The buzz surrounding the launch of the Chinese AI assistant DeepSeek is still going strong. Italy has temporarily banned the download, while France is also investigating the application’s integrity. Fabian Peltsch took the opportunity to speak with Feiyu Xu, former head of SAP’s AI research center, and Hans Uszkoreit, co-founder of the German Research Center for Artificial Intelligence.
In our double interview, the experts advise pragmatism. After all, the DeepSeek doesn’t have to be used directly. Instead, it could be used as open source on one’s own computer and private server to experiment with it first. However, it would be interesting to find out whether the DeepSeek R1 model has received the certificate for political correctness in China. After all, only systems with this certificate can be released in the People’s Republic.
Today’s opinion piece looks at the tension between growing protectionism and green tech exports. The Carbon Border Adjustment Mechanism (CBAM) has also caught the ire of Ma Jun, President of the Beijing-based Institute of Finance and Sustainability and former Co-Chair of the G20 Sustainable Finance Working Group.
While it may help to reduce carbon leakage – the relocation of emissions-intensive production to countries with looser environmental regulations – it also harms income and employment in developing countries that export CO2-intensive goods, argues Ma. Furthermore, he believes it does not promote cooperation, but could lead to even more protectionism through retaliatory measures.
As renowned AI experts, were you surprised by DeepSeek’s success?
Hans Uszkoreit (HU): We knew that the company existed. But in all honesty, DeepSeek didn’t really stand out in this crowd of Chinese model developers. It was quite a surprise that they have now turned up with such a powerful model that achieves so much with so few resources. Nobody could have predicted that.
Have you been able to examine the model thoroughly? Some critics already doubt the legitimacy and authenticity of the results.
HU: Everyone who sees the figures first doubts whether the results make sense and whether they can be verified based on the technology and methods. And that’s what we did.
I just spoke with my former team in China today to verify it. The efficiency compared to ChatGPT and others is indeed impressive. DeepSeek is good not only at machine learning but also at machine teaching. It’s a bit like a child at school: it’s not so important that they read as much as possible, but that they read the right things.
HU: DeepSeek’s so-called post-training is very systematically structured from the simple to the complicated, ensuring complex inferences and cooperative response behavior. Even if the numbers have been tweaked here and there, it is still remarkable how much innovation has been brought together and further developed – although most of it has been bolted together from things that already existed. But there are also genuine innovations, particularly a very effective compression process in pre-training, that is, learning from texts, which requires the most processing time and memory.
Does this mean that Chinese engineering has surpassed the rest of the world?
HU: Not directly. Founder Liang Wenfeng simply didn’t try to find the most experienced engineers, who are hard to come by as it is, but people who have good ideas, who are young and creative. We should do the same in Germany and find such people at universities in the first place, which shouldn’t be as difficult as in China, given that it is a much larger country.
FX: Over the last 20 or 30 years, we have experienced and supported many technology students in China. A great change has taken place there. You can sense a lot of creativity and energy there. If you make the cull, you will find many highly intelligent, highly motivated people. I hope that something like this will reappear in Germany and Europe and that people will work and research with passion and ambition. That’s when the magic happens.
The dangers associated with the use of DeepSeek are currently being discussed widely, precisely because it is a Chinese application. What is your opinion on this?
HU: In the coming weeks and months, the model will be tested very thoroughly to see if there are any hidden traps. But things are looking good now, apart from the occasional refusal to answer questions on politically sensitive topics.
FX: You don’t have to send your queries to China to use DeepSeek. You can just download the entire open source to your own device or private cloud to experiment.
HU: IBM and Fireworks, for example, already offer DeepSeek on their cloud structures. However, companies must be very careful when dealing with cloud-based applications. It is also interesting to find out whether DeepSeek’s R1 model has received the certificate for political correctness. Only systems that have this certificate are allowed to be released in China. Baidu had to wait a very long time for its Ernie model to receive this approval. And despite politically cautious responses, some issues suggest that DeepSeek may not yet have this certificate, or may have been tested too quickly.
