In its relationship with China, Canada is behaving like an abuse victim
This renewed enthusiasm for economic rapprochement with Beijing is deeply concerning. China has shown a clear track record of economic bullying and political intimidation toward Canada in recent years, particularly when former Prime Minister Justin Trudeau ran the show in Ottawa.
The first ministers' statement reflects a pragmatic, if anxious, response to the looming trade threats from the Trump administration. Facing potential tariffs and economic disruption from its largest trading partner, Canada's provincial and federal leadership appears to be seeking insurance through market diversification.
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The Diplomat
35 minutes ago
- The Diplomat
The Challenge to China's ‘Unified Big Market' Drive
The country's vast consumer base is the key to riding out Trump's tariffs. But China's internal market is riven by its own trade barriers. In April, U.S. President Trump announced his so-called 'Liberation Day,' slapping tariffs on nearly every country in the world. However, after Beijing retaliated, Trump made China his primary target. China has been widely viewed as 'well-prepared' for Trump's full-scale tariff war. It did not come as a surprise; Chinese economic officials and scholars had been discussing the possibility of renewed China-U.S. trade tensions since Trump's election victory in November 2024. Since Xi Jinping came to power in 2012, one of his top economic priorities has been to enhance the Chinese Communist Party's capacity to control and lead the economy while strengthening China's resilience to external shocks. The trade war during Trump's first term, along with the COVID-19 pandemic, further accelerated China's pivot away from reliance on international trade. Xi's strategy of economic self-strengthening – through technological nationalization and the promotion of 'dual circulation' – has made China less vulnerable to foreign economic coercion. The dual circulation strategy, introduced by Xi in 2020, prioritizes domestic economic activity over international trade. The goal is to increase the resilience of China's supply chains by reducing dependence on foreign technology. Xi's confidence rests on his belief in the strength of China's domestic market. He identifies China's vast consumer base – comprising over 400 million middle-class citizens – as the foundation of the national economy. As a result, strengthening the domestic market has become a top priority on Xi's agenda. During the most recent National People's Congress in March, Chinese leaders emphasized boosting domestic demand as the key to future growth, introducing new policies aimed at stimulating consumer spending and improving the domestic business environment. One example was the launch of a national subsidy program for major household purchases. Under this program, individuals buying cars, home appliances, and electronics can apply for price reductions. The goal is to encourage consumer spending and, in turn, stimulate economic growth through increased domestic consumption. The Chinese government is also advancing a major structural reform: dismantling internal market barriers. In the Government Work Report released in March, building a 'unified national market' was identified as a key policy objective. By breaking down regional trade barriers, policymakers aim to reduce logistics and other operational costs, thereby improving corporate profit margins and lowering consumer prices to boost domestic sales. Additionally, a unified market is expected to foster fair competition among businesses, enhancing the efficiency of resource allocation. More broadly, Xi envisions a system in which all factors of production – land, labor, capital, skills, and information – can circulate freely across the country. This nationwide integration, he argues, will maximize the use of resources and generate greater economic value. The root of China's 'dukedom economics' – a term coined by Chinese economists in the 1980s to describe the fragmented domestic market – can be traced to the growing power of local governments following the economic reforms. As part of the fiscal decentralization efforts in the 1980s, local governments gained control over their own budgets. In addition, they acquired authority over regional state-owned enterprises, effectively making them both regulators and entrepreneurs. The reforms also altered the incentives of local leaders: fostering local economic development became their top priority, as economic growth emerged as the most important criterion for cadre promotion. This shift gave rise to a tournament-style competition among localities, with each striving for rapid economic gains. As a result, local governments pursued aggressive investment strategies aimed at generating visible outcomes within short timeframes, often emphasizing self-sufficiency and local protectionism to achieve their growth targets. They are also incentivized to maximize the profits of local enterprises, which serve as their primary tax base. To protect these interests, many local governments established trade barriers to prevent local resources from flowing out and to block external goods from entering their jurisdictions. In recent years, the Chinese government has launched several major initiatives to dismantle internal trade barriers, including strengthened enforcement of anti-monopoly measures and regulations on unfair competition. These efforts specifically target local protectionist policies that discriminate against