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Reservists receive training during the annual Han Kuang military exercises in Taoyuan, Taiwan July 9, 2025.
Hard Numbers: Beijing calls Taiwan’s “bluff”, Copper prices soar, Russia breaks drone attack record (again), wildfire threatens France’s second city
22,000: Taiwan has mobilised 22,000 reservists to carry out its largest-ever military drills this week, with surface-to-air missiles and US-supplied High Mobility Artillery Rocket Systems as part of the maneuvers. When asked about the drills on Tuesday, the foreign ministry in Beijing – which considers self-governing Taiwan a part of China – called the exercises “nothing but a bluff.”
50%: US copper prices surged after President Donald Trump threatened on Tuesday to impose 50% tariffs on the metal. Copper is essential for home construction, car manufacturing, energy infrastructure, and data centers.
728: Russia launched a record 728 drones at Ukraine overnight, marking the third time in the last two weeks that Moscow has outdone itself. Last night’s attack came after Trump resumed shipments of critical air-defense weapons to Ukraine and declared he was tired of Putin’s “bullsh*t” on Tuesday.
400: A massive wildfire has reached the outskirts of Marseille, France’s second-largest city, prompting the evacuation of at least 400 people and injuring nine firefighters. At its peak, the fire spread at 1.2 kilometers per minute, driven by strong winds, dense vegetation, and steep terrain. Over 1,000 firefighters have been deployed to battle the blaze, which continues to threaten the area.
U.S. House of Representatives Speaker Mike Johnson walks back to office, as Republican lawmakers struggle to pass U.S. President Donald Trump's sweeping spending and tax bill, on Capitol Hill, in Washington, D.C., U.S., July 3, 2025.
What We're Watching: House folds on Trump bill, Beijing lashes out at US-Vietnam deal, Nigerian opposition unites
House holdouts bluff then fold on Trump’s budget bill
The US House is set to pass President Donald Trump’s epic tax-and-spending bill any minute now. Some eleventh hour House Republicans holdouts had signaled that they would oppose the broadly unpopular bill because it boosts the national debt by trillions while threatening to leave millions without health insurance, but they quickly fell in line after under direct pressure from Trump. The imminent final passage of the bill will fulfil Trump’s wish to have the landmark legislation on his desk by the Fourth of July holiday.
US-Vietnam trade deal angers Beijing
The US and Vietnam struck a preliminary trade deal to lower their bilateral tariffs yesterday, and China is not happy about it. Why? Because as part of the deal the US will heavily tariff any goods that pass through Vietnam from another country en-route to the US. That’s a direct swipe at Beijing, which does this frequently to skirt high US tariffs. China’s commerce ministry said it “firmly opposes any party striking a deal at the expense of Chinese interests” and threatened “countermeasures.”
Nigeria sees huge political shakeup as opposition leaders join forces
In one of the biggest shake ups since the end of military rule in 1999, Nigeria’s two main opposition leaders – Atiku Abubakar and Peter Obi – have joined forces to try to oust President Bola Tinubu in the 2027 election. In the 2023 election, they won a combined 54% of the vote compared to Tinubu’s 37%, meaning a common front could win. The big question: Which of these two political heavyweights will agree to play second fiddle to the other when it comes time to pick a presidential candidate?Chinese Foreign Minister Wang Yi and Kiribati's President and Foreign Minister Taneti Maamau meet after the Third China-Pacific Island Countries Foreign Ministers' Meeting in Xiamen, China, on May 28, 2025.
Beijing’s Island Breeze: China makes a play for power in the Pacific
Last week, something highly unusual was spotted off the coast of Japan. In an unprecedented show of naval power, two Chinese aircraft carriers were seen cruising together near the country’s easternmost islands of Minamitori and Okinotori—far out into the Pacific Ocean.
The carrier groups conducted drills alongside one another for the first time in Pacific waters, accompanied by jets, helicopters, and supporting warships.
The operations underscore Beijing’s growing bid for influence in the Pacific, and experts say they are part of a broader strategy that extends far beyond China’s immediate neighbors.
Less than two weeks ago, China’s foreign minister Wang Yi hosted senior diplomats from 11 Pacific Island nations in the southern city of Xiamen, where he pledged $2 million to support infrastructure building and climate adaptation efforts in the region.
The Pacific Islands are a valuable prize on the geopolitical chessboard – around a dozen nations comprising thousands of islands and atolls stretching more than 7,000 miles east of Australia.
