China This Week: Apple Shifts iPhones to India, China Seizes Reef Near Philippines, Have Trump’s 2025 Tariffs Backfired?
This week, we cover major developments in China and its foreign affairs — including a closer look at one key question: Have Trump’s 2025 Tariffs on China Backfired?
China Quote 🗩
America used to stand for hope and democracy, but now they are missing when we needed them most,” said Ko Aung Naing San, a resident of Sagaing, the earthquake’s devastated epicentre. “China sent help quickly.”
Hannah Beech, NYT
Are Trump’s 2025 Tariffs on China Backfiring on the U.S. Economy?
In April 2025, the Trump administration unleashed a new wave of tariffs on Chinese imports, some reaching as high as 34% in a renewed attempt to close the $295 billion goods trade deficit with Beijing. But rather than delivering a blow to Chinese exporters or reshoring American industry, the sweeping duties are reverberating through the U.S. economy, raising prices, stifling growth, and unsettling key international relationships.
The U.S. is heavily dependent on China for electronics, rare earth minerals, pharmaceuticals, textiles, and consumer goods. This reliance has led to a decline in domestic manufacturing after the implementation of counter tariffs by China, though recent reshoring efforts signal a slow recovery.
A Tax on the American Consumer
Though headline inflation appeared to cool in early 2025. But March’s Consumer Price Index (CPI tracks how prices for everyday things like food and rent change over time) climbed 2.4% year-over-year, analysts now warn that tariffs may rekindle pricing pressures. Core inflation hovered at 2.8%, and economists caution that import duties are likely to add fuel to the fire. Yale’s Budget Lab projects that the new tariff regime could raise average household costs by approximately $3,800 annually.
Sectors reliant on Chinese goods are feeling the pinch most acutely. Apparel prices are forecast to rise by 17%. E-commerce platforms have been particularly hard hit by the elimination of the “de minimis” threshold, which previously exempted low-value imports (under $800) from duties. Now, a flat 30% tariff applies to a category worth $22.8 billion in 2024, prompting retailers to raise prices and warn of shipping delays.
Growth Loses Traction
The early warning signs are already visible. The U.S. economy contracted by 0.3% on an annualized basis in the first quarter of 2025, marking the first decline since 2022. The downturn was driven in part by a rush of pre-tariff imports in Q1, followed by a sharp pullback in trade activity.
Yale forecasts the new trade measures will shave 0.9 percentage points from real GDP growth this year, amounting to a potential output loss of between $100 billion and $180 billion. The Federal Reserve has flagged the tariffs as a “self-inflicted supply shock,” increasing input costs, disrupting corporate planning, and weighing on investment. The fallout has been especially pronounced in sectors like technology, automotive, and retail—industries heavily dependent on global supply chains and just-in-time logistics.
Political Headwinds Mount
Voters are taking notice. A recent Reuters/Ipsos poll shows that 70% of Americans—including 62% of Republicans—expect the tariffs to drive prices higher. More than half of respondents believe the policy will cause more harm than good.
With the 2026 midterms on the horizon, the White House faces bipartisan unease. Republican strategists have expressed concern that persistent inflation could undercut support among core constituencies. Meanwhile, farmers and multinational businesses are pushing back, urging carve-outs to shield their industries from collateral damage.
Allies Push Back, China Retaliates
Though targeted at China, the tariffs have ensnared key allies as well. European imports face duties of up to 20%, while Japan and South Korea, both critical security partners, were hit with 24% and 26% tariffs, respectively. European capitals reacted swiftly. U.K. officials acknowledged the economic blow, while Ireland and Italy condemned the tariffs as “deeply regrettable.” Beijing, for its part, responded in kind—imposing a 34% retaliatory tariff on U.S. goods and calling Washington’s trade strategy “self-defeating.”
The diplomatic consequences are far-reaching. Fractures are widening within the transatlantic alliance, and China is moving quickly to leverage the discontent, tightening its ties with both emerging markets and long-standing U.S. partners.
Global Supply Chains in Flux
The corporate world is adapting—fast. Chipmaker TSMC has announced a $100 billion investment in new U.S. semiconductor facilities, while other firms are shifting production to Mexico and Southeast Asia to bypass tariff exposure. At the same time, U.S. manufacturers now face higher costs for critical inputs like steel, rare earths, and microchips. Price hikes are rippling through electronics and automotive parts, and logistical snarls threaten to push inventories lower in the months ahead.
Bottom Line
Trump’s “America First” tariff blitz and erratic rhetoric destabilized alliances with Japan and South Korea, shaking the security architecture that underpins U.S. economic engagement in the Asia-Pacific.
Deep dependence on China for electronics components, rare-earth minerals, pharmaceutical active ingredients, textiles, and consumer machinery has hollowed out U.S. supply chains.
Facing rising economic headwinds, the Trump administration has paused new tariffs for 90 days on most nations—excluding China, which now faces a 125% levy—to ease market volatility. Officials are also weighing sector-specific exemptions, particularly in tech, amid mounting pressure to soften the blow to U.S. growth.
Rather than tilting the playing field in favor of U.S. industry, the 2025 tariffs have raised costs, stalled economic momentum, and complicated foreign relations. With inflationary pressures mounting and allies bristling, the policy is proving to be less an economic masterstroke than a costly gamble with broad repercussions.
Economic Activity🏦
Apple says most iPhones sold in US will be from India
Srinivas Mazumdaru writes in DW that Apple CEO Tim Cook announced a major production shift, with most iPhones sold in the US soon to be made in India. The move aims to mitigate the impact of Trump’s tariffs on Chinese imports. Meanwhile, Vietnam will handle most production for iPads, Macs, and other Apple devices.
