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22.07.2025 10:30 AM
Trump Continues Seeking Ways to Pressure China Through Other Countries

According to media reports, President Donald Trump's ongoing efforts to pressure China via its supply chain trading partners threaten to undermine the country's growth and much of its exports to the United States.

China increasingly relies on third countries for the production of finished goods and components—a trend that accelerated following Trump's initial trade war and the imposition of stricter restrictions on the world's second-largest economy. According to available data, China's share of total value-added goods destined for the U.S., routed through countries like Vietnam and Mexico, rose from 14% in 2017 to 22% in 2023.

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Economists warn that if Trump succeeds in restricting transshipment through higher tariffs or tighter supply chain requirements, it could jeopardize 70% of China's exports to the U.S. and more than 2.1% of the country's GDP. There is also a risk of further economic damage if such restrictions affect the willingness of other countries to do business with China.

It is evident that large trade flows through third countries have helped mitigate the impact of existing U.S. tariffs. However, tightening control over these shipments would magnify the damage from the trade war and could undermine China's long-term growth prospects. This effect is amplified by the increasing relocation of manufacturing capacities from China to other countries such as Vietnam, Mexico, and India. Companies aiming to diversify supply chains and avoid tariff barriers are actively investing in new production sites outside of China.

There are, however, some upsides. The trade war has spurred a technological race between the two superpowers. U.S. export restrictions on high-tech goods to China have pushed Chinese companies to develop domestic innovations, particularly in critical sectors like semiconductors and artificial intelligence. While this may lead to greater technological independence for China, it also risks fragmenting global tech standards.

As noted above, the U.S. continues to increase pressure on China via other countries. In a series of letters sent out by Trump's administration announcing new tariffs effective August 1, the White House threatened even higher duties on goods identified as being transshipped. Although no detailed explanation was provided, this opens the door for the administration to target a broader range of Chinese exports to the U.S. The main countries through which China ships goods to the U.S. include Mexico and Vietnam, with the European Union also serving as a key transit hub. China's role in supplying goods through other nations may affect future U.S. trade agreements. Signs of this are already emerging: the U.S.-UK trade deal, for example, includes requirements on supply chain security and ownership rights in sensitive sectors.

As for the current technical outlook on EUR/USD: Buyers need to focus on reclaiming the 1.1700 level. Only this will open the path to test 1.1720. From there, the next target becomes 1.1750, although reaching it without support from major players will be quite difficult. The furthest target remains the 1.1780 high. In the event of a decline, I expect meaningful buyer activity only near the 1.1666 level. If there's no strong response there, it would be prudent to wait for a retest of the 1.1640 low or consider opening long positions from the 1.1615 level.

As for GBP/USD: Pound buyers need to break through the immediate resistance at 1.3500. Only then will a push toward 1.3540 be viable, though breaking above that level will be challenging. The furthest target is the 1.3580 level. If the pair declines, bears will attempt to take control around 1.3460. If successful, breaking this range would deal a serious blow to the bulls and push GBP/USD down to the 1.3435 low, with the potential to reach 1.3400.

Jakub Novak,
Analytical expert of InstaForex
© 2007-2025
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