“All of the Pacific Island region weighs into China's kind of broader strategy,” says Kathryn Paik, former director of Southeast Asia and the Pacific on the US National Security Council, who is now at the Center for Strategic and International Studies.
China has stepped up its engagement in the region in recent months—a trend underscored by its navy ships making an unprecedented voyage around Australia and carrying out live-fire exercises off the coast of Sydney earlier this year.
What’s motivating China’s drive into the Pacific? Closer ties with Pacific Island nations could boost China’s influence in international bodies like the UN, and they could also give Beijing preferential access to vast territorial waters containing mineral wealth and fish stocks.
But beyond those diplomatic and economic gains, there is a bigger goal as well, says Rory Medcalf, Head of the National Security College at Australia National University. Dominating the Pacific with naval power could increase China’s ability to “knock the United States out of a future war in the region.”
Once a key battleground in World War Two, the Pacific Islands now lie at the center of Beijing’s broader Indo-Pacific security strategy. From the Solomon Islands to Kiribati, China has made repeated attempts to leverage its development projects to gain access to strategic ports and airfields—with the PLA’s newest destroyer docking in Vanuatu’s Port Vila late last year.
“Any Chinese presence there would significantly complicate the US and Australian calculus when it comes to any contingency in either the South China Sea or Taiwan,” says Paik. “If they were to actually be able to build out a port in Solomon Island, similar to what they did in Cambodia, that would be just like a game changer for the US, Australia and others.”
What do the Pacific Islands want? Pacific Island countries face a multitude of development challenges stemming from geographic isolation and the impacts of climate change, to a growing flight of skilled workers. With a quarter of Pacific Islanders struggling below the poverty line—regional leaders will be turning to any and all partners capable of providing meaningful support.
“They want development assistance. They want economic growth. They want to protect their natural resources,” says Medcalf. “A lot of the development assistance China has provided has been effectively building grand infrastructure to satisfy the political needs of the government.”
China has ramped up its development assistance in recent decades, positioning itself as one of the largest aid providers in the region. Between 2008 and 2022, China committed $10.6 billion to various projects in the region, ranging from building transport infrastructure and government buildings, to supporting healthcare and education initiatives.
But China is still the challenger in a historically Western-aligned region. Australia remains by far the Pacific’s leading development partner, committing $20.6 billion over the same period. And other Western-aligned countries are active as well.
“It’s a permanent contest, with other players—not only the United States, but Australia, Japan, New Zealand, and, to some extent, the Europeans as well,” says Medcalf.
Together these countries have provided alternatives to Chinese assistance, with the QUAD countries—Australia, India, Japan, and the United States—announcing a range of multilateral initiatives to boost engagement in the region in 2023.
Beyond this, Pacific Island leaders and their constituents are skeptical about China’s growing security involvement and influence in local government. In 2021, the Solomon Islands’ decision to switch diplomatic recognition from Taiwan to China triggered nationwide anti-government protests, with rioters torching businesses in Honiara’s Chinatown.
“One of the biggest challenges for China is that the region certainly does prefer and is more just aligned culturally and historically with traditional western partners,” Paik says. “There's a lot of unsettlement about where the money's going, why the decisions are made, of certain types of infrastructure, of the governing of the government.”
Still the advantage the US and its allies currently hold over China relies on them “staying on the ball” in the region—an approach that analysts say the Trump administration has deprioritized. The US’ cuts to USAID programs, tariffs, and withdrawal from the Paris Climate Agreement and World Health Organization have opened the door for China to expand its influence in the region.
Last Wednesday, alarm bells rang in Canberra and London after the Pentagon announced that it was reassessing the AUKUS security pact, a multibillion dollar deal to counter Chinese influence by equipping Australia with a nuclear powered submarine fleet.
But while the geopolitical tides continue to pull the Pacific Island nations in different directions, their people are often focused on more immediate problems.
“We've actually got every chance of holding the line [against China], and most importantly, we've got to do it in a way that's respectful of the priorities of Pacific Island countries, because their priority is their own development,” says Medcalf.
President Donald Trump at a bilateral meeting with China's President Xi Jinping during the G20 leaders summit in Osaka, Japan, on June 29, 2019.
