PAUL WISEMAN, JOSH BOAK and ELAINE KURTENBACH
Tue, February 3, 2026
WASHINGTON (AP) — Bullied and buffeted by President Donald Trump’s tariffs for the past year, America’s longstanding allies are desperately seeking ways to shield themselves from the president’s impulsive wrath.
U.S. trade partners are cutting deals among themselves —- sometimes discarding old differences to do so — in a push to diversify their economies away from a newly protectionist United States. Some European governments and institutions are reducing their use of U.S. digital services such as Zoom and Teams.
Central banks and global investors are dumping dollars and buying gold. Together, their actions could diminish U.S. influence and mean higher interest rates and prices for Americans already angry about the high cost of living.
Last summer and fall, Trump used the threat of punishing taxes on imports to strong-arm the European Union, Japan, South Korea and other trading partners into accepting lopsided trade deals and promising to make massive investments in the United States.
But a deal with Trump, they’ve discovered, is no deal at all.
The mercurial president repeatedly finds reasons to conjure new tariffs to impose on trading partners that thought they had already made enough concessions to satisfy him.
Just months after reaching his agreement with the EU, Trump threatened new tariffs on eight European countries for opposing his attempts to seize control of Greenland from Denmark – though he quickly backed down. And last month, he said he’d slap 100% tariffs on Canada for breaking with the United States by agreeing to reduce Canadian tariffs on Chinese electric vehicles.
“Our trading partners are discovering that the largely one-sided deals they concluded with the U.S. provide little protection,’’ said former U.S. trade negotiator Wendy Cutler, senior vice president at the Asia Society Policy Institute. “As a result, trade diversification efforts by our partners are on turbo charge, looking to reduce dependence on the U.S.’’
Trump supporters such as Paul Winfree, who was deputy director of the White House Domestic Policy Council during Trump’s first term, are wary of the relative decline in U.S. Treasury note holdings by foreign central banks and view the national debt as a vulnerability rivals would like to exploit.
Winfree, CEO of the Economic Policy Innovation Institute, a think tank, said that some of Trump's advisers do not feel America has fully benefited from the dollar's status as the world's dominant currency.
“But the fact remains that every other country is jealous of our status, and many of our adversaries would love to challenge the U.S. dollar and Treasuries,” he said.
White House spokesman Kush Desai insists America's standing on the global stage has not been diminished.
“President Trump remains committed to the strength and power of the U.S. Dollar as the world’s reserve currency," he said.
India and the EU clinch a long-awaited deal
The most eye-opening deal so far has been the pact announced last week between the 27-country EU and India, the world’s fastest growing major economy. Negotiators had been at it for nearly two decades before they closed the agreement.
Likewise, an EU trade deal announced two weeks ago with the Mercosur nations of South America took a quarter century of negotiation. It will create a free-trade market of more than 700 million people.
“Some of these deals have been in the works for quite some time,’’ said Maurice Obstfeld, a senior fellow at the Peterson Institute for International Economics and former chief economist at the International Monetary Fund. “The pressure from Trump made them more eager to accelerate the process and reach agreement.’’
EU exporters were jubilant over the India deal. VDMA, a group of European machinery and plant engineering companies, welcomed lower Indian tariffs on machinery.
“The free trade agreement between India and the EU brings much needed oxygen to a world increasingly dominated by trade conflicts,” VDMA’s executive director, Thilo Brodtmann, said in a statement. “With this agreement, Europe is sending a clear signal in favor of rules-based trade and against the law of the jungle.”
'We have all the cards’
On Monday, Trump went on social media to announce his own deal with India. The U.S., he posted, would reduce tariffs on Indian imports after India agreed to stop buying oil from Russia, which has used the sales to fund its four year war in Ukraine.
The president said that India would reduce its tariffs on American products to zero and buy $500 billion worth of American products. Trade lawyer Ryan Majerus, a partner at the King & Spalding and a trade official in the Biden administration and during Trump's first term, said that businesses and legal analysts were awaiting official White House documents spelling out details of the deal.
Trump is banking on there being limits to other countries’ ability to pull away from the United States. America has the world’s biggest economy and consumer market. “We have all the cards,’’ Trump told Fox Business this month.
