China's trade engine just hit a brick walland it's painted red, white, and blue. After Trump cranked up tariffs to over 100% in April, Chinese exports to the US nosedived 21%, the steepest drop in years. Yet, in a surprising twist, China's overall exports rose 8.1% as it scrambled to reroute goods to India, Southeast Asia, and the EU. Analysts warn that if the US and China can't reach a deal during this weekend's talks, the global trade map could be redrawnand not in China's favor.

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US Treasury Secretary Scott Bessent is heading to Beijing, armed with a proposed tariff rollback to under 60%a significant de-escalation from April's punitive levies. Bessent's team believes the reduction could stabilize trade flows and ease pressure on embattled US importers. But the question is whether China's Vice Premier He Lifeng will bite. Meanwhile, A.P. Moller-Maersk (AMKBY) reports that container volumes between China and the US plunged up to 40% last month, as firms rerouted goods through Vietnam, Taiwan, and Malaysia to dodge tariffs.

For Vietnam, this diversion has been a double-edged sword. On one hand, exports to the US just hit record highs as companies rechannel goods once destined for US-China routes. On the other, Trump already slapped 46% duties on Vietnamthough they're temporarily suspended. With the US-China talks hanging by a thread, the risk for Vietnam and other Asian exporters is clear: they could be next in Trump's crosshairs if the trade chaos doesn't cool off fast.

This article first appeared on GuruFocus.

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