On May 12, China and the United States forged an historic breakthrough pact in Switzerland. This agreement opens the door for at least a short-term reprieve from escalating trade hostilities between the two countries. As part of this deal, the two sides committed to reversing recent tariff hikes. These dramatic jumps, all over 100%, will be delayed for at least 90 days. Their rollback is currently due to expire in mid-August. With the 24-month deadline quickly approaching, concern is mounting about the return of the United States’s long-term trading relations.
After the agreement was reached, diplomatic representatives from both nations took to Twitter late last week. They unitedly emphasized the need to address long-festering problems. China’s Ministry of Commerce Spokesperson, He Yongqian reassured that communication between China and the US is indeed ongoing. However, challenges persist. The US has expanded a campaign of technology restrictions against China. China hasn’t budged on any major concessions on rare earth materials.
The relationship between the two countries has grown bitterly antagonistic over the years. Other recent US actions—such as the revocation of Chinese students’ visas—have elicited fierce rebuke from Chinese authorities, who call these actions “completely unreasonable.” This backdrop of distrust and tension further demonstrates how fraught the negotiations would have to be to reach a way forward.
Scott Bessent, US Treasury Secretary Jack Lew’s chief of the US Treasury’s Office of Financial Stability, was key in brokering the agreement with Switzerland. He admitted that the US/China trade talks are currently “a touch up in the air.” He knew that there was no substitute for personal outreach. This new relationship between US President Donald Trump and Chinese President Xi Jinping will prove useful in moving negotiations forward.
“I believe that we will be having more talks with them in the next few weeks,” – Scott Bessent.
Indeed, Trump and Xi haven’t spoken since January. Recent indicators suggest that Trump is acutely interested in resuming dialog with Xi in the near future. China may agree to a call – on the condition that the US commits to no further escalation while they talk. This assurance would be an important step forward.
He Yongqian reiterated China’s position during a recent statement, urging the US to “immediately correct its wrong practices … and together safeguard the consensus reached at high-level talks in Geneva.” This short line is a telling indicator of the new China’s thirst for a more secure, less capricious trading climate.
In light of these changes, it is important to note that both countries have considerable challenges ahead in their trade relationship. As with anything, the way forward depends on case-specific communication and willingness to make concessions on both sides.