Were you surprised that the DeepSeek model was published as open source? After all, this is no longer a common practice in the US.
HU: It isn’t common in China, either. Only very few still do that.
FX: But it’s also a very clever strategy for an unknown company like DeepSeek, with an unknown team and an unknown CEO in AI, to become known quickly.
Some users report that they have achieved much better results on topics such as Chinese history or philosophy on DeepSeek than with applications such as ChatGPT. Is the AI world becoming more Chinese?
FX: This is understandable. In Common Crawl, a non-profit organization that provides large amounts of freely accessible web data for AI models, there is relatively little Chinese content.
For example, you can also find good Chinese content on Baidu’s Ernie 3 model. However, its Western content is not as pronounced. DeepSeek is the first model to combine Chinese and Western culture so strongly.
What does DeepSeek mean for the chip industry and the ambitious Stargate project just launched in the US?
HU: The timing is most interesting: Just at a time when Trump wanted to pick up the pace, he got a damper. Nevertheless, if Trump has enough good advisors at his side, he will not terminate the US Stargate project.
Should chip companies like Nvidia be worried, as reflected in their stock prices?
HU: The industry has slightly overreacted. The success of the more efficient DeepSeek in no way means that artificial intelligence is no longer chip-hungry – quite the opposite. Just because some models can now be trained with less learning effort and the inferences are cheaper does not mean that powerful chips are no longer needed. On the contrary, we are only at the beginning. We may currently be training with 14 trillion words, but we have by no means exhausted the full potential. We still lack a lot of high-quality knowledge data: Technical literature and feature films as training data or the enormous amounts of images from autonomous vehicles that can capture and understand entire cities for a world model. The really large amounts of data are yet to come. What we are seeing now are preliminary stages, although very lovely preliminary stages, of course.
What does this success mean for the AI race between China and the US?
FX: Meta’s Chief AI Scientist Yann LeCun says that the competition on a scientific and technological level is not primarily happening between the USA and China, but rather between open source and non-open source approaches. So it’s less about countries and more about different development philosophies – and I agree. DeepSeek, as a Chinese company with external constraints, shows that even small start-ups with limited capital but highly motivated and curious talent can be successful. They do not have to be large AI hyperscalers with vast capital and infrastructure focusing exclusively on rapid commercialization. This development opens up new opportunities – and I think this is a good direction and also encouraging for Europe.
In what way?
FX: Even if it may look as if the USA or China are currently dominating large language models and AI ecosystems, a stronger focus on existing research and open-source results could also lead to even better developments for others. You can always be better than others – so the train never has left the station. Perhaps we simply need to build new tracks and develop better trains. Germany, especially, has often proven that it is capable of doing just that.
HU: Unfortunately, we lack elite funding for research and training centers. Instead, we always have to chop up our money carefully. As a result, we have 20 federally funded AI competence centers, service centers and AI labs, and each one has just enough to publish internationally recognized papers. But none of them can build the truly big systems. If funding were concentrated on one to three elite centers, too many federal states would cry out because they got nothing despite their interests and good universities.
Do we need a German strategy or do we need a European one?
HU: A European one would be better. Fortunately, there is a glimmer of hope on the horizon. On Feb. 1, a major European project called OpenEuroLLM will launch, bringing together 20 outstanding research centers to develop open-source language models for European languages and cultures. This initiative will even have access to significant AI computing power, partly provided by the Barcelona Supercomputing Center. Several German partners are also involved. However, getting to this point took far too long once again – considerable effort was needed to convince stakeholders.
FX: DeepSeek shows once again that not everything has to be organized by the state. Instead, entrepreneurs with a strong innovation drive should play a key role. After all, there is also a lot of talent in Europe that could be pooled.
However, Europe often lacks energy. After the Second World War, many new things were created here – but today, we have to ask: Why aren’t there as many new companies with digital and software-based business models being founded in Europe? This question needs to be answered, perhaps also from a cultural and socio-psychological perspective.
