Morning Edition · Sunday, July 26, 2026Published at 1:15 AM EDT · New York

Trade Blocs Harden as China Splits the EU and US Tariffs Hit Seven Southeast Asian States

Brussels analysts warn Beijing is exploiting member-state divisions while Washington's new levies deepen doubts about it as a reliable partner in Asia.

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Trade Blocs Harden as China Splits the EU and US Tariffs Hit Seven Southeast Asian States

Two developments this weekend point to the same structural shift: global commerce is fracturing into competing blocs. The Financial Times reported that China is exploiting divisions within the European Union (EU), with individual member states and companies vulnerable to economic coercion from Beijing as the bloc struggles to maintain a common position on trade.

In Asia, the South China Morning Post reported that a new set of United States tariffs targeting seven Southeast Asian countries, justified by Washington as a response to alleged forced-labor practices, is reinforcing perceptions of the United States as an unreliable partner. The same outlet argued that the "China plus one" strategy, in which manufacturers diversify supply chains away from China, will only move the region beyond the middle-income trap (the point at which developing economies stall before reaching high-income status) if governments pursue deeper reforms.

The common thread is that both Washington and Beijing are using market access as leverage, and mid-sized economies are caught between them. European capitals disagree over how hard to confront China, and Southeast Asian governments must weigh American tariffs against Chinese investment. The result is a slow move from integrated global supply chains toward defensive, bloc-based commerce.

Part of a tracked trend

North American Trade Rupture

Washington's willingness to tariff even close allies makes trade policy a recurring source of price shocks and supply rerouting, accelerating a shift from integrated supply chains toward defensive, bloc-based commerce.

Veracity: Corroborated

80/100

If true, who benefits: The United States and China, which both convert market access into leverage, and the mid-sized economies that credibly pick a side and attract diverted investment, while exposed Southeast Asian and European firms bear tariff and coercion risk.
The nuance: The forced-labor tariffs on roughly 60 economies, including seven Southeast Asian states at 10 to 12.5 percent, are real, but "China splitting the EU" and "the United States as an unreliable partner" are analysts' interpretations rather than established fact.

An open-source-intelligence read of how likely this story is true with its real nuance, not a judgment of any outlet. It assesses the claim, weighing independent and adversarial reporting. How we label confidence.

What this means

When the two largest economies both use trade access as a tool of pressure, smaller exporters face higher costs and unpredictable rules, which raises the price of goods and reroutes supply chains toward political alignment rather than efficiency. Southeast Asian manufacturers and European firms exposed to China lose through tariff uncertainty and coercion risk, while the countries that can credibly pick a side gain investment. The mechanism is policy risk repricing into corporate margins and sourcing decisions.

What to watch

Whether the European Union agrees a unified response to Chinese pressure or continues to fracture, which determines its bargaining power against Beijing.
How the seven tariffed Southeast Asian states respond, because retaliation or a pivot toward China would accelerate the bloc split.

Observations to monitor, not financial advice.

3 sources

Synthesized from: Financial Times · South China Morning Post (tariffs) · South China Morning Post (China plus one)