US President Donald Trump on Friday tweeted suspension of almost all tariffs on Chinese goods. This announcement is further straining the relationship between the two economic superpowers. The adjustments, which see tariffs on Chinese exports to the United States reduced from 145% to 30% for a 90-day period, signal a potential thaw in the trade war that has plagued relations since Trump assumed office.
In retaliation to these tariffs, China has matched the US dollars worth of imported tariffs by bringing its own tariffs on US imports down from 125% to 10%. This cause-and-effect sequence illustrates the nuanced layers of the trade relationship, as each country acts to protect their economic advantage. The ongoing negotiations have seen both sides pledging to continue dialogue regarding trade, indicating that both are seeking a resolution despite the tumultuous backdrop of previous confrontations.
One of the frontline combat arenas in Trump’s broader trade war. This conflict exemplifies overreaching policies aimed at addressing real or imagined inequities. The administration is still open to these extreme actions. They are flexible and open to ideas depending on the situation. It’s not yet clear what the long-term impact of these amendments will be on foreign relations or on the overall economic competition landscape.
The White House has made a judgment call to make tariffs the priority in their negotiations with China. In fact, they are purposefully steering clear of other inflammatory topics, such as the value of the yuan. This abrupt reversal leaves us with many questions about the administration’s priorities, and how they will be leading the conversations in the future.
Federal data indicates that inbound shipments into US ports have cratered. Retailers predict empty shelves from tariffs, stoking fears. Retailers and other opponents say that tariffs would lead to empty shelves just days before Christmas. We know that the retail sector as a whole is alarmed by these policies. They worry that they will trigger cataclysmic failures elsewhere in the supply chain. Trump’s administration has seen trade moderates gain influence in response to these warnings, suggesting an internal shift towards more conciliatory approaches.
In a recent speech in Wisconsin, Trump touted his administration’s real and palpable efforts to shift trade currents. For example, his claim that “two dolls rather than 30 dolls. He has been a tireless advocate for the adoption and enforcement of fair trade practices. He plans to rewrite trade deals that he believes have not benefited this country.
US Treasury Secretary Scott Bessent had a series of high level discussions with Chinese officials in Geneva. These conversations are a reminder that much diplomatic work continues to address our trade disputes. To their credit, financial markets reacted with healthy skepticism to these developments. Indeed, most Chinese traders view the cuts as a sign of capitulation rather than a victory. Whether that uncertainty—which has surrounded the global economy ever since Trump’s first tariff announcement—will finally lift is anybody’s guess.
Specifically, these 30% tariffs on Chinese exports to the US are permanent, despite some recent tinkering. This shows that significant barriers still remain. Still, Trump’s other “reciprocal” levies on other countries are scheduled to expire in July. This unexpected twist might set up a fascinating new international trade relations dynamic.
The fate of the totality US-China trade relations hangs on a knife’s edge. Both countries are deeply engaged in charting a course through this new and daunting territory. Their continuing conversations have the potential to do enormous damage to global trade and economic stability.