HU: If these core technologies, which can turn our entire living and working environment upside down – and potentially cause harm – are no longer in our hands, this raises a crucial question: Do we really trust that American or Chinese politicians will always use them for the benefit of all humanity? I have my doubts about that.
Dr. Feiyu Xu studied at Tongji University in Shanghai and at Saarland University and habilitated in big text data analytics. She co-founded the AI start-up Nyonic and was Global Head of Artificial Intelligence at SAP until June 2023, where she led the company’s AI strategy.
Hans Uszkoreit is Scientific Director at the German Research Center for Artificial Intelligence. Uszkoreit has initiated German and international research networks. His research results on language and knowledge technologies are documented in over 250 international publications. He was elected a member of the European Academy of Sciences and received two Google Research Awards.
The Chinese government has rejected responsibility for the fentanyl epidemic in the United States. “Fentanyl is America’s problem,” said a spokeswoman for the Chinese Foreign Ministry on Sunday. The ministry reacted to the introduction of additional tariffs of ten percent on all Chinese exports to the US, which will come into force on Tuesday. US President Donald Trump announced the tariffs weeks ago in an effort to force China to regulate its fentanyl raw materials exports to the US.
“The Chinese side has carried out extensive anti-narcotics cooperation with the United States and achieved remarkable results,” said a Chinese spokeswoman. Beijing announced that it would challenge the tariffs at the World Trade Organization and announced unspecified “countermeasures.”
Starting Tuesday, the US will also impose blanket tariffs on imports from Mexico and Canada, as much as 25 percent. The reason given is that, as transit countries, they would support the supply of chemicals from China. Many Chinese companies export preliminary products or raw materials to Canada and Mexico, which are processed further before reaching the United States. Tariffs could reduce demand for such intermediate products, as the final products would become more expensive and less competitive.
China’s Commerce Ministry said that Trump’s move “seriously violates” international trade rules. It called on the US to “engage in frank dialogue and strengthen cooperation.” Even a blanket tariff of ten percent would significantly burden trade between the two largest economies, whose trade volume stands at around 600 billion US dollars per year.
Moreover, Trump has threatened to impose further tariffs of 60 percent on Chinese goods because he accuses the People’s Republic of unfair trade practices, such as extensive subsidies. However, if this comes to pass, a dangerous spiral will likely be set in motion – just as it was during Trump’s first term in office. In 2018, Trump provoked a series of countermeasures with high punitive tariffs on Chinese imports. This phase marked the start of a veritable trade war between the world’s two largest economies, which could now intensify further.
Beijing initially avoided a drastic escalation on Sunday. A possible complaint to the WTO could even give Beijing diplomatic success by emphasizing the importance of a rules-based trading system. A complaint to the WTO would not entail any immediate costs for Washington.
However, China’s massive trade surplus – almost a trillion dollars last year – is considered a flaw in the Chinese argument. Exports in key industries, including cars, have grown faster in volume than in value, suggesting producers lower prices to generate overseas sales. Domestic demand, on the other hand, has stalled.
China has also been preparing for months for Trump’s long-awaited tariff move by deepening ties with allies, pushing for a degree of autonomy in key technology areas and providing funds to prop up a fragile economy. rtr/grz
There is a straightforward path to ending our dependence on fossil fuels: nurture green industries – which would not only mitigate climate change, but also boost economic growth and job creation – and ensure that their output can be traded as widely as possible. Open trade would strengthen these industries, reduce the costs of green goods and services in most countries, and facilitate the adoption of low-carbon practices and technologies.
At a time of rising protectionism, pursuing this path requires the establishment of a special green free-trade arrangement, involving sharp reductions in tariffs and non-tariff barriers on goods and services that deliver environmental and climate benefits. Since one or two economies could scupper a truly global framework, multiple smaller arrangements could be created by “coalitions of the willing.”
