Why China Will Not Blink: Beijing’s Strategic Resolve Amid Escalating Trade Tensions

In a recent press conference, the Chinese Foreign Minister responded to Washington’s moves by stating, “China stands firm against these tariffs, not only to defend its own rights and interests, but also to safeguard the common interests of the international community to ensure that humanity is not dragged back into a jungle world where might makes right.” 

Chinese President Xi Jinping, speaking during a Southeast Asia diplomatic tour, reinforced the sentiment, warning that “trade wars yield no winners.” Instead of escalating the confrontation, he advocated for “mutual respect and multilateral cooperation to maintain global stability.” 

But behind these carefully worded remarks lies a deeper truth: China’s long-term economic and geopolitical vision makes it uniquely positioned to endure and outmaneuver short-term economic pressures. While Washington plays checkers, China plays chess. 

The Tariff Tally: Escalating Measures And Global Disruption 

Following his inauguration on 20 January of this year, President Donald Trump swiftly launched a series of tariffs targeting strategic imports. Although the US White House justifies these measures as necessary to protect American industries, they have sent shockwaves through global trade networks.   

Key developments include: 

New Trade War with Canada and Mexico 

Trump imposed a 25 per cent tariff on most goods from Canada and Mexico, framing it as a way to hold these countries accountable for contraband drug trafficking and illegal immigration while also supporting domestic manufacturing. Canada also countered with its own 25 per cent tariffs. 

Shortly thereafter, he granted indefinite exemptions for goods that comply with the USMCA trade pact provisions, partially easing tensions with close US neighbours. 

25 Per Cent Tariff on Imported Steel, Aluminium, And Automobiles 

Seeking further leverage in trade negotiations, Trump announced a 25 per cent tariff on imported steel, aluminium, and automobiles from all countries. Tariffs on auto parts are expected to follow. 

April 2: ‘Liberation Day’ Executive Order 

On 2 April, President Trump declared “Liberation Day” and signed an executive order imposing a minimum 10 per cent tariff on all US imports effective 5 April. In a sweeping measure, the administration instituted a baseline 10 per cent tariff on almost every nation, including small, uninhabited territories with no actual trade ties to the US. Although partly symbolic, it underscores Washington’s all-encompassing protectionist posture. 

Additional tariffs ranging from 11 per cent to 50 per cent on imports from 57 countries were scheduled to take effect on 5 April, but were almost immediately suspended for 90 days for all countries except China. The 10 per cent tariff remains in effect across the board. 

Baselines Raised to 145 Per Cent on Chinese Imports 

In an escalation of the ongoing trade war, after 9 April, 2025, Trump raised baseline tariffs on Chinese imports to an effective 145 per cent. China responded by increasing its own retaliatory tariffs on US goods to 125 per cent. 

Collectively, these new measures reflect a dramatic escalation in US protectionism. Estimates suggest these combined and retaliatory tariffs have reduced global trade flows by hundreds of billions per year from pre-tariff projections, stalling supply chains, investments, and consumer confidence. Multiple agencies warn that protracted or expanded trade wars could cut deeper into global GDP growth. 

China’s Strategic Patience: Beyond The Election Cycle 

One of China’s principal advantages is its capacity for long-range planning. While Western democracies frequently shift economic policies after each election, Beijing commits to multi-decade initiatives like Made in China 2025 introduced in 2015, the Belt and Road Initiative (BRI) launched in 2013, and the creation of state-of-the-art technology hubs. 

Western and American companies often brace for abrupt policy reversals every four or five years, but Chinese businesses, guided by consistent state directives, methodically advance their global industrial dominance. 

The BRICS Expansion: A New Global Bloc Emerges 

China’s forward-looking strategy is readily apparent in its leadership within BRICS (Brazil, Russia, India, China, and South Africa). Recent additions—such as Saudi Arabia, Egypt, the UAE, Iran, and Ethiopia—are transforming BRICS into a geopolitical heavyweight and an alternative to Western-led alliances. 

Within the expanded bloc, China, possessing the largest economy and most advanced tech base, drives initiatives like the New Development Bank and BRICS currency proposals, aimed at diminishing the US dollar’s global dominance. Representing more than 45 per cent of the global population and roughly a quarter of global GDP, BRICS offers an attractive forum to emerging economies frustrated by rising US protectionism. 

Mastering Manufacturing: Real Power From Production 

In an era where controlling supply chains is a form of geostrategic leverage, China stands supreme. It dominates 80 per cent of global solar panel manufacturing, refines 70 per cent of the world’s lithium (one of the world’s hottest commodities), and constructs half of the world’s ships. 

While many Western countries offshored labour to focus on services and finance, China never forgot the strategic value of real production. It built factories, high-speed rail lines, and AI-optimised logistics networks, creating the most integrated manufacturing hub in the modern world. Consequently, when Washington warns of “decoupling,” Beijing shrugs—only 15 per cent of its exports go to the US, and an expanding Chinese middle class now sustains robust domestic demand. 

Infrastructure Overdrive: Building At Home And Abroad 

China’s capacity to handle external shocks also arises from relentless infrastructure spending at home and under the Belt and Road Initiative. Domestically, its high-speed rail network—the largest globally—binds the country’s megacities, while 5G telecom, highways, and new airports, bolster e-commerce and advanced manufacturing. 

Internationally, Beijing has poured hundreds of billions of dollars into flagship BRI ventures, such as: 

• Gwadar Port in Pakistan: The linchpin of the China-Pakistan Economic Corridor, offering a direct route to the Arabian Sea. 

• Mombasa-Nairobi Railway in Kenya: Slashes travel times and stimulates East African trade. 

