TRUST IN CHINA’S TARIFF RESPONSE
Trust is always important, but even more so in China.


It has become an even more important issue as President Trump’s tariff attacks on China have ramped up. NT businesses working with China cannot afford to ignore understanding this issue. Tariffs have meant that trust has also become entwined with a determination never to again be subject to foreign interference.
To understand the context of China’s response we have to start with the situation in the United States. When the modern-day rebels stormed the steps of the White House in 2021 they carried the confederate flag, some 165 years after their defeat in the Civil War. The flag remains a potent symbol to many of those who still support Trump and it reflects the ideas and attitudes that drove the original confederate states.
This is relevant to our understanding of China because the influence of a 165-year- old event is something we readily accept when it comes to assessing modern-day America.
The same occurs in modern-day Australia. The union movement and others carry the Eureka flag, referencing a rebellion that took place 167 years ago. The 110-year-old ANZAC tradition influences contemporary Australian policies and reactions. Just as the confederate flag carriers cannot forget the humiliation of the civil war, China cannot forget the events of the opium war 165 years ago.
An awareness of what drives China’s reaction to tariffs should guide the way NT business approaches the development of business with China. Like the factors that drive China’s response to tariffs, the significant role played by trust has deep historical roots. Historically, trust comes from the guanxi network, starting with family. Some think of this as being like a bank account, where guanxi is banked and withdrawn. Chinese start with a family bank account, and this is gradually extended, although with gradually reducing degrees of trust the further you get away from family.
Western businesses open new guanxi accounts, but they can never match the family “bank” account.
Guanxi is loosely translated as relationships. This is usually among family and business friends and is essential for living in China because bureaucracy is so large. When there are millions of people, there are potentially millions of possible mistakes, so you must choose your friends, associates and business associates very carefully. Guanxi helps by providing trusted introductions.
Trust became even more important during the Cultural Revolution. It gave birth to a new part of the guanxi network in the concept of true friends outside the family. These were people you shared secrets with and whom you trusted not to turn you over to the Red Guards. These true friend friendships shaped the emergence of China’s first modern entrepreneurs.
The concept of true friendship continues and, because the Cultural Revolution in many ways destroyed family trust, this true friendship trust is even more important.
Trust is essential in a commercial relationship where the law, corporate or otherwise, is sometimes applied in inconsistent ways. Nobody really benefits from taking commercial legal action in China, and generally people will go to great lengths to avoid this. The court system is as opaque to Chinese residents as it is to foreigners.
In this type of legal situation, trust becomes particularly important as written documents may not offer the same levels of protection as they do in the Western legal and commercial law system.
President Trump is running a masterclass on how to quickly destroy trust. Trump’s written trade and defence agreements are not worth the paper they are written on, as shown by his withdrawal of support for Ukraine and the way he dumped the North America Free Trade Agreement.
The continued attacks on the lease of Darwin Port have also eroded investor trust in commercial agreements. This creates headwinds and makes it more difficult for NT business to engage with China. For those in the NT doing business on the ground in China this erosion of trust on a global scale is corrosive. It is even more corrosive in China because of the greater role that trust plays in all relationships.
The solution is to take extra care, and pay additional attention to maintaining trust, establishing trust and reinforcing trust. It will be challenging. Trump has tipped the scales against all foreigners doing business in China. It is unwise to assume that the levels of trust previously afforded to your business will continue.
Chinese partners may seek reassurance and this often involves new tests of trust. Be prepared, and act accordingly.

Daryl Guppy is an international financial technical analysis expert. He has provided weekly Shanghai Index analysis for mainland Chinese media for more than a decade. Guppy appears regularly on CNBC Asia and is known as “The Chart Man”. He is a former national board member of the Australia China Business Council. The views expressed here are his own.