Using existing regional trade agreements as a basis for green trade could hasten this process considerably. Consider the Regional Comprehensive Economic Partnership (RCEP) – the world’s largest trade bloc by both population and GDP – comprising Australia, China, Japan, New Zealand, South Korea, and the ten ASEAN countries. Operating within the RCEP’s framework may enable quicker agreement and implementation of a green free-trade arrangement involving countries that collectively account for 30 percent of global economic activity.
The first step toward realizing this vision would be to demonstrate clearly the economic benefits of a green trade agreement to all members of arrangements like the RCEP. A preliminary study, based on a “computable general equilibrium” model and conducted by the Institute of Finance and Sustainability (which I chair) and research partners, does just that. Our study, which we will present at a conference in Hong Kong in March, found that a green free-trade arrangement could boost members’ economies (in terms of GDP, exports, jobs, and fiscal revenue), bolster their green industries, and bring about faster decarbonization.
Next, in order to help mitigate climate change and address environmental degradation, countries must identify the goods and services that should be covered by the green free-trade arrangement. Our study suggests that this list could include a few dozen categories and a few hundred products and services, including renewable energy, electric vehicles (EVs) and their components, waste management, sustainable agriculture, nature-based solutions, and environmental professional services.
A third priority is to attract green foreign investment and technology transfers, which requires a more stable policy environment, protections for investors, and secure intellectual property rights in the regional trade blocs. A green trade arrangement that ensures these conditions would help lower-income countries, in particular, to develop their green industries and create green jobs. In the RCEP, for example, Chinese, Japanese, and South Korean firms producing, say, EVs or solar panels might license their technologies to producers in the ASEAN countries and invest in building up the region’s green supply chains.
Such arrangements must also address non-tariff barriers, which can impede trade and investment even within low-tariff or tariff-free zones. A successful green trade arrangement must start with careful analysis of all non-tariff barriers, including those arising from import and export quotas, quality-control and customs-clearance processes, product-traceability requirements, trade-finance and export-credit insurance, and the settlement of cross-border payments. Targeted measures to lower these barriers – for example, harmonizing quality and traceability standards across jurisdictions and reducing the cost of trade finance using green finance instruments – should then be implemented.
Leadership and open dialogue are essential. In the case of the RCEP, larger economies like Australia, China, Indonesia, Japan, and South Korea should take the lead in cultivating consensus, with discussions highlighting the arrangement’s wide-ranging benefits for all. This approach would support a “just transition” to a climate-neutral economy, by accelerating decarbonization in participating countries, advancing growth and job creation in green industries, and fostering the mutual trust that is essential to broader cooperation on climate and trade issues.
The case for green trade arrangements is even stronger when one compares them to the approach being embraced by advanced economies. While the carbon border adjustment mechanism (CBAM) favored by the European Union, the United Kingdom, and potentially the US can reduce carbon “leakage” from imports produced in countries with more lenient emissions rules, it harms incomes and employment in the developing economies exporting carbon-intensive goods. And it does nothing to foster cooperation; on the contrary, such unilateral measures could lead to retaliation and yet more protectionism.
As incentives go, CBAM amounts to a “stick,” which punishes developing countries for not sacrificing domestic growth and development in order to reduce emissions. A green free-trade arrangement, by contrast, amounts to a “carrot”: by aligning climate goals with development objectives, it rewards participating economies for making progress in the green transition. It is a win-win solution - just the type a just green transition demands.
Ma Jun is President of the Beijing-based Institute of Finance and Sustainability and former Co-Chair of the G20 Sustainable Finance Working Group.
Copyright: Project Syndicate, 2025
Editor’s note: Discussing China today means – more than ever – engaging in controversial debate. We aim to reflect a wide range of opinions to give you an insight into the breadth of the debate. Opinions do not reflect the views of the editorial team.
