Trump’s Tariffs May Push U.S. Allies Toward China and India
Former U.S. diplomat Wendy Cutler warns that Trump’s tariffs could push U.S. allies toward China and India, with the EU even considering joining the CPTPP. Trump’s latest tariff threats target European alcohol products in response to EU countermeasures. Meanwhile, the EU has secured a major trade deal with Mercosur, reducing its reliance on U.S. trade. At the same time, China is strengthening economic ties, upgrading its free trade agreement with ASEAN, and emerging as a more stable alternative.
Analysts suggest Europe is increasingly looking to China for trade stability amid rising U.S. tensions. Countries may also turn to multilateral agreements like RCEP and CPTPP, both of which exclude the U.S. Hong Kong has expressed interest in RCEP, while the U.K. recently joined CPTPP. Trump’s trade policy remains highly unpredictable, with analyst Stephen Olson stating that Trump thrives on chaos as a negotiation tactic. Rather than seeking lasting resolutions, he aims to keep trade partners in a state of uncertainty. As global trade shifts, the White House has yet to comment on Trump’s latest policies.
Trump’s Tariffs May Push U.S. Allies Toward China and India
Former U.S. diplomat Wendy Cutler has cautioned that President Donald Trump’s aggressive tariff strategy could alienate longstanding American allies, potentially driving them closer to economic competitors like China and India. Speaking on CNBC’s Squawk Box Asia, Cutler highlighted the European Union’s (EU) possible interest in joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP)—a trade bloc originally designed to counterbalance China’s influence—as it seeks alternatives to U.S.-centric trade frameworks.
Escalating Trade Disputes
Tensions between the U.S. and its allies have intensified following Trump’s recent threats to impose tariffs on European alcoholic beverages. This move comes in retaliation for the EU’s planned tariffs on $28.3 billion worth of American goods, set to take effect in April. The friction builds on earlier U.S. tariffs on steel and aluminum imports, which targeted allies such as Canada, Mexico, and China. Cutler noted that the EU has responded assertively by pursuing new trade agreements, including a landmark deal with Mercosur—a South American bloc comprising Argentina, Brazil, Paraguay, Uruguay, and Bolivia—and restarting negotiations with India after a years-long hiatus.
EU Diversifies Trade Partnerships
The EU-Mercosur agreement, finalized in December, aims to eliminate tariffs on over 90% of bilateral trade, granting European exporters an estimated €4 billion in annual savings. In return, South American nations gain preferential access to European markets, allowing their agricultural and industrial goods to compete more effectively against U.S. and Japanese products. Meanwhile, the EU’s renewed dialogue with India signals a strategic pivot toward emerging economies as it reduces reliance on U.S. markets.
China Seizes Economic Opportunities
As the U.S. adopts an increasingly unpredictable trade posture, China has moved to solidify its role as a global economic anchor. Beijing has upgraded its free trade agreement with the Association of Southeast Asian Nations (ASEAN) and expanded outreach to other regions. Cutler emphasized that U.S. allies, facing uncertainty over American commitments, may increasingly view China as a viable alternative for stable trade relations. David Roche, a strategist at Quantum Strategy, reinforced this view, pointing to Europe’s growing interest in deepening ties with China amid strained transatlantic relations.
Multilateral Trade Blocs Gain Momentum
Cutler predicts a surge in interest toward multilateral trade agreements that exclude the U.S., such as the Regional Comprehensive Economic Partnership (RCEP) and the CPTPP. The RCEP, a China-led initiative encompassing 15 Asia-Pacific nations, is poised to become the world’s largest trade bloc. Hong Kong has expressed interest in joining, while the U.K. recently became the first non-founding member to enter the CPTPP. Cutler suggested that the EU might even explore CPTPP membership to hedge against U.S. trade volatility. These developments underscore a broader shift toward regional partnerships that sidestep Washington’s influence.
Trump’s “Chaos Strategy” in Trade Negotiations
Analysts argue that Trump’s erratic trade policies are part of a deliberate tactic to unsettle partners and leverage uncertainty. Stephen Olson, a senior fellow at the ISEAS-Yusof Ishak Institute, described Trump’s approach as a “chaos strategy” designed to keep adversaries and allies perpetually off-balance. By threatening tariffs without clear timelines or objectives, the administration fosters an environment where partners feel pressured to concede to U.S. demands to avoid sudden economic penalties.
However, Olson noted that this strategy risks long-term damage to U.S. credibility. While allies are unlikely to sever ties with the U.S. entirely, the lack of predictable trade policies could accelerate their diversification into alternative markets. The EU’s Mercosur deal and engagement with India exemplify this trend, as does Southeast Asia’s deepening integration with China through RCEP.
Conclusion: A Shifting Global Order
The ripple effects of Trump’s trade policies highlight a paradox: efforts to assert U.S. dominance may instead erode its economic influence. As allies gravitate toward China, India, and regional blocs, the U.S. risks isolation in a global economy increasingly structured around multilateral cooperation. While Trump’s tactics may yield short-term concessions, analysts warn they could undermine America’s position as a reliable partner, reshaping trade dynamics in favor of rival powers. In this climate of unpredictability, nations appear more willing than ever to explore alliances that promise stability—even if it means aligning with Washington’s competitors.