Trump promises to be “very nice” with China – but Beijing won’t be flattered
On Wednesday, Donald Trump said he would deliver a “fair deal” with China. He also said he’d be “very nice” to the country after meeting with major retailers. CNN reports the retailers gave the president a “blunt message” about the risks of a prolonged trade war with China, warning shop shelves could “soon be empty.”
Beijing, however, denied that there are any ongoing talks and told the US it must cancel its unilateral tariffs before China will broker any negotiations.
Trump is now promising a substantial drop in tariffs on China, which currently sits at 145%, though he says he won’t drop them to zero. Meanwhile, Treasury Secretary Scott Bessent says there won’t be a tariff reduction without a trade deal, and that it could take two or three years before the US manages to rebalance its trade with its rival, citing the past precedent of Japan, with whom it took a decade to rebalance trade volumes.
On Wednesday, markets were up on the China expectations and news, further buoyed by Trump’s comment that he had “no intention” of firing Federal Reserve chair Jerome Powell. But don’t bank on a long-term comeback or market stability. Earlier in the week, stocks were down with indices closing roughly 2.5% lighter than they started the day after Trump called Powell “Mr.Too Late” and “a major loser” as he pressed for interest rate cuts he claims will buoy the economy amid declining consumer confidence and a growing recession risk.
Containers on a cargo ship are seen at an industrial port in Tokyo, Japan April 3, 2025.
Beijing tries to woo an uninterested Tokyo over joint tariff fight
Chinese Premiere Li Qiang sent Japanese Prime Minister Shigeru Ishiba a letter asking that they “fight protectionism together,” according to local reports Tuesday, as both countries face potentially disastrous US tariffs.
“I don’t know what the equivalent in Japanese for ‘chutzpah’* is, but I think the Japanese bureaucrats will snicker a bit to themselves,” says David Boling, Eurasia Group’s director for Japan and Asian trade. “China has a tendency when relations with the US are not going well to suddenly become much more positive in their approach to Japan.”
China is Japan’s largest trading partner but a highly distrusted neighbor from a national security perspective. Japan launched trade talks with the United States last week, and Boling says Tokyo is determined to strike a deal.
“The United States is just too important as an ally and trading partner, and even if talks break down, they’re not going to look to China first,” he says.
What’s more, Ishiba faces a crucial election in the upper house of the Diet, Japan's legislature, in July, right around when the US tariff pause is due to expire. With his political life on the line, we’re watching for an agreement in principle to be sealed with the US soon.
*Chutzpah is 厚かましさ (astukamashi-sa), if you were curious.
US President Donald Trump attends a bilateral meeting with China's President Xi Jinping during the G20 leaders summit in Osaka, Japan, June 29, 2019.
China vows retaliation as US tariffs take effect
With the Trump administration’s reciprocal tariffs taking effect on Wednesday, the US’s largest trading partner, China, has signaled that it is not backing down from a trade war. Beijing has promised to “fight to the end” after Donald Trump imposed 104% levies on China. Sure enough, the Mainland Kingdom announced on Wednesday that it would impose an additional 50% tariff on US imports, matching Trump’s latest hike.
According to Eurasia Group China expert Lauren Gouldeman, unofficial government-linked sources have indicated that Beijing is prepared to implement six other measures in retaliation, including:
- Halting collaboration on fentanyl-related efforts
- Limiting agricultural exports from the US
- Imposing restrictions on US poultry imports
- Blocking the sale of American services in China, such as design, consulting, financial, and legal services
- Banning US films (Sorry, “A Minecraft Movie”)
- Launching investigations into the intellectual property practices of American companies
These steps aren’t just reactionary — they reflect a strategic shift. “Beijing has been preparing for decoupling for years,” says Gouldeman. “So it will continue to follow its playbook of stepping up support to safeguard the domestic economy and finding alternative markets for trade and investment.”
The EU, meanwhile, has said it is open to working with China to stabilize the global economy, a sign that trade alliances could be realigning to circumvent the US. However, the bloc is also concerned about Chinese products flooding their markets.
Speaking of markets, stocks slid back down the slippery slope on Wednesday. Japan’s Nikkei closed nearly 4% down, Europe’s Stoxx 600 dropped 3% Wednesday morning, and futures on US indices also headed backward. Tuesday’s brief respite seems like a fever dream.
There is still room to maneuver: Beijing has reiterated its openness to negotiations, provided the US first removes its unilateral tariffs. But the Trump administration has signaled that it will stay the course to reshore supply chains. Going even further, the US president announced yesterday that he will soon announce “major” tariffs on pharmaceutical imports, which had been exempt from the “reciprocal” rates announced on “liberation day.”
