# 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.

- Published: 2026-07-26T05:15:19.989Z
- Canonical: https://polylog.news/2026-07-26/trade-blocs-harden-as-china-splits-the-eu-and-us-tariffs-hit
- Publisher: Polylog (Global desk)
- Section: macro
- Sources: [Financial Times](https://www.ft.com/content/ccf8b73f-c798-46d8-a00b-47df2a6c6859?syn-25a6b1a6=1), [South China Morning Post (tariffs)](https://www.scmp.com/week-asia/economics/article/3361861/why-new-us-tariffs-threaten-trump-governments-credibility-asean?utm_source=rss_feed), [South China Morning Post (China plus one)](https://www.scmp.com/week-asia/opinion/article/3361816/southeast-asia-must-embrace-reforms-china-plus-one-succeed?utm_source=rss_feed)

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](https://www.ft.com/content/ccf8b73f-c798-46d8-a00b-47df2a6c6859?syn-25a6b1a6=1) 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](https://www.scmp.com/week-asia/economics/article/3361861/why-new-us-tariffs-threaten-trump-governments-credibility-asean?utm_source=rss_feed). 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](https://www.scmp.com/week-asia/opinion/article/3361816/southeast-asia-must-embrace-reforms-china-plus-one-succeed?utm_source=rss_feed).

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.

## 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.