Many countries are ‘quiet quitting’ the US and China on trade

As US President Donald Trump rebuilds the tariff wall the country’s Supreme Court knocked down, the headlines fixate on each individual block. With the global 10 per cent tariff initially levied in response expiring on July 24, the Trump administration is preparing to replace it by imposing Section 301 tariffs on 60 economies for not doing enough to keep forced labour out of their supply chains. The next tariff announcement will target 16 economies over alleged “structural excess capacity” leading to persistent trade surpluses. Meanwhile, multiple national security-based Section 232 tariffs loom, layered on those already levied on steel, aluminium and other items. The targets are not adversaries. Several have long-standing free-trade agreements with the United States. In other cases, they are countries that did what the Trump administration asked. The likes of Indonesia and Malaysia reached Agreements on Reciprocal Trade, where countries offered one-way concessions to the US in exchange for supposed increased tariff certainty. In almost all cases, they are countries also struggling with Chinese overcapacity, in addition to the economic hit from the US-Israel war against Iran. Many are also military allies or partners of the US. Their reward for engagement is continued investigations and threats, with tariff rates ranging from 10-12.5 per cent and more to come. What to do? In the corporate world, “quiet quitting” describes workers who stop going above and beyond once they realise extra effort doesn’t get rewarded. They do the bare minimum to keep their job but find alternative paths to satisfaction. The same logic plays out in global trade, with the response already taking place. It is not protests or retaliatory tariffs but a quiet architectural shift: new agreements, rules of origin and supply chain anchors, all designed with the goal of creating a world where neither the US nor China dominates. Both the US and Chinese markets are essential, but dealing with each comes with great costs: tariffs, uneven playing fields and blatant bilateral transactionalism. As a result, many countries are going beyond rhetorical responses and pursuing proactive trade diversification. The European Union and parties to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) held a joint ministerial meeting at the 14th World Trade Organization Ministerial Conference in March and agreed to continue working towards a digital trade agreement and overall supply-chain resilience – what could effectively become a bloc-to-bloc anchor outside the US system. With the accession of Costa Rica and Uruguay under way, Indonesia, the Philippines and the United Arab Emirates are now set to start the process of joining the CPTPP. With US tariff risks rising, intra-CPTPP trade becomes less of a preference and more of a hedge. Pivoting to China doesn’t reduce exposure; instead, it trades one set of risks for another. China offers no clean off-ramp. Beijing’s confidence has grown, buoyed by successful weaponisation of critical minerals. The US and China do not have a truce in their trade war. Rather, they are at a stalemate. This pause gives China time to entrench its supply chain advantages. Accordingly, the quiet building of alternative networks continues. The same quiet repositioning is playing out across the Americas, where countries reside firmly in the US sphere of influence. After more than 25 years of negotiation, the Mercosur bloc of Brazil, Argentina, Uruguay and Paraguay completed a comprehensive agreement with the EU, overcoming competitive concerns on both sides of the Atlantic and representing some 30 per cent of global GDP. Brazil, long a proponent of engaging with multiple trading partners, is itself a target of diversification efforts as the world’s second-leading source of rare earth reserves. Even Mexico and Canada, which have a comparatively privileged place amid Trump’s trade war thanks to the United States-Mexico-Canada Agreement, are playing the diversification game. For its part, Mexico has deepened its existing agreement with the EU, which now includes agricultural and digital trade. Despite its deep integration with the US market, Canada is the poster child for efforts to reduce reliance on the US, with a goal of doubling non-US exports by 2035. Canada launched consultations last year regarding free-trade talks with India, the UAE, Thailand and Mercosur. Canadian Prime Minister Mark Carney’s Davos speech was a clarion call for middle powers to counter the rise of great power rivalry. Discussions will continue to focus on the US tariff investigations, including which countries are affected, what the rates will be and what the global economic landscape will look like come July 24. However, countries’ responses won’t come in press conferences or retaliatory tariffs. The time needed to transition away from long-held dependencies means few leaders are likely to publicly echo Carney’s courageous call for middle powers to come together. Behind the scenes, though, they will quietly move in that direction. None of this will replace the American market. US tariffs are here to stay, certainly as long as Trump remains in office and perhaps even into the next administration, regardless of who wins in 2028. Once in place, tariffs can be difficult to eliminate. Even so, diversifying away from the US where possible reduces costs from both the tariffs and American unpredictability. Each agreement signed provides one more reason for firms to make investment decisions without defaulting to the US as the anchor. That is the real consequence of US tariffs – not that they punish bad actors, but that they teach the good ones to stop trying.

Many countries are ‘quiet quitting’ the US and China on trade

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}While the US and Chinese markets are essential, other countries are making deals with each other in search of more diversified trade

While the US and Chinese markets are essential, other countries are making deals with each other in search of more diversified trade