non-local firms. In June 2024, the State Administration for Market Regulation (SAMR) issued a policy document on fair market competition regulation, outlining the agency's responsibilities and enforcement powers. The document authorizes the SAMR and its local branches to investigate local laws and regulations that obstruct the development of a unified national market – particularly those involving discriminatory practices in subsidies, market access, and market entry and exit. Notably, the policy grants local Market Regulation Bureaus sweeping authority to scrutinize the policymaking processes of other local agencies and to strike down any regulations deemed inconsistent with the goal of building a unified national market. While China's recent reforms have significantly elevated the status of the Market Regulation Bureau – giving it more power within local governments – important exemptions remain in its authority. Specifically, policies that aim to 'protect national interests,' 'promote technological and innovation capabilities,' and 'provide public goods such as energy conservation, environmental protection, and disaster relief' are exempt from investigation. These broad exemptions leave the door open for local governments to continue offering subsidies to China's strategic industries, particularly the high-tech sector, including electric vehicles. In effect, local authorities can shield their own tech companies from both domestic and international competition, making market consolidation in China's tech sector more difficult. Regarding the national interest clause, an immediate question arises: Who holds the authority to define 'national interest'? Local governments – especially those at the municipal level – play a crucial role in the distribution of subsidies. While national and provincial governments formally own industrial policy subsidies, they typically do not engage in the detailed review and allocation process. For national subsidies, the central government allocates funds to provinces based on economic performance and other indicators. Provinces then distribute these subsidies to cities using similar criteria. It is the municipal governments that actually review companies' applications and decide on the final allocation of subsidies to individual firms. In addition to subsidies from higher levels, many cities also operate their own local industrial policy programs. There have been some attempts to centralize the distribution of subsidies. For example, last year Hunan province revised its industrial policy so that companies would submit subsidy applications directly to the provincial government, rather than through municipal governments. The goal was for the provincial government to review applications and allocate subsidies in a way that better reflected provincial economic priorities. However, the provincial government quickly found itself overwhelmed by the volume of applications, exceeding its processing capacity. Moreover, unlike municipal governments, which could conduct on-site visits to verify company information, the provincial government lacked the human and financial resources to carry out such reviews. As a result, the effort failed, and the Hunan government was forced to delegate the review and distribution authority back to the municipal level. By controlling the distribution of subsidies, municipal governments effectively gain the power to define 'national interests,' which often results in equating national interests with local interests. Consequently, city governments continue to use subsidies to protect local companies from outside competition. For example, Article 46 of the 'National Unified Big Market Construction Guideline' (全国统一大市场建设指引) states that local government cannot use local registration, subsidiary, and investment requirements to exclude companies from receiving local subsidies. But the local commerce bureaus, who are responsible for subsidies distribution, view this article as complete nonsense. 'Our job is to protect our [local] companies and promote our economic growth,' a Commerce Bureau cadre said, commenting on this requirement. 'If you don't contribute to our local economy, why do we give you our money?' 'We will try our best to carry out the rest of the document, but there is no way for us to implement this article,' he concluded. The SAMR is responsible for enforcing the unified national market, so the local Market Regulation Bureau is expected to monitor compliance. According to the cadre, the Commerce Bureau would likely receive a warning from the local Market Regulation Bureau. However, the Commerce Bureau would respond by invoking 'national interest' to justify its policy. In the end, the local Market Regulation Bureau is still part of the local government – its budget comes from the city – so it understands that it cannot act in direct opposition to local interests. The warning is therefore more symbolic than substantive; it serves primarily to demonstrate to the higher-level Market Regulation Agency that it is fulfilling its duties, rather than to enforce any meaningful policy change. The challenge to Xi's 'unified big market' vision will certainly hamper China's ability to weather the China-U.S. trade war. Without a massive boost to the domestic market as a buffer, China cannot implement a shifting export policy without experiencing short-term pain. However, the implications go far beyond the current trade war: Despite over a decade of power centralization under Xi, Beijing still faces pushback from its localities in implementing its vision.
