Weekend Long Read: What China Can Learn From Germany’s Battle of Economic Ideas

Tariff escalation: China has raised its additional tariff on U.S. imports from 84% to 125% in retaliation against U.S. President Donald Trump’s latest hike in levies. A day earlier, the White House clarified that Washington had imposed 145% in additional tariffs on Chinese goods in total since Trump’s second-term began in January. That figure consisted of the 125% in additional levies, plus the two 10% tariff hikes that the administration imposed on China over the country’s alleged role in fentanyl trafficking. The Ministry of Finance also announced that it will “ignore” any further tariff hikes from the U.S. as there will be no market acceptance in China for American goods at the current tariff level.

Ships change course: Shipping companies are slashing capacity on China-U.S. routes and container freight rates are plunging as new U.S. tariffs take effect. Rates to Europe, South America and Asia have risen as exporters begin to divert cargo. According to the Ningbo Shipping Exchange, on Friday rates for shipments from China to the American West Coast fell 18% from last week due to a collapse in demand. Rates to the Mediterranean jumped 15.3%, South America east coast surged 52.5%, and routes to Japan, South Korea and Southeast Asia also rose. The Shanghai Shipping Exchange noted that improving economic data in Europe is fueling optimism for deeper China-Europe trade, investment, and industrial cooperation.

Teatime IPO: Chagee Holdings Ltd. is to become the fifth Chinese milk tea company to go public overseas, aiming to raise up to $417 million in a Nasdaq Initial Public Offering (IPO) at a price range of $26 to $28 per American Depositary Share. With a potential valuation of $5.12 billion and a 2024 price-to-earnings ratio of 14.8, Chagee plans to use the proceeds to expand its store network in China and abroad, invest in branding and technology, develop new products and build an overseas supply chain. Founded in 2017, Chagee operates a franchise model and has rapidly grown from regional roots to 6,440 stores globally, fueled by the viral success of its signature milk tea and a booming domestic market. The company’s revenue surged from 492 million yuan ($68 million) in 2022 to 12.4 billion yuan in 2024.

Xi’s state visits: President Xi Jinping will make state visits to three countries in Southeast Asia next week. He will arrive in Vietnam on Monday before moving on to a second leg of the trip, consisting of visits to Malaysia and Cambodia, on Tuesday. Both Vietnam and Malaysia are top-20 trading partners of both China and the U.S. As Beijing and Washington slap each other with escalating tariffs, China’s commerce minister has been speaking with several of the country’s major trading partners in an effort to convince them to band together to make a coordinated response to Trump’s tariffs. On Thursday, the minister spoke with his Saudi Arabian and South African counterparts to discuss a response to the U.S.’ “reciprocal tariffs.”

Tariff diplomacy: President Xi Jinping said during a meeting in Beijing on Friday with visiting Spanish Prime Minister Pedro Sánchez that China and the EU should jointly resist unilateral bullying to safeguard the trend toward economic globalization and the international trade environment. Sánchez is the first European leader to visit China since the U.S. launched its tariff onslaught. During a stop in Vietnam earlier in his Asia trip, the prime minister spoke up in favor of the multilateral trading system, saying that Spain “defends a world with open doors.” In an interview on Wednesday, U.S. Treasury Secretary Scott Bessent warned the Spanish leader that looking to China instead of the U.S. would be akin to “cutting your own throat.”

De minimis squeeze: The U.S. has again increased tariffs on packages valued under $800 shipped to the U.S. from the Chinese mainland and Hong Kong. These parcels are now subject to a tariff equal to 120% of their value or a flat fee of $100 — whichever is higher. These shipments had until recently been exempt from duties under the “de minimis” tax exemption. Chinese e-commerce platforms such as Shein and Temu had made frequent use of the exemption to deliver products cheaply to their U.S. customers, which fueled their rapid growth. The number of shipments claiming the de minimis exemption jumped from approximately 139 million a year in fiscal year 2015 to over 1 billion annually by fiscal year 2023.