The United States and China are currently amidst a deepening trade conflict. Both countries are currently negotiating tariffs to come to a resolution. Those formal discussions took a turn back in June. Then-U.S. Treasury Secretary Scott Bessent’s historic meeting with Chinese officials in Geneva on May 10 of this year. Those discussions took place at the magnificent Villa Saladin, an 18th-century masterpiece overlooking the picturesque Lac Léman. This backdrop emphasized how important the economic partnership between the two countries is.
Former President Donald Trump’s opposite series of tariffs laid the groundwork for these debates. Included in that is a shocking 145% tariff on a slew of Chinese imports. Trump first enacted these tariffs to help offset China’s unfair trade practices in a more consistent way. He hit hard with the tried and true strategy of targeting advanced technology sectors, like quantum computing and autonomous vehicles. The U.S. government has argued that all of these unfair tactics give China an unfair competitive edge. This plays a huge role in our rapidly expanding trade deficit.
Last year the U.S. trade deficit with China soared to an all-time high of $263 billion. This enormous loophole continues to be a point of emphasis and aggravation for U.S. negotiators. In an effort to pressure Beijing into curtailing the flow of synthetic opioids, including fentanyl, into the U.S., Trump specifically implemented a 20% tariff targeting these narcotics. He’s slapped a blanket 10 percent tariff on imports from nearly every other country on earth. Trade war escalated. This latest step further escalates the ongoing US-China trade war.
To match U.S. tariffs, China has retaliated by imposing its own 125% tariff on American imports. This tit-for-tat has further aggravated tensions while fomenting deep and costly turmoil in our two-way bilateral trade, which totaled more than $660 billion last year. The implications of these tariffs go beyond bilateral relations, imposing costs on American industries and consumers alike while benefiting their Chinese counterparts.
After 18 months of escalating trade warfare, the two countries finally arrived at a Phase One agreement in January 2020, designed to de-escalate the trade war. Under this deal, the U.S. agreed not to impose even more tariffs. At the same time, China promised to increase its imports of American goods. Soon after, the COVID-19 pandemic turned upended global commerce. So the first concerted implementation of this agreement fizzled.
Even as these negotiations move forward, the U.S. finds itself in a difficult position with its own tariffs on other countries, too. Recently, Trump suspended plans for hefty 31% tariffs on Swiss goods, while Switzerland has abolished all industrial tariffs since January 1 last year, allowing 99% of U.S. goods to enter duty-free. The Swiss federal government is proactive in monitoring and avoiding negative effects on important industries. They are especially worried about sectors such as watches, coffee capsules, cheese and chocolate.
The current negotiations in Geneva represent the latest installment in the stormy saga that is trade relations between the U.S. and China. The stakes could hardly be higher for either country as they both try to chart a course through their perilous trade relationship.
“The best scenario is for the two sides to agree to de-escalate on the … tariffs at the same time.” – Female official involved in the negotiations