Countries like South Korea, dependent on America’s market and military protection, can’t afford to ignore Trump’s threats. On Monday, for example, the president said he was increasing tariffs on South Korea goods because the country’s legislature has been slow to approve the trade framework announced last year. On Tuesday, the country’s Finance Ministry responded by saying its chief, Koo Yun-cheol, would push lawmakers to quickly approve a bill to invest $350 billion as promised in the agreement.
"The U.S was trying to identify a counterpart that would find it difficult to refuse U.S. demands outright, given the depth of its economic and security ties,” said Cha Du Hyeogn, an analyst at South Korea’s Asan Institute for Policy Studies.
Or consider Canada, which sends 75% of its exports to its southern neighbor. “Canada and U.S. will always be tightly linked through international trade,” said Obstfeld, a professor at the University of California, Berkeley. “We’re talking about adjustments more or less on the margin.’
But the world’s growing rejection of Trump’s policies is already having an impact, driving down the value of the dollar, long the currency of choice for global commerce, to its lowest level since 2022 last week versus several competing currencies.
Syracuse University political scientist Daniel McDowell, author of the book “Bucking the Buck: U.S. Financial Sanctions and the International Backlash against the Dollar,” sees a vibe shift under Trump: Foreign countries and investors want to reduce their exposure to the United States, which has moved from a source of security and stability to a driver of instability and unpredictability under Trump.
“Trump has shown that he is willing to use foreign countries’ economic dependence on the U.S. as leverage against them in negotiations,” McDowell said. “As global perceptions of the US are changing, it is only natural that investors — public and private alike — are reconsidering their relationship with the dollar.”
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Kurtenbach reported from Bangkok. Associated Press videographer Yong Jun Chang in Seoul and AP Business Writer Kelvin Chan in London contributed to this report.
Analysis by Simone McCarthy, CNN
Mon, February 2, 2026
British Prime Minister Keir Starmer visits the Forbidden City in Beijing last week. - Kin Cheung/Getty Images
As US President Donald Trump takes a sledgehammer to longstanding alliances with a volatile foreign policy that’s included threats to take control of Greenland and a spiraling feud with Canada, he’s also creating a significant opening for China.
Look no further than the revolving door of Western leaders hosted by Xi Jinping in recent weeks aiming to reset relations or deepen cooperation with the world’s second-largest economy.
That procession includes the leaders of some of the US’ closest traditional allies: Britain’s Keir Starmer and Canada’s Mark Carney last month, as well as NATO ally Finland’s Petteri Orpo. French President Emmanuel Macron made a visit in December, while German Chancellor Friedrich Merz is expected soon.
Viewed from Beijing, that list is a powerful sign that an era of talking about economic separation from China is waning, and Western leaders are finally seeing China as a reliable partner – in contrast to the US under Trump.
Visiting leaders have praised relations with China as key to international stability or their own national security – a far cry from the recently prevailing orthodoxy among G7 leaders that China was a challenge to the rules-based international order.
And in broader conversations taking place across gatherings like the World Economic Forum meeting in Davos, Western leaders are openly acknowledging that the US-backed post-1945 order is being eclipsed – a view not completely out of step with China’s.
The European Union “has really been bullied by the US and it’s only human nature to seek outside support when you’re being pushed around. That’s why Europe is actually open to the idea of strengthening ties with China,” Jin Canrong, an international relations expert at Renmin University in Beijing, said in a recent analysis.
Chinese foreign policy thinkers are under few illusions that American allies are about to wipe clean a list of ongoing concerns about China – from trade to human rights to security – or mount a sweeping shift to Beijing at the expense of ties with Washington.
But as Xi continues to push to forge a more China-friendly world, Beijing seems well aware of the major potential benefits from the seismic shift underway.
That’s especially true when it comes to ensuring its aims to dominate high-tech – and expand its global trade, clout and military might – meet less resistance.
People wait for the arrival of French President Emmanuel Macron at the University of Sichuan for a meeting with students in China's Chengdu in December. - Pedro Pardo/AFP/Getty Images
The end of ‘collective confrontation’?
Already the recent diplomatic parade in the Chinese capital has amounted to an opportunity to repair relations with key Western economies.
Carney in his visit – the first from a Canadian prime minister since 2017 – relaxed stringent tariffs on China-made electric vehicles that Canada had imposed in lockstep with the US in exchange for an easing of barriers on Canadian agricultural goods.
