01-05-2025
How Trump's tariff chaos is bringing China's ‘trade circle of friends' closer
BEIJING (SCMP): There has been growing debate about whether US President Donald Trump's tariff strategy will drive a wedge between China and other Global South nations. Analysts say the opposite is happening.
One example is China, facing duties of up to 245 per cent, and Brazil, where Trump's global baseline 10 per cent tariff has been imposed.
The two nations have stepped up high-level engagement since the tariff chaos started.
On Tuesday, China's top diplomat Wang Yi called for Brasilia and Beijing to oppose 'the law of the jungle' together and said relations were at their 'best period in history' during separate meetings in Rio de Janeiro with Brazilian Foreign Minister Mauro Vieira and chief presidential adviser Celso Amorim.
Those meetings – on the sidelines of a Brics gathering – were held ahead of Brazilian President Luiz Inacio Lula da Silva's planned trip to China in May, and after Chinese officials travelled to Brazil for Brics agriculture talks and infrastructure projects in mid-April.
Analysts say the American president's trade war is likely to help strengthen ties between China and Brazil – the largest developing economies in the eastern and western hemispheres, respectively. It could also drive further cooperation and give fresh impetus to joint efforts for greater clout in the global governance system.
The White House's hardline approach on China could create a more 'consolidated' footing for Beijing's ties with Latin America in general, according to analysts, but the region's complex political dynamics remain a challenge.
'Brazil and China have reached a very high-level and very consolidated relationship,' said Hsia Hua Sheng, associate professor of finance at the Escola de Administração de Empresas de Sao Paulo da Fundacao Getulio Vargas, a Brazilian private higher education institution.
'The US tariff war event will just make this relationship stronger.'
He said if Washington continued its restrictive position against China, prompting countermeasures from Beijing, it could create opportunities for Brazilian agricultural exporters, who could broaden their shipments to the Chinese market since Brazil and the US were competitors in agribusiness.
Hsia added that Trump's tariffs could also help reroute Chinese investment into renewable energy and green manufacturing sectors in Brazil, which would benefit the largest Latin American economy's 're-industrialisation' drive.
Washington has claimed that more than 70 countries wanted to start tariff talks and is reportedly planning to use those negotiations to pressure trading partners to isolate China, as the rival powers vie for support.
In response, Beijing has urged countries not to strike trade deals with the US 'at the expense of the Chinese side'.
Liu Ying, a research fellow at Renmin University's Chongyang Institute for Financial Studies in Beijing, said she expected a big country like Brazil would try to safeguard the multilateral trading system while defending its interests.
'I do not think [Brazil] will bow to the US … or seek to compromise with the US,' Liu said.
Brazil could also be expected to fight the US tariff, even if it was at the lowest end of the scale, because it was still 'unfair', according to Hsia.
Lula enacted a law in mid-April empowering Brazil's federal government to impose reciprocal measures on countries or economic blocs restricting its exports.
On the same day, Chinese Commerce Minister Wang Wentao discussed responses to the US tariffs with Brazilian Vice-President Geraldo Alckmin.
Beijing then sought to rally Brics members and its partner states, calling on the group of emerging economies to 'jointly resist unilateral bullying'.
Brazil holds the rotating presidency of Brics this year and is a founder of the bloc – along with Russia, India, China and South Africa – that has since expanded to 11 members.
Chinese President Xi Jinping is expected to visit Rio de Janeiro in July for the annual summit of Brics leaders.
The Brics coalition has highlighted a closer partnership between Beijing and Brasilia that extends beyond trade and investment.
They have worked together through Brics to reduce reliance on the US dollar – a push known as the de-dollarisation initiative – and to give developing countries more political influence in world affairs.
Liu from Chongyang expected that Brazil would seek to strengthen unity with Global South nations, including those in Brics, to try to counter America's unilateral protectionist policies.
According to Hsia, Brics could provide support to an alternative global trade and financial system.
As well as strengthening ties with Brazil, Beijing is also trying to consolidate its relations across Latin America.
The region is home to economies that share strong industrial complementarity with China but have limited trade competition, analysts from China Industrial Bank wrote in a note in January. They said China should 'actively expand its trade circle of friends with these economies'.
Lula's planned trip to China in mid-May, just six months after Xi visited Brasilia, will take place during a high-profile ministerial meeting between China and the Community of Latin American and Caribbean States.
It comes during a pivotal year for the region, with four nations – Ecuador, Bolivia, Chile and Honduras – gearing up for presidential elections and midterms looming in Argentina in October.
Right-wing populist leaders in Latin America – who share strategic alignment with the US – could come to power, creating obstacles for relations with China given the region's increasing importance in Trump's foreign policy.
Zhou Chao, a research fellow with Beijing-based independent think tank Anbound, said Trump's tariffs might not deliver a serious blow to China-Brazil relations in the short term but it could be a different story in the long run.
He said if Brazilian exporters failed to secure a sustainable market in China, given the softening Chinese consumer demand, then bilateral ties could 'naturally suffer more disruptions'.
'Brazil's right-wing pro-US forces still have a strong influence and support base, which will continue to negatively impact the further development of bilateral relations,' he said.
Liu from Chongyang said the US was likely to court Latin American nations, adding there were uncertainties in particular around Chile's election in November.
As Chile's left-wing President Gabriel Boric prepares for his final months in office, the polls are favouring candidates from the right and extreme right – factions historically pro-US.
But Liu said it would be difficult for Washington to pull Brasilia into its orbit.
'Brazil knows where its core interests lie, where its future is and the direction of its development,' she said. 'It won't be led by the US.'
She added that economic ties were strengthening between China and Brazil, especially in agriculture, infrastructure and manufacturing.
China has been Brazil's top trading partner for 16 years. It accounted for 25.6 per cent of Brazil's total exports in the first quarter – more than double the 12.5 per cent of Brazilian exports sent to the US.
It is seen as a complementary economic relationship, with China's industrial demand matching Brazil's farm goods, energy and minerals.
And while China is in direct competition with its East and Southeast Asian neighbours on exports to the US, that is not the case with Brazil.
China has also become an increasingly significant investor in Brazil in recent years, with Chinese firms taking on megaprojects such as power plants, ultra-high-voltage transmission lines and gas pipelines. However, the US remains the top single-country source of foreign direct investment in Brazil.
Hsia said US trade instability could 'accelerate' planned investment between Brazil and China.
Cooperation between China and Brazil continues to grow, and Brazil has pledged to 'deepen' ties in agriculture, clean energy and technology. However, Brazilian Finance Minister Fernando Haddad has warned that US-China tensions could hurt Brazil if they slow down China's economy.
Still, the US-China tariff war has already shifted trade flows. China has ordered some 1.8 million tonnes of Brazilian soybeans for April-May while halting its US soybean orders, according to Chinese commerce ministry data.
Since 2013, Brazil has outpaced the US as China's top soybean supplier, with its market share rising from 53 per cent in 2017 to 71 per cent last year. Brazil also sees opportunities in beef and aerospace after China restricted US meat imports and Boeing deliveries.
'No single country can buy as much as China buys from Brazil,' Hsia said. '[The US tariffs] just confirmed that Brazil has chosen the right way to have China as a good friend.' - South China Morning Post/ANN
