While the United States’ tariff offensives have roiled the global trade system and financial markets, China has taken the opposite path by continuously lowering tariffs. Its average effective tariff rate has steadily declined over the years, dropping to just 1.3 percent in 2025, according to the Economist Intelligence Unit.
By contrast, the US’ effective tariff rate surged to 11.2 percent in 2025 — the highest average level since 1943, according to the Tax Foundation, a US-based research institute.
This stark contrast highlights a dramatic shift: The once-leader of free trade has retreated, instead weaponizing trade to pursue its political goals. Meanwhile, China — once unjustly labeled a “market manipulator” — has emerged as a defender of free trade.
This is precisely why when Washington escalated its tariff war in April 2025, I proposed that China must step up as a leader of the new wave of globalization and even announce a zero-tariff initiative.
As the world’s largest trading country since 2013, China has no choice but to lead the new drive for globalization and build global scale to fend off sustained pressure from the US. Its pro-trade policies have paid off, and more importantly, China has achieved profound trade diversification, reducing reliance on the US market.
In 2025, China’s trade network expanded to more than 240 countries and regions, with total foreign trade value climbing to 45.47 trillion yuan ($6.60 trillion), a 3.8 percent year-on-year increase, and a record surplus of nearly $1.2 trillion, driven by booming exports to non-US markets.
The tariff war has compelled China to fundamentally reshape its global trade architecture, leading to a steady decline in the US market’s significance. Once the “bedrock” of China’s economic growth, the US accounted for roughly one-fourth of China’s total foreign trade at its peak (around 26 percent from 1998 to 1999), but this share plummeted to below 10 percent in 2025.
Even as its exports to the US slumped 20 percent last year, China’s total exports grew 6.1 percent year-on-year to 26.99 trillion yuan — with shipments rising 25.8 percent to Africa, 7.4 percent to Latin America, 13.4 percent to Southeast Asia, and 8.4 percent to the European Union. For a nation whose economic ascent was once anchored to Western market access, this structural shift is profound.
While China’s manufacturing sector has made remarkable progress, the journey to becoming a true manufacturing powerhouse by 2035 continues. This new globalization drive will not only transform China’s own economy but also play a decisive role in building manufacturing capacity worldwide
This divergence signals a decisive break from the past and heralds a new era of diversified, resilient, and geographically balanced trade, deliberately engineered to be less vulnerable to the pressures of any single bilateral relationship.
China has not stumbled into this trade realignment — it is the result of a deliberate, long-term strategy, with the Belt and Road Initiative (BRI) underpinning its new global trade architecture. The BRI has evolved from a collaborative framework into a core pillar of China’s foreign economic cooperation — and a key driver of its trade diversification.
Its impact was evident in 2025: Bilateral trade with BRI partner countries reached 23.6 trillion yuan, increasing 6.3 percent year-on-year and accounting for 51.9 percent of China’s total foreign trade value. The conclusion is inescapable: The BRI is successfully building an integrated, alternative trade network — a new global architecture centered on the Global South, with China as its principal hub and driver.
Even amid strained relations over disputes from technology to geopolitics, China-EU trade has defied expectations by continuing to grow. The EU consolidated its position as a critical market for China in 2025, with bilateral trade reaching 5.93 trillion yuan, a 6 percent year-on-year increase, and accounting for 13 percent of China’s total foreign trade. This trajectory, if sustained, would see the EU overtake the US as China’s second-largest export destination, anchored by key partners like the Netherlands, the bloc’s largest importer of Chinese goods, and Germany, of which China remains the top trading partner.
To solidify its leadership in the new phase of globalization, China is transitioning from the “world’s factory” to the “engine of the global factory” by pushing its companies to evolve into truly global multinationals — a strategic pivot in its core economic priorities. This requires a decisive departure from the old playbook: Rather than merely exporting finished goods, Chinese firms are now manufacturing overseas, embedding themselves deeply into host economies.
This shift marks a strategic pivot in China’s core economic priorities. It represents a fundamental transition away from a domestically focused, cost-driven production model toward one centered on exporting globalized capital and technology, in which China supplies the foundational capabilities underpinning manufacturing systems worldwide.
The traditional “world’s factory” model saw China as the central hub of global manufacturing, with competitiveness rooted in a massive labor pool, economies of scale, and integrated domestic supply chains — primarily producing finished goods designed and branded by external firms.
The new paradigm of “engine of the global factory” positions China as a net exporter of manufacturing capacity itself: Its role is evolving from a production location to a provider of core inputs (high-tech equipment, turnkey factory solutions, and managerial expertise) and the capital needed to build production facilities abroad. Chinese firms are also moving from contractors to owners and operators of global production networks.
This strategic evolution is already in motion. Propelled by massive trade surpluses, the need for supply chain resilience, and aspirations for global economic leadership, Chinese firms have moved beyond manufacturing for others to building, owning, and managing sophisticated production facilities overseas — establishing a network from the Association of Southeast Asian Nations to Latin America that integrates local production into global supply chains.
While China’s manufacturing sector has made remarkable progress, the journey to becoming a true manufacturing powerhouse by 2035 continues. This new globalization drive will not only transform China’s own economy but also play a decisive role in building manufacturing capacity worldwide.
This strategic evolution is not just a response to current geopolitical pressures, but a forward-looking adaptation to a world in flux. By now, it is clear that the old world order is not returning — and the post-Cold War globalization that bound the world together has vanished. Nations must instead build new, flexible frameworks rooted in shared interests to navigate an era defined by rupture, not smooth transition. Once again, it is in the world’s, including China’s, interest to lead and reshape this new wave of globalization by delivering mutual benefits to all parties — turning its strategic pivot into a collective opportunity for global economic resilience and growth.
The author is a professor of globalization and business at the City University of Hong Kong.
The views do not necessarily reflect those of China Daily.