Separately, Beijing and the European Union last month came to an agreement to replace tariffs on Chinese EVs with commitments to sell at minimum prices – easing a longstanding friction based around Europe’s concern that artificially cheap cars from China, far and away the leader of global production, would devastate its domestic auto industry.
Britain's Prime Minister Keir Starmer visited Beijing and then Shanghai during his four-day trip last month. - Carl Court/AFP/Getty Images
Starmer, making the first trip by a British leader in eight years, praised business opportunities in China for the UK, days after his government green-lighted plans for China to build a controversial “mega” embassy close to London’s financial district.
“Realism” is at work in European leaders’ recent diplomacy toward China, according to Steve Tsang, director of the SOAS China Institute in London.
“Mistrust of China remains deep, particularly over Chinese support for Russian war efforts in Ukraine … (but) European states cannot ignore China, particularly when the US is going ‘rogue’ from their perspective.”
European governments in recent years ramped up scrutiny of China’s role in areas from telecoms networks and critical infrastructure to education – and followed US cues to restrict the sale of advanced semiconductor technology over national security concerns.
They’ve also grown increasingly alarmed by China’s gaping trade surplus and are working on ways to protect their industries, some of which analysts say face an existential threat from an influx of heavily subsidized Chinese goods. (Macron, during his December visit to China, said he threatened EU tariffs if the trade surplus isn’t addressed.)
French President Emmanuel Macron speaks at Sichuan University during a meeting with students in the city of Chengdu in southwestern China on December 5, 2025.
It remains to be seen how willing the EU and its member countries are to downplay these concerns or reorient their policies on China (which the bloc has described as an “economic competitor and a systemic rival”), even in the face of Trump’s on-again, off-again tariff threats and his rattling of NATO.
European leaders including Starmer, who had pushed for tighter UK-China ties prior to Trump’s election, have insisted they don’t have to come at the expense of security.
And the EU appears to be keeping its foot on the pedal. Last month it released a new proposal to phase out components and equipment from “high-risk” suppliers in critical sectors, expected to affect Chinese telecoms giant Huawei, after late last year ramping up screening of foreign investments. Addressing the trade surplus and reducing dependence on China’s critical minerals also remains high on the EU agenda.
Still, voices within China are optimistic.
“Some Western countries, under US leadership, have attempted and advocated collective confrontation against China and decoupling from China,” Wang Wen, a professor at Renmin University, wrote in a recent commentary, referring to efforts to separate supply chains from China.
“However, reality has repeatedly proven that the ‘decoupling theory’ and the ‘new Cold War’ are not only unpopular but also difficult to truly implement.”
A new world order
Other Chinese analysts have suggested that with the US exit from more than two dozen United Nations bodies – and Trump’s effort to set up a parallel “Board of Peace” – Europe will simply need China more as an international counterweight.
“In order to maintain the multilateral system, (Europe) may need to compromise with China on trade and economic issues,” Ye Weimian, a researcher at the Chinese University of Hong Kong, wrote in an analysis, pointing to areas like tariffs, technology access restrictions, and even a stalled China-EU investment agreement.
Honor guards prepare for a welcome ceremony for Britain's Prime Minister Keir Starmer at the Great Hall of the People in Beijing last week. - Kin Cheung/AFP/Getty Images
Nonetheless, Beijing has pushed back against a narrative that it aims to “take advantage” of a rift between the US and its allies. Instead, it frames the warming of relations as proof of the appeal of its own market – and its vision for the world.
“This is an inevitable result of China’s development benefiting the world and continuously injecting stability and certainty into the international community,” an editorial in the state-backed outlet Global Times said last month.
Chinese analysts have also pointed to the US’ own climb-down on frictions with China as part of this recognition. The two sides reached an agreement to de-escalate trade tensions last fall. That was after Beijing played its trump card of stopping the flow of rare earth minerals, waking up the world to its outsized control over their supply chains.
More importantly for Beijing, the US has moved away from framing China as an ideological challenger, to simply a competitor in an economic and strategic sense.
That shift dovetails with China’s broader vision for the world order: one no longer dominated by what it sees as American values and alliances, where countries aren’t bound to one another in ideological or security blocs, but instead make calculations based on shared economic and strategic interests.
And at a time when European voices are acknowledging that a “new world order” is taking shape, Beijing wants to frame its own vision for that order as one whose time has come.
“It’s less about these countries choosing China,” the Global Times editorial read. “And more about them choosing to follow the trend of the times.”
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