Trump’s gift to Beijing?
The Donald Trump administration’s embrace of an ‘America first’ policy agenda seems likely to hit economies in the Global South disproportionately hard. So far, the main sources of potential difficulty are Washington’s imposition of punitive tariffs on many trading partners; the suspension of US aid flows; and the creation of a hostile environment for developing-country citizens who might have sought opportunities to work or study in the US. Further damage might result if Washington seeks to undermine the leading international financial institutions – including the World Bank and the IMF – by using the US’s voting power to restrict their activities or limit their funding.
In broad terms, any kind of restriction on aid or trade, or on the availability of financing from the official sector, plainly adds to the economic challenges of the developing world. In the language of economics textbooks, these countries are ‘small, open economies’ which, by definition, rely more than others on a liberal global trade regime to support domestic growth. Indeed, average GDP growth rates in developing countries have diminished in recent years in lock-step with the decline in global trade growth. For the poorest members of the Global South, the threat of reduced donor support – as seen, among other developments, in the US government’s termination of most USAID programmes – is especially worrisome, given that relatively low income levels make these countries more obvious recipients of aid and concessional financing.
The pressure that recent changes in US policy are exerting on emerging economies is, arguably, a diplomatic gift for Beijing. Establishing China as a political beacon in the Global South – of which China itself is, of course, a part – is key to the country’s ambition to present itself as an alternative pillar of global order. Chinese official rhetoric is often at pains to declare not only Beijing’s solidarity with the Global South – illustrated above in the statement by President Xi Jinping – but also China’s capacity to lead by example.
This solidarity is often articulated by China as part of a commitment to an open global order which respects individual countries’ autonomy. Wang Yi, China’s foreign minister, emphasized this theme at a BRICS+ meeting in May 2025 with his call to ‘jointly reject protectionism, oppose hegemony and bullying’. A recent national security white paper, published by China’s State Council, promises ‘inclusive globalization’. And, most recently, Xi Jinping used the occasion of the September 2025 Tianjin summit of the Shanghai Cooperation Organization to promise that ‘China will readily share the opportunities of its vast market’.
On the face of things, the leadership in Beijing is working hard to make the most of the opportunity that Washington has unwittingly provided to Chinese diplomatic ambitions. Since President Trump’s self-proclaimed ‘Liberation Day’ on 2 April 2025, Xi Jinping has presided over two high-profile engagements with the developing world: a visit to Vietnam, Cambodia and Malaysia that produced 113 economic agreements with the three countries; and a May 2025 meeting in Beijing of the China–CELAC Forum, at which officials announced $9 billion in credit to the Latin American and Caribbean countries that make up the forum, and at which Xi spoke of a ‘new historical starting point’ in China’s relations with Brazil. China also committed to ‘increase its imports of high-quality products from Latin American and Caribbean countries and encourage its enterprises to expand investment in that region’.
China is making similar overtures to trading partners elsewhere. In September 2024 President Xi announced that China would offer zero-tariff access to its market to any least-developed country that has diplomatic relations with Beijing, including 33 African countries. And in May 2025, China pledged to open its markets to more products from Pacific Island nations when it hosted a meeting of 11 of their foreign ministers.
This commitment on China’s part to supporting the Global South is not entirely new, of course, and long predates President Trump’s return to office in early 2025. Despite all this activity, however, there remains an open question as to whether the kind of assistance on offer from Beijing will really allow China to become a more benign influence on emerging economies’ prospects than it has been to date.
This paper argues that the pattern of China’s engagement with emerging economies leaves a lot to be desired from the point of view of trading partners in the developing world. China’s trade with emerging economies is both asymmetrical, in the sense that China’s own interests seem best served by importing commodities from emerging economies and selling manufactured goods to them; and unbalanced, in the sense that a growing share of China’s overall trade surplus is with emerging economies.
Moreover, since China is now receiving net repayments on loans that it extended to developing countries in earlier years, the only net capital flows that such economies are receiving from China are in the form of foreign direct investment (FDI). These flows are indeed a bright spot in China’s economic engagement with the Global South, given FDI’s acknowledged role in driving development, even though the range of countries that can realistically attract Chinese FDI seems limited. But while Chinese FDI continues to offer potential as a source of relatively stable funding for industrial growth in emerging economies – Egypt, Indonesia, Morocco and Turkey can be considered as case studies – one problem is that at least some of these flows are part of a tariff-avoidance strategy by Beijing. This arguably exposes the recipients of Chinese FDI to the risk of additional tariffs, for example from the EU should such inflows be seen as unduly enabling exports to protected European markets.
China needs to become more of a source of demand in the global economy and less a source of supply.
Instead, this paper argues, by far the best form of economic support that Beijing can offer developing countries is to rebalance China’s own trade with them. This means enacting reforms to render the Chinese economy less export-focused, and to boost domestic demand so that China becomes a more reliable importer of goods and services from the Global South. Put another way, China needs to become more of a source of demand in the global economy and less a source of supply.
It almost goes without saying that emerging economies would not be alone in benefiting from an additional source of demand if China were to alter its macroeconomic policies; plenty of advanced economies would gain too. It is also the case that emerging economies may actually benefit less than some advanced economies, since many developing countries are far from being in a position to increase manufactured exports to China or anywhere else. Nonetheless, expanding the Chinese market’s role as a source of global demand seems an effective tool for Beijing to, as it were, ‘put its money where its mouth is’ in support of China’s claims to global leadership.
For now, China’s commitment to maintaining its trade surplus likely reflects a strategic choice that won’t easily be shifted. For that reason, it is probably up to developing countries themselves to encourage Beijing both to adopt more expansionary macroeconomic policies at home (which would boost domestic demand) and to further liberalize China’s trade regime. Plenty of Chinese economists have recently been arguing for the government to change its policy framework in ways that would boost domestic spending growth. Advocates of reform contend that this is the best way to improve the welfare of Chinese households. By extension, policies to stimulate Chinese domestic demand would also likely improve the welfare of the very countries in the Global South whose political support Beijing wishes to cultivate.