Chinese e-commerce exports to US plummet by 65% in face of tariffs
Lisa O'Carroll writes in The Guardian that Chinese online exports to the US, including from Temu and Shein, fell 65% in early 2025 due to Trump’s tariff war. As shipping costs to the US surged, companies shifted focus to the EU, where exports rose 28%. Consumers now face price hikes exceeding 100% on low-cost items, while Shein considers restructuring to avoid duties.
Inside China🐉
Vice-chairman of securities regulator under investigation
China Daily reports that Wang Jianjun, vice-chairman of the China Securities Regulatory Commission, is under investigation for serious violations of Party discipline and national law. The probe, announced by China’s top anti-corruption agencies, comes amid ongoing efforts to strengthen integrity within key financial institutions. No further details have been released.
Former Harvard professor convicted over China ties joins Tsinghua University
Holly Chik reports in the South China Morning Post that Charles Lieber, a retired Harvard nanoscientist convicted in 2021 for concealing links to China’s Thousand Talents Plan, has joined Tsinghua University in Shenzhen. Now a chair professor, Lieber will lead research in biomedical engineering and materials science, signalling China’s continued effort to attract global scientific talent despite past US prosecutions.
China and the World🌏
Senate confirms former Sen. David Perdue as Trump’s US ambassador to China amid tariff showdown
Didi Tang and Mary Clare Jalonick write in AP News that the US Senate has confirmed former Senator David Perdue as ambassador to China, as tensions spike in the ongoing tariff war. Perdue pledged a strategic and nonpartisan approach to the complex US–China relationship. His appointment comes as both countries dig in over 145% and 125% tariffs, respectively, with limited diplomatic contact.
Trump threatens massive new China sanctions over Iranian oil
Ben Berkowitz and Ben Geman write in Axios that Donald Trump has warned of sweeping secondary sanctions against any entity purchasing Iranian oil, implicitly targeting China, Iran's largest crude buyer. The threat complicates ongoing trade negotiations and risks further destabilising energy markets, with oil prices bouncing slightly despite broader demand concerns from the US-China tariff war.
China says it’s evaluating the possibility of trade talks with the U.S.
Anniek Bao writes in CNBC that China is considering U.S. proposals to restart trade negotiations, following multiple outreach attempts amid escalating tariff tensions. Beijing insists the U.S. must first roll back unilateral duties to show sincerity. Analysts expect a protracted, delicate process, with both sides unlikely to concede easily. A drawn-out truce appears more probable than a breakthrough.
Trump ousts White House national security adviser Waltz, replaces him with Rubio
Steve Holland, Gram Slattery and Erin Banco report in Reuters that President Trump has removed National Security Adviser Mike Waltz, naming Secretary of State Marco Rubio as interim replacement. The ouster follows Waltz’s involvement in a messaging app scandal and broader White House dissatisfaction. Over 20 NSC staffers have been dismissed in a month of turmoil, raising concerns among allies over US foreign policy stability.
China seizes control of disputed reef and plants national flag near Philippine military base
Stuti Mishra writes in The Independent that Chinese coastguard forces have briefly seized Sandy Cay, near the Philippine-held Thitu Island, planting a national flag in a symbolic show of sovereignty. Though no permanent structures were built, the incident escalates tensions during ongoing US–Philippines joint drills. Washington called the move “deeply concerning,” warning of threats to regional stability.
How China's military mystery can spill into Taiwan strategy
Katsuji Nakazawa writes in Nikkei Asia that an internal purge within China’s military, including the disappearance of CMC vice-chair He Weidong and suspension of Miao Hua, signals deeper instability. Both men were linked to Taiwan-facing commands. Their absence, amid PLA drills near Taiwan, raises concerns about how Xi Jinping’s internal power struggles could shape cross-Strait and U.S.-China tensions.
CIA hopes cinematic videos will persuade Chinese to spy for U.S.
Dan De Luce writes in NBC News that the CIA has released Mandarin-language recruitment videos aimed at disillusioned Chinese officials, encouraging them to share secrets. Framing espionage as a moral and personal choice, the cinematic clips target frustrations with corruption and authoritarianism. Officials say the dark web outreach is working, as more Chinese informants are stepping forward.
Why the US will lose against China
Martin Wolf writes in the Financial Times that the US, under Donald Trump’s second term, is undermining its own strengths in its trade war with China. While China is not unbeatable, the US has become unreliable, transactional, and institutionally fragile—alienating allies and weakening the foundations of its global influence. In contrast, China appears more resilient and strategically patient.
Tech in China🖥️
Huawei delivers advanced AI chip ‘cluster’ to Chinese clients cut off from Nvidia
Zijing Wu and Eleanor Olcott write in the Financial Times that Huawei has begun supplying its CloudMatrix 384 AI chip clusters to Chinese data centres, as US export controls block access to Nvidia’s chips. While Huawei’s chips underperform individually, the company has leveraged optical networking and high chip volume to rival Nvidia's NVL72. Despite higher power use and maintenance needs, the system is being embraced as a viable domestic solution.
De/Cypher Data Dive📊
China’s Provincial Outstanding Debt:
The graph below depicts China's province outstanding debt-to-GDP ratio. The Red colour represents a level of outstanding debt to GDP ratio above 50%, Blue represents a level of outstanding debt to GDP ratio between 25% to 50% and Green represents a level of outstanding debt to GDP ratio below 25%. In 2017, just three provincial regions -Qinghai, Guizhou, and Tianjin had debt levels [measured by Local Government (LG) and Local Government Financial Vehicle (LGFV) bonds outstanding] exceeding 50% of their respective provincial GDP. By the end of 2022, 12 provinces had debt level above 50% of provincial GDP.
Image of the Week📸
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Microessay by Manash & Priyanka
Data by Bhupesh
Edited by Aurko
Produced by Decypher Team in New Delhi, India