Three Ways to Counter China in Trade Talks

There is an elephant, or a dragon, in the room as U.S. officials negotiate with more than seventy-five countries seeking to reduce U.S. tariffs. Treasury Secretary Scott Bessent has suggested the United States could reach deals with close partners and then “approach China as a group.”   

Whether isolating China has emerged as the primary goal or just one of several competing objectives for U.S. officials is unclear. Bessent reportedly pitched the China approach to President Donald Trump on April 6, four days after “reciprocal” tariffs were announced. Trump has also claimed that tariffs will reduce bilateral trade deficits, revitalize U.S. manufacturing, and even lower taxes. 

Chinese officials are taking the threat seriously. “China firmly opposes any party reaching a deal at the expense of China’s interests,” China’s Ministry of Commerce said on Monday. “If this happens, China will never accept it and will resolutely take countermeasures in a reciprocal manner.” 

The rest of the world is ducking to avoid the crossfire. Japanese officials are hesitant to maximize pressure on China, according to recent reports. Mexico, which depends on the United States for more than 80 percent of its exports, is an outlier and has been willing to consider matching U.S. tariffs on China. But given that China is the largest trading partner to more than 120 countries, U.S. officials will need to offer more than sticks to build an effective coalition. 

An even bigger question is whether isolating China is a temporary diplomatic objective or a longer-term economic objective. In other words, is the goal to increase collective pressure and strike a deal with China, or more fundamentally, to reduce dependence on China? 

Realistically, a strategy to reduce dependence on China would need to extend well beyond the current ninety-day suspension of “reciprocal” tariffs. Key issues such as updating rules of origin, strengthening investment screening, and developing new sources of supply and production, are multiyear efforts. Progress will require legislative changes, regulatory reforms, and public-private partnerships. Supply chains do not move in months. 

To set the table for longer term efforts, however, U.S. officials could prioritize three areas in their current trade talks: 

First, focusing on strengthening the enforcement of existing agreements would help reduce the ability of companies to illegally transship Chinese goods through third countries and circumvent U.S. export controls. These issues are especially important to prioritize in talks with “connector countries” such as Mexico, Indonesia, and Vietnam as well as hubs such as Malaysia, Singapore, and Turkey that have been used to circumvent export controls. Countries could offer to devote more resources to monitoring, raise penalties, and improve information sharing.  

While perfect enforcement is impossible, progress could also shift the dynamic with U.S. trading partners from combative to cooperative. Better information sharing could provide earlier warnings of Chinese goods being dumped. The U.S. government could offer capacity-building support, including access to supply chain technology from U.S. firms, to help trading partners track goods and prevent illegal activities. Meanwhile, partner countries could assure their Chinese counterparts that they are simply upholding existing rules.  

Second, attracting investment toward strategically important sectors could help reduce dependencies on China. This would require prioritizing areas of vulnerability such as critical minerals, semiconductors, and ship building over other sectors where the United States has ample access to reliable sources such as energy and agriculture. The results of those investments would take time, and much more capital would be needed, but announcements could help provide momentum and positive signals to the market.   

Third, and most importantly, removing U.S. reciprocal tariffs is itself the strongest near-term opportunity to counter China. In recent years, a growing number of multinational companies have pursued “China+1” strategies that entail moving some operations out of China and into markets such as India, Indonesia, and Vietnam which now face tariffs of 26, 32, and 46 percent, respectively. Removing reciprocal tariffs and providing targeted exemptions to current and upcoming 232 tariffs would help encourage this longer-term shift.  

Collectively, these steps would help U.S. negotiators secure meaningful wins and set the table for longer-term discussions. Moving beyond today’s bilateral talks, U.S. officials should consider broader approaches to update and align rules across several key markets. It takes two to trade, but derisking from China will require a coalition.