Snooker has been firmly established in China for many years. In fact, numerous players from the People’s Republic now rank among the extended world elite – a development that was not foreseeable until the late 2000s. It has not yet been enough for a Chinese snooker pro to win a World Championship title, for example. However, many young, highly talented players are entering the world’s most prestigious tournaments. Currently, 13 Chinese players rank among the top 50, such as Yuan Sijun (39th place). At the German Masters last weekend in Berlin, Yuan reached the last four before being eliminated in the semi-finals.
The buzz surrounding the launch of the Chinese AI assistant DeepSeek is still going strong. Italy has temporarily banned the download, while France is also investigating the application’s integrity. Fabian Peltsch took the opportunity to speak with Feiyu Xu, former head of SAP’s AI research center, and Hans Uszkoreit, co-founder of the German Research Center for Artificial Intelligence.
In our double interview, the experts advise pragmatism. After all, the DeepSeek doesn’t have to be used directly. Instead, it could be used as open source on one’s own computer and private server to experiment with it first. However, it would be interesting to find out whether the DeepSeek R1 model has received the certificate for political correctness in China. After all, only systems with this certificate can be released in the People’s Republic.
Today’s opinion piece looks at the tension between growing protectionism and green tech exports. The Carbon Border Adjustment Mechanism (CBAM) has also caught the ire of Ma Jun, President of the Beijing-based Institute of Finance and Sustainability and former Co-Chair of the G20 Sustainable Finance Working Group.
While it may help to reduce carbon leakage – the relocation of emissions-intensive production to countries with looser environmental regulations – it also harms income and employment in developing countries that export CO2-intensive goods, argues Ma. Furthermore, he believes it does not promote cooperation, but could lead to even more protectionism through retaliatory measures.
As renowned AI experts, were you surprised by DeepSeek’s success?
Hans Uszkoreit (HU): We knew that the company existed. But in all honesty, DeepSeek didn’t really stand out in this crowd of Chinese model developers. It was quite a surprise that they have now turned up with such a powerful model that achieves so much with so few resources. Nobody could have predicted that.
Have you been able to examine the model thoroughly? Some critics already doubt the legitimacy and authenticity of the results.
HU: Everyone who sees the figures first doubts whether the results make sense and whether they can be verified based on the technology and methods. And that’s what we did.
I just spoke with my former team in China today to verify it. The efficiency compared to ChatGPT and others is indeed impressive. DeepSeek is good not only at machine learning but also at machine teaching. It’s a bit like a child at school: it’s not so important that they read as much as possible, but that they read the right things.
HU: DeepSeek’s so-called post-training is very systematically structured from the simple to the complicated, ensuring complex inferences and cooperative response behavior. Even if the numbers have been tweaked here and there, it is still remarkable how much innovation has been brought together and further developed – although most of it has been bolted together from things that already existed. But there are also genuine innovations, particularly a very effective compression process in pre-training, that is, learning from texts, which requires the most processing time and memory.
Does this mean that Chinese engineering has surpassed the rest of the world?
HU: Not directly. Founder Liang Wenfeng simply didn’t try to find the most experienced engineers, who are hard to come by as it is, but people who have good ideas, who are young and creative. We should do the same in Germany and find such people at universities in the first place, which shouldn’t be as difficult as in China, given that it is a much larger country.
FX: Over the last 20 or 30 years, we have experienced and supported many technology students in China. A great change has taken place there. You can sense a lot of creativity and energy there. If you make the cull, you will find many highly intelligent, highly motivated people. I hope that something like this will reappear in Germany and Europe and that people will work and research with passion and ambition. That’s when the magic happens.
The dangers associated with the use of DeepSeek are currently being discussed widely, precisely because it is a Chinese application. What is your opinion on this?
HU: In the coming weeks and months, the model will be tested very thoroughly to see if there are any hidden traps. But things are looking good now, apart from the occasional refusal to answer questions on politically sensitive topics.
FX: You don’t have to send your queries to China to use DeepSeek. You can just download the entire open source to your own device or private cloud to experiment.
