It’s called Derisking but is the same old trade war
By Amarynth (my friends are in the process of shooting me if I don’t put my name front and center on my columns).
Trump’s imminent State Visit to China scheduled for May 14-15 is becoming high temperature, despite the advertised pause in the trade war.
China moved to block derisking before the Trump-Xi Summit. Beijing introduced new trade regulations (https://www.straitstimes.com/asia/white-house-quiet-as-china-ramps-up-trade-leverage-before-trump-xi-summit) this month laying legal groundwork to penalise foreign companies that reduce supply chain dependence on China . A U.S. official described this as a test of White House willingness to maintain the current trade war pause. The Trump administration has not publicly responded. The American Chamber of Commerce in China warned that foreign firms could face investigation by Chinese authorities for reducing sourcing from China, while Beijing faces little reciprocal consequence.
The rules run directly against Washington’s stated policy of derisking — reducing exposure to Chinese supply chains in strategic sectors including critical minerals and pharmaceuticals. The asymmetry is structural: China can cut purchases from foreign firms freely, while foreign firms attempting the same face legal exposure under the new framework. The timing, ahead of a high-stakes bilateral meeting, gives Beijing additional negotiating leverage over the trade war truce in place since early last year.
The White House’s silence ahead of the Busan APEC summit sideline meeting signals either deliberate restraint or internal division on how to respond without disrupting summit conditions.
This is not the only part of the new legislation and the secondary set of Chinese laws will be picked up later in this post.*
The most visible case is the Manus Acquisition. It follows Panama’s Supreme Court ruling to annul the long-standing concession for Hong Kong-based operator Panama Ports Company linked to CK Hutchison Holdings. China warned that the country would pay a “heavy price” if it does not reverse course.
Beijing Blocks Meta’s $2B Manus Acquisition
China has moved to block Meta’s $2 billion acquisition (https://asia.nikkei.com/business/technology/artificial-intelligence/china-s-block-of-meta-manus-deal-spooks-entrepreneurs-and-investors) of Manus, a Chinese-founded AI startup, following a national security review. The deal’s reversal remains structurally unclear given that the purchase had already been completed. Beijing invoked its regulatory authority over technology deemed to be of Chinese origin.
The intervention signals that China is willing to exercise extraterritorial regulatory reach over AI assets founded by Chinese nationals, regardless of where those companies are incorporated or operate. This creates a new category of deal risk for cross-border, technology-intensive transactions involving China-origin founders or IP.
The precedent directly narrows exit options for Chinese-born entrepreneurs and raises the risk profile of any foreign acquisition targeting AI assets with Chinese roots.
There is a further background. South Korea is not sitting still and obeying their master’s voice any longer. Shortly after the advent of Trump’s Tariffs, they started stating clearly that they want to repair ties with China.
The US–South Korea Ties Fracture: US-South Korea security consultations have stalled across multiple fronts (https://www.straitstimes.com/asia/east-asia/growing-us-s-korea-tensions-spill-over-into-intelligence-business-fronts), according to Seoul’s National Security Adviser Wi Sung-lac in an April 23 briefing. The breakdown followed a March 6 public disclosure by Unification Minister Chung Dong-young of a previously undisclosed North Korean uranium enrichment site — a leak Washington viewed as a breach of shared intelligence protocols. The US is livid.
The China-Taiwan fractious relationship seems to be more muted now. The Taiwanese opposition is growing and the leaders visited China some weeks ago, supporting unification.
China media is replete with negativity on Japan and its re-arming. (We need to see this re-arming of Japan in the same sphere as European re-arming – it is the same war that is being planned). Just today, China released a Working Paper on the issue of Japan’s Nuclear Armament, laying bare Japan’s dangerous nuclear ambitions, its problematic remarks and moves, and warning that such tendencies pose a grave challenge and blatant provocation to the international nuclear non-proliferation regime with the NPT as its cornerstone, the outcomes of the victory of World War II, and the post-war international order.
* Here comes China’s mode of sheer punishment, and this is directly aimed at the US blockade of the Strait of Hormuz.
A second set of Chinese regulations published days later lays out punishments for foreign firms that comply with “unjustified extraterritorial jurisdiction”, Beijing’s term for US sanctions and export controls. My short descriptor for this is “You take our ship, we take your business in China.! No more, no less.
Welcome to China, Donny.