Asahi Shimbun
4 hours ago
- Asahi Shimbun
U.S. and China agree to work on extending the tariff pause deadline in trade talks in Stockholm
Swedens prime minister Ulf Kristersson, left, greets U.S. treasury secretary Scott Bessent, right, and U.S. trade representative Jamieson Greer, second right, outside Rosenbad ahead of trade talks between the U.S. and China in Stockholm on July 28. (TT News Agency via AP) STOCKHOLM--The United States and China have agreed to work on extending a deadline for new tariffs on each other after two days of trade talks in Stockholm concluded on Tuesday, according to Beijing's top trade official. The U.S. side says the extension was discussed but not decided. China's international trade representative Li Chenggang said the two sides had 'in-depth, candid and constructive' discussions and agreed to work on extending a pause in tariffs beyond an Aug. 12 deadline for a trade deal. 'Both sides are fully aware the importance of maintaining a stable, healthy China-U.S. economic and trade relations,' Li said, without elaborating how the extension would work. U.S. Treasury Secretary Scott Bessent described the talks as a 'very fulsome two days with the Chinese delegation.' He said they touched on U.S. concerns over China's purchase of Iranian oil, supplying Russia with dual-use tech that could be used on the battlefield, and manufacturing goods at a rate beyond what is sustained by global demand. 'We just need to de-risk with certain, strategic industries, whether it's the rare earths, semiconductors, medicines, and we talked about what we could do together to get into balance within the relationship,' Bessent said. He stressed that the U.S. seeks to restore domestic manufacturing, secure purchase agreements of U.S. agricultural and energy products, and reduce trade deficits. The latest round of talks opened Monday in Stockholm to try to break a logjam over tariffs that have skewed the pivotal commercial ties between the world's two largest economies. The two sides previously met in Geneva and London to address specific issues — triple-digit tariffs that amounted to a trade embargo and export controls on critical products — China's chokehold on rare earth magnets, and U.S. restrictions on semiconductors. Monday's discussions lasted nearly five hours behind closed doors at the office of Swedish Prime Minister Ulf Kristersson. Before the talks resumed Tuesday, Kristersson met with Bessent and U.S. Trade Representative Jamieson Greer over breakfast. The talks in Stockholm unfolded as President Donald Trump is mulling plans to meet Chinese President Xi Jinping, a summit that could be a crucial step toward locking in any major agreements between their two countries. 'I would say before the end of the year,' Trump told reporters aboard Air Force One on Tuesday. On his Truth Social media platform, Trump insisted late Monday that he was not 'seeking' a summit with Xi, but may go to China at the Chinese leader's invitation, 'which has been extended. Otherwise, no interest!' Bessent told reporters the summit was not discussed in Stockholm but that they did talk about 'the desire of the two presidents for the trade team and the Treasury team to have trade negotiations with our Chinese counterparts.' Greer said the American team would head back to Washington and 'talk to the president about' the extension of the August deadline and see 'whether that's something that he wants to do.' The U.S. has struck deals over tariffs with some of its key trading partners — including Britain, Japan and the European Union — since Trump announced earlier in July elevated tariff rates against dozens of countries. China remains perhaps the biggest challenge. 'The Chinese have been very pragmatic,' Greer said in comments posted on social media by his office late Monday. 'We have tensions now, but the fact that we are regularly meeting with them to address these issues gives us a good footing for these negotiations.' Many analysts had expected that the Stockholm talks would result in an extension of current tariff levels, which are far lower than the triple-digit percentage rates proposed as the U.S.-China tariff tiff reached a crescendo in April, sending world markets into a temporary tailspin. The two sides backed off the brink during bilateral talks in Geneva in May and agreed to a 90-day pause — which ends Aug. 12 — of those sky-high levels. They currently stand at U.S. tariffs of 30% on Chinese goods, and China's 10% tariff on U.S. products. While China has offered few specifics of its goals in the Stockholm talks, Bessent has suggested that the situation has stabilized to the point that Beijing and Washington can start looking toward longer-term balance between their economies. Since China vaulted into the global trading system more than two decades ago, Washington has sought to press Beijing to encourage more consumption at home and offer greater market access to foreign, including American-made goods. Wendy Cutler, a former U.S. trade negotiator and now vice president at the Asia Society Policy Institute, said Trump's team would today face challenges from 'a large and confident partner that is more than willing to retaliate against U.S. interests.' Rollover of tariff rates 'should be the easy part,' she said, warning that Beijing has learned lessons since the first Trump administration and 'will not buy into a one-sided deal this time around.' Bessent said the 'overall tone of the meetings was very constructive' while Li said the two sides agreed in Stockholm to keep close contact and to 'communicate with each other in a timely manner on trade and economic issues.' On Monday, police cordoned off a security zone along Stockholm's vast waterfront as rubbernecking tourists and locals sought a glimpse of the top-tier officials through a phalanx of TV news cameras lined up behind metal barriers. Flagpoles at the prime minister's office were festooned with the American and Chinese flags.
NHK
7 hours ago
- NHK
Trump's trade strategies in Asia
The United States reached a trade deal with Japan. What's next for Asia, especially with US-China trade negotiations in the background? NHK World's Inoue Yuki speaks with William Chou at Hudson Institute and Mireya Solis at the Brookings Institution to get their insights.
