Chinamaxxing or Chinataxxing? | The weekly recap

March is shaping up to be a tense month in China-US relations.

At the end of last month, we told you that US-China relations were on a steady (but fragile) path toward stabilization.

• Both countries seemed satisfied with the follow-through from their October meeting in Busan and have kept a lid on trade tensions ahead of Trump’s planned visit to China in late March and early April.

But a political development in the US has thrown a wrench into the gears: Last week, the US Supreme Court (SCOTUS) ruled that US President Donald Trump overstepped his authority in invoking the International Emergency Economic Powers Act (IEEPA) to impose sweeping tariffs on most US trading partners.

• The IEEPA was the basis for Trump’s 34% Liberation Day tariffs and 20% fentanyl-related tariffs on China.

Surely the invalidation of Trump’s tariffs is good news for China, right?

• Not so fast.

Trump was furious with SCOTUS’s decision and immediately began searching for alternative legal avenues to keep tariffs in place.

• As a stopgap measure, he invoked the Trade Act of 1974 to impose a 10% flat tariff on all US trade partners, which will expire after 150 days unless approved by Congress.
• The administration is working on raising the figure to 15%.

Quick math: Even with the 15% tariff, the SCOTUS ruling will reduce China’s overall effective tariff rate.

The problem is, Washington may not stop there:

• On February 25, US Trade Representative Jamieson Greer hinted that the US could replace the affected tariffs with duties under a Section 301 investigation into China’s implementation of the 2020 Phase One Trade Deal.
• Greer also highlighted Section 301 investigations into forced labor and excess capacity as potential avenues for “reconstructing” Trump’s now-defunct Liberation Day tariffs.

Greer repeatedly emphasized that the administration’s goal was “continuity” rather than escalation – in other words, to bring tariff rates back to the level they were before the SCOTUS decision – but we’re not sure China will see it that way.

• Also on February 25, a Chinese Ministry of Commerce (MofCom) spokesperson defended China’s record in implementing the Phase One Trade Deal and warned the US against “shifting blame and…using the opportunity to create trouble.”
• MofCom also threatened countermeasures if Washington “uses the investigation as a pretext to introduce restrictive measures such as tariffs.”

Don’t panic: With just over a month until Trump’s trip to China, both sides have a strong incentive to keep relations on track and talk through any disagreements in person.

• But the confusion surrounding Trump’s tariff regime shows that there is still no shortage of trade-related gripes that could harm the long-term prospects for Sino-American stabilization.

Additionally, SCOTUS taking away Trump’s favorite weapon (massive, at-whim tariffs and the threat thereof) is not necessarily an unalloyed win for China.

• Trump may now turn to other levers to pressure Beijing in future disagreements, including increased support for Taiwan, tighter export controls, and financial sanctions, among others.
• This would move the China-US rivalry into less familiar and possibly more dangerous territory.

For its part, China still has a strong hand to play against the US.

• Rare earth export controls remain Beijing’s ace-in-the-hole to use against all manner of American chicanery and will be for the foreseeable future.
• With Trump’s tariffs now increasingly subject to Congressional oversight, China could crank up the pain on business in key US constituencies in a bid to hurt Republicans’ electoral chances in the 2026 midterms, hamstringing the White House.

We’ll say it again: Tensions are under control for now, but that doesn’t mean they’ll stay that way.

• Assuming relations don’t break down in the next month, businesses should be prepared to capitalize on the good vibes from Trump’s upcoming China visit to address supply chain vulnerabilities.
• While global business has grown accustomed to the perpetual threat of US tariffs, the SCOTUS ruling should prompt multinationals to assess which other aspects of the US lawfare toolbox they are exposed to and update their risk mitigation strategies accordingly.

Most of all, global business should monitor for signs of new or renewed disagreements that could fray the fragile Sino-American equilibrium.

• Each breakdown in ties makes it less likely that future agreements will hold and harms prospects for long-term stabilization.

Joe Mazur, Head of Geopolitical Research, Trivium China

What you missed

Econ and finance

Infrastructure investment is set to expand significantly in 2026.

• Infrastructure investment unexpectedly declined 2.2% y/y in 2025.
• Authorities are signaling that they intend to turn that around, with Party publications in recent weeks repeatedly arguing that China’s capital stock significantly lags that of developed economies.

According to the readout from the State Council executive meeting on Tuesday, Premier Li Qiang wants to “unleash the consumption demand of the elderly.”

• China is home to over 320 million people aged 60 and above – and by 2035, that figure is set to exceed 400 million.
• The State Council promised measures to boost seniors’ spending power, including direct support like elderly care consumption subsidies.
• It also pledged to expand “inclusive” elderly care, building a  “universally accessible” system covering urban and rural areas.

Tech

On Monday, Anthropic released a blog post detailing several large-scale campaigns by Chinese AI companies to illicitly take training data from US AI companies.

• The post alleges that three Chinese AI companies – DeepSeek, Moonshot, and MiniMax – have launched distillation attacks against Anthropic’s Claude.
• “Distillation” is a process in which one AI model asks another AI model questions, and then learns from the answers, speeding up its training.
• Anthropic alleges that Chinese companies used coordinated armies of fake accounts, running through proxies, to ask US models questions and harvest the answers.

 On February 12, the industrial regulator (MIIT) released draft mandatory safety standards for automated driving systems (ADS), or self-driving vehicles L3 and above.

• “Mandatory standards” are issued sparingly and carry similar legal weight as regulations – most standards are “voluntary.”
• The draft standards revise and upgrade ADS voluntary standards issued in 2024, with the biggest change being the addition of detailed technical requirements for L3 and L4 vehicles, respectively.
• MIIT is aiming to implement the standards in July 2027, although this date is not set in stone.

Foreign affairs

On Tuesday, the commerce ministry (MofCom) issued two notices targeting 40 Japanese entities, tightening the screws on Japanese access to Chinese dual-use exports.

• Twenty entities, including Mitsubishi Heavy Industries, Kawasaki Heavy Industries, and IHI Corporation, were added to the Export Control List, barring them from receiving dual-use exports from China.
• Twenty entities, including Subaru Corporation, Sumitomo Heavy Industries, and the Institute of Science Tokyo, were added to a watch list, subjecting any dual-use exports to case-by-case approval under stricter scrutiny.
• This is the first time MofCom has deployed the watch list, which was created under the Dual-use Item Export Control Regulations issued in late 2024.

On Wednesday, German Chancellor Friedrich Merz kicked off his long-anticipated visit to China with a 30-person-strong business delegation in tow.

• Germany has grown increasingly concerned about the yawning trade deficit with China and threats to key German industrial sectors, including autos.
• Merz addressed the issue bluntly in a meeting with Premier Li Qiang: “I pointed out that we have had a considerable imbalance in the trade balance for about two years…which have arisen primarily from overcapacity in China.”
• Merz later said the two sides had agreed to restart bilateral governmental consultations and that China had agreed to buy up to 120 aircraft from Airbus.

As always, it was a busy week in China.

• Thank goodness Trivium China is here to make sure you don’t miss any of the developments that matter.