• Piraeus Port in Greece: Overhauled into a premier Mediterranean maritime hub. 

• East Coast Rail Link in Malaysia: Strengthens intra-Asian connectivity and boosts regional economic collaboration. 

These high-impact projects not only yield financial returns, but also secure Beijing greater access to raw materials and strategic markets—often under preferential conditions negotiated with local governments. 

Digital Currency And Financial Innovation 

To reduce reliance on Western-controlled financial networks, China has piloted one of the first central bank digital currencies (CBDCs)—the digital yuan. Increasingly used in cross-border settlements with BRI and BRICS partners, this technology skirts the traditional, dollar-centric systems like SWIFT. 

This innovation underscores China’s broader push for financial sovereignty. As President Xi Jinping reiterates: “We must promote reform in global governance and build a community with a shared future for mankind.” 

The Role Of IFCs In A Changing Global Landscape 

Against the backdrop of fractious trade policies and shifting geopolitical allegiances, international finance centres (IFCs) remain vital conduits for cross-border investment. Jurisdictions like the British Virgin Islands (BVI) have historically provided legal neutrality, robust corporate frameworks, and efficient tax structures—qualities especially sought after by Chinese firms looking to expand abroad. 

Today, 44 per cent of the beneficial owners of BVI-registered companies are Chinese, highlighting how pivotal IFCs are in channeling outbound foreign direct investment (FDI) from the world’s second-largest economy into emerging markets. Yet with Washington’s tariffs reshaping the global commercial order at breakneck speed, IFCs are under increasing pressure to stay agile, uphold compliance, and navigate a landscape rife with both opportunity and risk. 

Insights From The ‘Behind the Headlines’ Webinar 

These themes were central to a recent BVI Finance webinar, ‘Behind the Headlines: The Trump Era, Global Geopolitics, and the Future of International Finance Centres’.  Moderated by Elise Donovan of BVI Finance, the session featured experts Geoff Cook, former CEO of Jersey Finance and Chair of Mourant Consulting; Mark Pragnell, economist and Managing Director of Pragmatix Advisory; Oliver Cooper, Legal Counsel at Charles Russell Speechleys and Counsel at the IFC Forum; and EY partner LaNishka McSweeney. Their discussion underscored several critical points relevant to IFCs worldwide: 

1. Neutrality and Stability: Panelists emphasised that IFCs benefit from political neutrality and consistent legal frameworks. In an environment where President Trump’s policies can shift rapidly—often announced via social media—stability becomes a prized asset. “In an uncertain, unstable world,” said Cook, “simply being stable is attractive to investors.” 

1. Technological Readiness: Rapid adoption of digitised compliance (eg, e-KYC, AI-based analytics) was highlighted as essential for IFCs to handle growing transaction volumes and adhere to multiple, sometimes conflicting sanctions regimes. 

1. Proactive Diplomacy: Economist Pragnell noted that small IFCs must “pivot on a dime” by proactively engaging with both US and European stakeholders to clarify that these jurisdictions facilitate, rather than hinder, cross-border capital flows. “We need quiet diplomacy,” said Cooper, “demonstrating why IFCs are not a ‘deficit’ problem but actually help spur economic activity.” 

1. Realigning Amid Trade Shifts: With US firms re-shoring or diversifying supply chains, and Europe rethinking industrial policy, IFCs may play a bigger role in structuring joint ventures, mergers, and private placements. According to McSweeney: “When giants fight, the grass can get trampled, but IFCs can remain safe havens—if we adapt quickly.” 

Collectively, the panel concluded that although Trump-era protectionism causes short-term disruptions, it also sparks new investment needs, infrastructure financing, and cross-border deals—areas where IFCs traditionally excel. 

Cutting Out The Middleman: China’s Direct Reach 

Historically, China manufactured goods while Western brands and retailers stood between Chinese producers and global consumers. That model is eroding rapidly. Chinese e-commerce giants and FinTech platforms have begun marketing directly to overseas customers via social media channels—especially TikTok—and forging new, end-to-end supply chains that bypass Western intermediaries. 

Within the ‘Behind the Headlines’ webinar, panelists saw this direct-to-consumer evolution as part of China’s broader effort to control the full value chain—from raw materials and capital formation to manufacturing and retail distribution. For IFCs, it creates further scope to structure cross-border capital injections, manage digital payments, and handle the complexities of multinational corporate governance. 

China’s Calculated Calm 

“We will not create too much of a storm in a teacup,” remarked Wang Yi, underplaying the rhetoric without dismissing the stakes. China’s real strength lies in steadfast investment in infrastructure, a vast domestic market, and an ever-expanding technological edge that allows it to withstand trade shocks. Meanwhile, President Trump’s minimum 10 per cent tariff on nearly every nation—an extraordinary assertion of ‘America First’ unilateralism—has left allies and rivals alike scrambling. 

For international finance centres, the new geopolitical landscape presents both peril and promise. As highlighted in the BVI Finance webinar, IFCs that invest in advanced compliance, showcase unwavering stability, and stay attuned to shifting global alliances, stand to benefit substantially. They can serve as hubs through which the world’s capital, trade and investment still flows—even if major powers tussle over tariffs at the top. 

In this unfolding contest of economic might, the question remains: ‘Will China blink?’ Or will the rest of the world open its eyes to the quiet empire China is constructing—one high-speed rail, one digital currency pilot, one IFC-facilitated transaction at a time? Beijing’s strategy, coupled with the agility of global finance hubs, suggests that calm calculation may well outlast the biggest headlines of any trade war. 

Elise Donovan
CEO