Asia Daily: February 25, 2026

Key Takeaways

• China delays decision on US 15% tariff retaliation
• Military purges create PLA command vacancies, hurting readiness
• DeepSeek used Nvidia Blackwell chips despite export ban
• German Chancellor Merz seeks trade deals amid deficit
• Japan restricts dual‑use exports to 40 firms, escalating tensions

Summary

China signaled it will weigh counter‑measures after the United States imposed a temporary 15% tariff on all imports, while urging Washington to cancel unilateral duties and resume frank trade talks. A new IISS study warned that ongoing anti‑corruption purges have left gaps in the People’s Liberation Army’s senior command, potentially degrading operational readiness. Despite U.S. export controls, Chinese AI firm DeepSeek trained its latest model on Nvidia’s flagship Blackwell chip, highlighting the limits of current sanctions. Meanwhile, German Chancellor Friedrich Merz travelled to Beijing to discuss trade amid a €90 billion deficit, and Japan imposed export restrictions on 40 domestic firms linked to military use, reflecting rising geopolitical friction across East Asia.

Pulse Analysis

The latest round of U.S. tariffs has reignited a fragile trade equilibrium in East Asia, prompting Beijing to signal a measured response while simultaneously calling for renewed dialogue. For multinational corporations, the uncertainty surrounding tariff schedules and potential retaliatory measures translates into heightened supply‑chain volatility, especially in sectors reliant on Chinese manufacturing and raw materials. Analysts note that the timing of these tariffs coincides with broader geopolitical frictions, compelling firms to diversify sourcing strategies and reassess exposure to both U.S. and Chinese regulatory regimes.

Internally, China faces a paradoxical challenge: while it pushes forward with high‑tech ambitions, such as DeepSeek’s AI model trained on Nvidia’s Blackwell GPU, it also grapples with a leadership vacuum in the PLA caused by sweeping anti‑corruption purges. The IISS report underscores that the reduction of the Central Military Commission to just two senior figures could impair decision‑making and operational cohesion, even as defense spending climbs to 44% of Asia’s total. Simultaneously, the record deployment of maritime militia vessels, though now more civilian‑focused, signals Beijing’s continued use of hybrid maritime tactics to assert claims in the South China Sea.

Regionally, diplomatic overtures and trade restrictions are reshaping the economic landscape. Germany’s Chancellor Merz’s visit to Beijing aims to mitigate a €90 billion trade deficit, seeking partnerships with automotive giants and energy firms. Conversely, Japan’s move to block dual‑use exports to 40 entities marks a hardening stance against perceived Chinese militarization. In South Asia, India’s willingness to restart U.S. trade talks after tariff clarity reflects a strategic pivot toward balancing Chinese influence. Collectively, these threads illustrate a complex tapestry where trade, technology, and security intersect, demanding vigilant risk management from investors and policymakers alike.