

• Reshoring Incentives: Through the IRA and CHIPS Act, the U.S. is building parallel supply chains in semiconductors, batteries, and critical minerals. Maritime Chokepoints & Strategic Access The U.S. is now challenging China's global port footprint from Piraeus to Gwadar, due to concerns that port presence may not remain purely commercial.

• Panama Canal: Chinese state-linked firms control terminals at both ends of the Canal, raising U.S. concerns over strategic influence in Latin America. In response, the U.S. has reportedly encouraged private sector investors to explore acquiring nearby port assets.

• Suez Canal: In the lead-up to U.S. strikes on Houthi positions in Yemen, a leaked Signal group chat showed Stephen Miller advocating that Egypt and Europe be made to "understand what we expect in return".

• Piraeus:(Operated by state owned COSCO) Offers China both commercial influence and potential strategic access within the European Union, a NATO region.

• Gwadar (Pakistan): Operated by China Overseas Ports Holding Company (COPHC), this port is the cornerstone of China–Pakistan economic trade, giving rise to concerns around potential for dual use as both a commercial and naval facility. In this phase, who controls movement — of goods, data, finance, and influence — will determine not just trade outcomes but the broader balance of power.

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