As the United States and China recently agreed to extend their trade ceasefire for 90 days, this was clearly a well-thought-out decision made just hours before an otherwise scheduled increase in tariffs was due to take effect. This extension is the result of years of quiet talks between the two nations. From access to China’s rare earth minerals to China’s increasing purchases of Russian oil, they are zeroing in on key strategic issues. Through these negotiations, the U.S. and Europe have both demonstrated a commitment to seek mutually beneficial resolutions to their long-standing trade disagreements.
In early April, trade tensions between the US and China seemingly reached a boiling point. This touched off a tit-for-tat escalation of retaliatory tariffs, with rates jumping into triple-digit percentages. The trade war all but froze trade between the two countries. The cumulative effect of these factors means that American exports to China tanked, falling by nearly 20% year-on-year over this period. Chinese goods entering the US now pay an additional 30% tariff, a jump of over 25% since the beginning of the year. At the same time, US products find themselves facing a new 10% tariff in China.
In earlier roundtables, both sides have called their discussions “constructive,” indicating a willingness by each side to address areas of contention. One main theme of these discussions has been the US ban on advanced technology sales. There’s particular focus, really unprecedented specific focus on semiconductors being sold to China. Given the significance of this measure, it has received even more scrutiny, as it might affect the tech ecosystem and economic relations in both countries.
Beijing has retaliated to the US tariffs with its own series of US tariffs, making the current trade war even murkier. On a related note, US President Donald Trump just signed an executive order that actually enforces an agreement made last May. This agreement has important provisions to use non-specific tariffs to further create positive, stabilizing trade relations.
The latest round of talks was a reminder of the unfortunate realities of the US-China relationship. It raises alarm about the growing danger associated with existing trade tensions. Yet as each country works to combat these troubles, the key to their blossoming economic relationship hangs in the balance.