Where the US-China Tariff War is Taking Us

The tariff war is not only a war between the governments of the US and China, but also a war on consumers, workers and manufacturers around the world. Hence, countries became relieved when the two most powerful economies agreed to at least pause their actions as they knew no one can be a winner. Although, the trade truce is only 90 days. President Xi Jinping of China addressed the leaders of Latin American countries (LAC), saying, only through unity and cooperation can countries safeguard global peace and stability and promote worldwide development and prosperity. Meanwhile, President Trump of the US wants to reduce or eliminate the trade balance, which economists say could be impossible for China as last year, the US ran a trade deficit with China worth approximately USD 295 billion.

Some media commentators said the irony seemed quite palpable this past week when both the US and China claimed victories after announcing a temporary tariff truce on 12 May. Their agreement drastically reduced their tariffs by 115% on each other's goods for 90 days to ease tensions.

However, there were those who said Mr Trump's victory claim was hollow and disingenuous. After swiftly raising tariffs to 145%, he expected Beijing to capitulate. But he grossly underestimated Beijing's political strategy as well as its readiness and resolve to endure short-term economic hardship. In a strategic twist, Beijing effectively adopted Mr Trump's own tactic of maximum pressure, coupled with strong rhetoric about "fighting to the end”.

There were also analysts who said, from a Chinese perspective, that China was the first and only country to stand up to Mr Trump's bullying tactics and secure its position as an undisputed equal to the US in the great power game – a status Xi once described as "viewing the world as equals". This victory could bolster China's standing and improve its credentials as a leader of the Global South.

However, Deborah Elms, head of trade policy at the philanthropic Hinrich Foundation, believes that while both the US and China are calling it a victory on their own terms, it is still too early to tell the actual winner of the negotiations.

According to the tariff truce, Washington will cut tariffs on Chinese imports to 30% from 145% for 90 days while Beijing will slash duties on US imports to 10% from 125% for the same period. The US will remove a total of 91% additional tariffs on Chinese products, and China will accordingly cut 91% additional countermeasure tariffs against US imports. At the same time, the US will suspend a 24% reciprocal tariff and China, likewise, will suspend their 24% countermeasure tariff, according to China's Ministry of Commerce.

The Customs Tariff Commission of the State Council of China also recently announced that it will reduce additional tariffs on US articles set forth in their Announcement of the Customs Tariff Commission of the State Council No 4 of 2025, reducing the tax from 34% to 10 for the same initial period of 90 days.

The Trump administration has made it very clear they want to balance trade. That is their ultimate objective; however, analysts believe that is never going to happen. So, whatever has been agreed may soon be amended if the objective is not realised. Furthermore, most believe 90 days will be insufficient to reach a comprehensive deal that addresses barriers to trade on both sides. These include intellectual property issues, the role of state-owned enterprises in China and export controls on the US side.

Dan Wang, China director at the Eurasia Group, a political risk consultancy, said the reduction in tariffs was a “giant surprise” and a positive start for both countries. She added that China is trying to avoid a prolonged deflation and an economic slowdown which could deter long-term business investment.

The Chinese job market has been deteriorating for more than a year, and this economic pain could be one factor that led China to enter into talks with the US, said Wang. But she cautioned that China will only make concessions if it sees them as useful for gaining long-term benefits such as enlarging their market share in high-end manufacturing.

The US-China relationship has been marked by long-term competition, with both sides not likely to back down. Chinese leaders have a very long-term view to becoming a stronger voice on the world stage and see the US as a threat to achieving this goal, said Wang.

In the US, business operations have been paralysed by the uncertainty caused by the tariffs’ announcements, and firms may still be reluctant to increase their orders. While the tariffs for Chinese goods have been reduced to 30%, this is still a painful increase in duties for US consumers, who may still cut back on discretionary spending, like Christmas shopping as they see prices beginning to rise.

Zhou Mi, a senior research fellow at the Chinese Academy of International Trade and Economic Cooperation, said on Tuesday that this new temporary agreement sends an important signal, a step back from the previous round of tariff escalation. The adjustment likely reflects mounting pressure from rising costs and supply chain disruptions in the US, adding that the development offers a degree of confidence to those engaged in bilateral trade.

Furthermore, there have been positive responses from other trading partners. In a 12 May press release, a UN spokesperson said, “We welcome the direct dialogue on trade between China and the US over the weekend in Switzerland. It's very positive for the world economy, and we've always said that we don't need any escalation in the trade war.”

They went on, "We need dialogue. I think Secretary-General Antonio Guterres has been very clear that no one wins in a trade war. And as you know, I think the theme of the idea of decoupling is one that has troubled him.”

The EU also welcomed the decision of the US and China to pare back their tariff war while the two countries negotiate a deal, the Wall Street Journal reported, citing a European Commission spokesperson, Olof Gill, saying, "We do welcome the fact that the US and China have announced that to some extent, at least, they will roll back the imposition of tariffs for 90 days.

Stock markets have responded positively to the US-China tariff truce, with major indices experiencing significant gains. However, analysts said since Trump is unpredictable, there is no guarantee that these current tariff rates are going to stick. They could go down, or they could also go back up just as quickly.

Business / Business

Where the US-China Tariff War is Taking Us

Kamol Kamoltrakul 22 Posts

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