HU: IBM and Fireworks, for example, already offer DeepSeek on their cloud structures. However, companies must be very careful when dealing with cloud-based applications. It is also interesting to find out whether DeepSeek’s R1 model has received the certificate for political correctness. Only systems that have this certificate are allowed to be released in China. Baidu had to wait a very long time for its Ernie model to receive this approval. And despite politically cautious responses, some issues suggest that DeepSeek may not yet have this certificate, or may have been tested too quickly.
Were you surprised that the DeepSeek model was published as open source? After all, this is no longer a common practice in the US.
HU: It isn’t common in China, either. Only very few still do that.
FX: But it’s also a very clever strategy for an unknown company like DeepSeek, with an unknown team and an unknown CEO in AI, to become known quickly.
Some users report that they have achieved much better results on topics such as Chinese history or philosophy on DeepSeek than with applications such as ChatGPT. Is the AI world becoming more Chinese?
FX: This is understandable. In Common Crawl, a non-profit organization that provides large amounts of freely accessible web data for AI models, there is relatively little Chinese content.
For example, you can also find good Chinese content on Baidu’s Ernie 3 model. However, its Western content is not as pronounced. DeepSeek is the first model to combine Chinese and Western culture so strongly.
What does DeepSeek mean for the chip industry and the ambitious Stargate project just launched in the US?
HU: The timing is most interesting: Just at a time when Trump wanted to pick up the pace, he got a damper. Nevertheless, if Trump has enough good advisors at his side, he will not terminate the US Stargate project.
Should chip companies like Nvidia be worried, as reflected in their stock prices?
HU: The industry has slightly overreacted. The success of the more efficient DeepSeek in no way means that artificial intelligence is no longer chip-hungry – quite the opposite. Just because some models can now be trained with less learning effort and the inferences are cheaper does not mean that powerful chips are no longer needed. On the contrary, we are only at the beginning. We may currently be training with 14 trillion words, but we have by no means exhausted the full potential. We still lack a lot of high-quality knowledge data: Technical literature and feature films as training data or the enormous amounts of images from autonomous vehicles that can capture and understand entire cities for a world model. The really large amounts of data are yet to come. What we are seeing now are preliminary stages, although very lovely preliminary stages, of course.
What does this success mean for the AI race between China and the US?
FX: Meta’s Chief AI Scientist Yann LeCun says that the competition on a scientific and technological level is not primarily happening between the USA and China, but rather between open source and non-open source approaches. So it’s less about countries and more about different development philosophies – and I agree. DeepSeek, as a Chinese company with external constraints, shows that even small start-ups with limited capital but highly motivated and curious talent can be successful. They do not have to be large AI hyperscalers with vast capital and infrastructure focusing exclusively on rapid commercialization. This development opens up new opportunities – and I think this is a good direction and also encouraging for Europe.
In what way?
FX: Even if it may look as if the USA or China are currently dominating large language models and AI ecosystems, a stronger focus on existing research and open-source results could also lead to even better developments for others. You can always be better than others – so the train never has left the station. Perhaps we simply need to build new tracks and develop better trains. Germany, especially, has often proven that it is capable of doing just that.
HU: Unfortunately, we lack elite funding for research and training centers. Instead, we always have to chop up our money carefully. As a result, we have 20 federally funded AI competence centers, service centers and AI labs, and each one has just enough to publish internationally recognized papers. But none of them can build the truly big systems. If funding were concentrated on one to three elite centers, too many federal states would cry out because they got nothing despite their interests and good universities.
Do we need a German strategy or do we need a European one?
HU: A European one would be better. Fortunately, there is a glimmer of hope on the horizon. On Feb. 1, a major European project called OpenEuroLLM will launch, bringing together 20 outstanding research centers to develop open-source language models for European languages and cultures. This initiative will even have access to significant AI computing power, partly provided by the Barcelona Supercomputing Center. Several German partners are also involved. However, getting to this point took far too long once again – considerable effort was needed to convince stakeholders.
FX: DeepSeek shows once again that not everything has to be organized by the state. Instead, entrepreneurs with a strong innovation drive should play a key role. After all, there is also a lot of talent in Europe that could be pooled.