We’ll be watching to see whether bilateral trade survives, but in the meantime, China has a well-stocked arsenal of memes going viral, making fun of the American dream of re-industrialization.How DeepSeek changed China’s AI ambitions
But when the Chinese startup DeepSeek released its AI models in January, claiming they matched American ones in performance at much cheaper prices to develop, the US lead was suddenly called into question. If DeepSeek can be believed, they achieved a huge technological advance without unfettered chip access — an affront to the US government’s export controls that, it thought, were keeping China at bay.
After DeepSeek, China is emboldened
Now, the Chinese tech industry seems emboldened, with a slew of new releases from startups and incumbents alike. This breakthrough has jumpstarted AI development across China that has, in an instant, changed global tech competition and reshaped Beijing’s tech strategy.
Alibaba, Tencent, and Baidu, along with newcomers like Manus AI, have since released their own advanced models. Many of these are available for free as open-source software, unlike the subscription models of OpenAI and others.
“DeepSeek shifts the narrative — not by immediately putting China ahead, but by undermining America's AI dominance and forcing Silicon Valley giants onto the defensive much sooner than anticipated,” said Tinglong Dai, professor at Johns Hopkins Carey Business School.
“DeepSeek did two things: increase confidence in China's ability to innovate and convince policymakers to push hard on tech advancement now,” said Kenton Thibaut, senior resident China fellow at the Atlantic Council's Digital Forensic Research Lab.
At a press conference earlier this month, Chinese Foreign Minister Wang Yi wrote off America’s strict export controls. “Where there is blockade, there is breakthrough,” he said. “Where there is suppression, there is innovation; where there is the fiercest storm, there is the platform launching China’s science and technology skyward like the Chinese mythological hero Nezha soaring into the heavens.”
Beijing’s shifting focus
After DeepSeek, Thibaut notes, the Chinese government has signaled it will expand support to finance technological innovation — increasing its relending program budget, establishing a new national venture capital fund, allowing unprofitable firms to go public, and increasing mergers and acquisitions in the Chinese tech sector.
This is a major shift from just a few years ago when Beijing sought to put the explosive domestic tech sector in its place — infamously sinking the IPO of the rideshare giant Didi and closing a key loophole for companies going public on foreign markets in 2021.
Beijing’s incentives are now “aligned” with developing the domestic tech sector, Thibaut said, “Both are aligned on the understanding that companies have major incentives to localize — i.e. using domestically produced chips, even if they aren’t as good as NVIDIA’s — in the long term because of just how uncertain and unpredictable chip availability is and will be.”
And China's embrace of open-source AI models, which are freely available for the public to download and modify, has also raised eyebrows because it stands in contrast with the mostly closed Western models, with Meta’s Llama as a notable exception. If China can get its open-source models to be commonly used by Western developers, it could make an important stake in the global AI space. That said, the open-source model could hinder the economic benefits of AI in China — at least, in terms of making money directly off of these advancements.
For now, we’re witnessing a moment of confidence for China — one shared by both its government and tech sector. “Xi Jinping surely feels emboldened,” Dai said, “viewing this as tangible evidence of Western vulnerability and China’s rising trajectory.”
The DeepSeek logo is displayed on three cell phones in front of a computer screen showing the Chinese national flag.
China announces a state-backed AI fund
Chinese officials on Thursday announced a new state fund to invest in cutting-edge technology, including artificial intelligence.
Zheng Shanjie, chairman of the National Development and Reform Commission, the country’s economic planning agency, told reporters that the “state venture capital guidance fund” will bring in $138 billion over 20 years from local governments and private firms.
The fund comes two months after the Chinese firm DeepSeek unveiled its R1 artificial intelligence model, which quickly became one of the world’s top-performing systems — essentially China’s first model that can compete with those from Silicon Valley firms like Anthropic, Google, Meta, and OpenAI. Since then, Chinese tech giant Alibaba has released its own model, called QwQ-32B, to rival DeepSeek and other major players.
The United States has tried to cut off China from its top AI chip companies, but the country still has managed to build AI models — either from smuggled chips or through, as DeepSeek claimed, efficient new means. A new and emboldened China now wants the world to know it’s ready to publicly write big checks to spur its domestic AI industry.