However, Europe often lacks energy. After the Second World War, many new things were created here – but today, we have to ask: Why aren’t there as many new companies with digital and software-based business models being founded in Europe? This question needs to be answered, perhaps also from a cultural and socio-psychological perspective.
HU: If these core technologies, which can turn our entire living and working environment upside down – and potentially cause harm – are no longer in our hands, this raises a crucial question: Do we really trust that American or Chinese politicians will always use them for the benefit of all humanity? I have my doubts about that.
Dr. Feiyu Xu studied at Tongji University in Shanghai and at Saarland University and habilitated in big text data analytics. She co-founded the AI start-up Nyonic and was Global Head of Artificial Intelligence at SAP until June 2023, where she led the company’s AI strategy.
Hans Uszkoreit is Scientific Director at the German Research Center for Artificial Intelligence. Uszkoreit has initiated German and international research networks. His research results on language and knowledge technologies are documented in over 250 international publications. He was elected a member of the European Academy of Sciences and received two Google Research Awards.
The Chinese government has rejected responsibility for the fentanyl epidemic in the United States. “Fentanyl is America’s problem,” said a spokeswoman for the Chinese Foreign Ministry on Sunday. The ministry reacted to the introduction of additional tariffs of ten percent on all Chinese exports to the US, which will come into force on Tuesday. US President Donald Trump announced the tariffs weeks ago in an effort to force China to regulate its fentanyl raw materials exports to the US.
“The Chinese side has carried out extensive anti-narcotics cooperation with the United States and achieved remarkable results,” said a Chinese spokeswoman. Beijing announced that it would challenge the tariffs at the World Trade Organization and announced unspecified “countermeasures.”
Starting Tuesday, the US will also impose blanket tariffs on imports from Mexico and Canada, as much as 25 percent. The reason given is that, as transit countries, they would support the supply of chemicals from China. Many Chinese companies export preliminary products or raw materials to Canada and Mexico, which are processed further before reaching the United States. Tariffs could reduce demand for such intermediate products, as the final products would become more expensive and less competitive.
China’s Commerce Ministry said that Trump’s move “seriously violates” international trade rules. It called on the US to “engage in frank dialogue and strengthen cooperation.” Even a blanket tariff of ten percent would significantly burden trade between the two largest economies, whose trade volume stands at around 600 billion US dollars per year.
Moreover, Trump has threatened to impose further tariffs of 60 percent on Chinese goods because he accuses the People’s Republic of unfair trade practices, such as extensive subsidies. However, if this comes to pass, a dangerous spiral will likely be set in motion – just as it was during Trump’s first term in office. In 2018, Trump provoked a series of countermeasures with high punitive tariffs on Chinese imports. This phase marked the start of a veritable trade war between the world’s two largest economies, which could now intensify further.
Beijing initially avoided a drastic escalation on Sunday. A possible complaint to the WTO could even give Beijing diplomatic success by emphasizing the importance of a rules-based trading system. A complaint to the WTO would not entail any immediate costs for Washington.
However, China’s massive trade surplus – almost a trillion dollars last year – is considered a flaw in the Chinese argument. Exports in key industries, including cars, have grown faster in volume than in value, suggesting producers lower prices to generate overseas sales. Domestic demand, on the other hand, has stalled.
China has also been preparing for months for Trump’s long-awaited tariff move by deepening ties with allies, pushing for a degree of autonomy in key technology areas and providing funds to prop up a fragile economy. rtr/grz
There is a straightforward path to ending our dependence on fossil fuels: nurture green industries – which would not only mitigate climate change, but also boost economic growth and job creation – and ensure that their output can be traded as widely as possible. Open trade would strengthen these industries, reduce the costs of green goods and services in most countries, and facilitate the adoption of low-carbon practices and technologies.
At a time of rising protectionism, pursuing this path requires the establishment of a special green free-trade arrangement, involving sharp reductions in tariffs and non-tariff barriers on goods and services that deliver environmental and climate benefits. Since one or two economies could scupper a truly global framework, multiple smaller arrangements could be created by “coalitions of the willing.”
Using existing regional trade agreements as a basis for green trade could hasten this process considerably. Consider the Regional Comprehensive Economic Partnership (RCEP) – the world’s largest trade bloc by both population and GDP – comprising Australia, China, Japan, New Zealand, South Korea, and the ten ASEAN countries. Operating within the RCEP’s framework may enable quicker agreement and implementation of a green free-trade arrangement involving countries that collectively account for 30 percent of global economic activity.
The first step toward realizing this vision would be to demonstrate clearly the economic benefits of a green trade agreement to all members of arrangements like the RCEP. A preliminary study, based on a “computable general equilibrium” model and conducted by the Institute of Finance and Sustainability (which I chair) and research partners, does just that. Our study, which we will present at a conference in Hong Kong in March, found that a green free-trade arrangement could boost members’ economies (in terms of GDP, exports, jobs, and fiscal revenue), bolster their green industries, and bring about faster decarbonization.
Next, in order to help mitigate climate change and address environmental degradation, countries must identify the goods and services that should be covered by the green free-trade arrangement. Our study suggests that this list could include a few dozen categories and a few hundred products and services, including renewable energy, electric vehicles (EVs) and their components, waste management, sustainable agriculture, nature-based solutions, and environmental professional services.
A third priority is to attract green foreign investment and technology transfers, which requires a more stable policy environment, protections for investors, and secure intellectual property rights in the regional trade blocs. A green trade arrangement that ensures these conditions would help lower-income countries, in particular, to develop their green industries and create green jobs. In the RCEP, for example, Chinese, Japanese, and South Korean firms producing, say, EVs or solar panels might license their technologies to producers in the ASEAN countries and invest in building up the region’s green supply chains.
Such arrangements must also address non-tariff barriers, which can impede trade and investment even within low-tariff or tariff-free zones. A successful green trade arrangement must start with careful analysis of all non-tariff barriers, including those arising from import and export quotas, quality-control and customs-clearance processes, product-traceability requirements, trade-finance and export-credit insurance, and the settlement of cross-border payments. Targeted measures to lower these barriers – for example, harmonizing quality and traceability standards across jurisdictions and reducing the cost of trade finance using green finance instruments – should then be implemented.
Leadership and open dialogue are essential. In the case of the RCEP, larger economies like Australia, China, Indonesia, Japan, and South Korea should take the lead in cultivating consensus, with discussions highlighting the arrangement’s wide-ranging benefits for all. This approach would support a “just transition” to a climate-neutral economy, by accelerating decarbonization in participating countries, advancing growth and job creation in green industries, and fostering the mutual trust that is essential to broader cooperation on climate and trade issues.
The case for green trade arrangements is even stronger when one compares them to the approach being embraced by advanced economies. While the carbon border adjustment mechanism (CBAM) favored by the European Union, the United Kingdom, and potentially the US can reduce carbon “leakage” from imports produced in countries with more lenient emissions rules, it harms incomes and employment in the developing economies exporting carbon-intensive goods. And it does nothing to foster cooperation; on the contrary, such unilateral measures could lead to retaliation and yet more protectionism.
As incentives go, CBAM amounts to a “stick,” which punishes developing countries for not sacrificing domestic growth and development in order to reduce emissions. A green free-trade arrangement, by contrast, amounts to a “carrot”: by aligning climate goals with development objectives, it rewards participating economies for making progress in the green transition. It is a win-win solution - just the type a just green transition demands.
Ma Jun is President of the Beijing-based Institute of Finance and Sustainability and former Co-Chair of the G20 Sustainable Finance Working Group.
Copyright: Project Syndicate, 2025
Editor’s note: Discussing China today means – more than ever – engaging in controversial debate. We aim to reflect a wide range of opinions to give you an insight into the breadth of the debate. Opinions do not reflect the views of the editorial team.
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