By Eric Vandenbroeck and co-workers

Is Trump Losing the Trade War with China...

Trump’s shock-and-awe tariff approach threatened to rupture the global financial system and drive the US economy into recession. Nervous about the prospect of empty store shelves and reignited inflation, Trump sent in his even-keeled and professional negotiators to Geneva to snag a win. 

Chinese leader Xi Jinping says “bullying” and “hegemonism” will only backfire, in a veiled reference to the United States, just a day after a temporary truce was agreed in the trade war between the world’s two largest economies.

While the White House is hailing the tariff pause as a win for the United States and a demonstration of Trump’s “unparalleled expertise in securing deals that benefit the American people,” Chinese commentators and state-run media are celebrating the agreement as “a huge victory” for China and a vindication of Beijing’s tough stance.

Xi chose to deliver this message, which paints China as a global leader and defender of free trade, at a summit of Latin American and Caribbean officials — including the presidents of Brazil, Colombia, and Chile — in Beijing on Tuesday. The region has become increasingly caught in the middle of a tussle for influence between the US and China for influence.

“There are no winners in tariff wars or trade wars. Bullying or hegemonism only leads to self-isolation,” Xi said, reiterating a warning he has made throughout the trade showdown with US President Donald Trump.

Great changes unseen in a century are accelerating, which have “made unity and cooperation among nations indispensable,” he added.

Xi’s speech comes a day after the US and China announced they would drastically roll back tariffs on each other’s goods for an initial 90-day period, in a surprise breakthrough that has de-escalated a punishing trade war and buoyed global markets.

“This shows that China’s firm countermeasures and resolute stance have been highly effective,” Yuyuan Tantian, a social media account affiliated with state broadcaster CCTV, wrote on microblog Weibo. “The retaliatory measures had a significant impact on the US, prompting its government to lower tariffs to baseline levels following the talks.”

As countries rushed to make deals with Trump after his April 2 announcement of “reciprocal tariffs,” China took a markedly different approach, standing its ground and retaliating with tariffs on US goods along with a host of other countermeasures.

For over a month, Trump’s second-term tariffs on Chinese imports remained at a staggering 145%, while China’s retaliatory levies on US goods held at 125%, a tit-for-tat trade war that was already inflicting economic pain on both sides.

The trade agreement reached over the weekend effectively means the US will temporarily lower its overall tariffs on Chinese goods from 145% to 30%, while China will cut its levies on American imports from 125% to 10%, according to the joint statement.

Trump’s 20% fentanyl-related levies on China, imposed in February and March, will stay, so will China’s countermeasures against the US for those tariffs. Under the agreement, China will also suspend or cancel its non-tariff countermeasures imposed on the US since April 2.

In addition, the US will cut its “de minimis” tariff on small packages from China from 120% to 54% starting from May 14, while still maintaining the $100 flat-fee option, according to a White House executive order issued Monday.

 

A ‘huge victory’

Chinese state media have cast the reduction in tariffs as being on equal terms, emphasizing that both sides are suspending the 24% “reciprocal tariffs” for 90 days and removing the 91% additional tariffs mutually imposed during the rapid-fire retaliatory escalation in April.

Under the terms of the agreement, Trump’s “reciprocal” tariff on China now stands at 10%, the same rate as the levies on the UK, a close American ally, some Chinese users noted on social media.

“This is a huge victory for China’s commitment to the principles of equality and mutual respect,” Hu Xijin, the former editor of the state-run Global Times, wrote in a Weibo post.

He called the agreement “a triumph for international trade rules and the rightful global order,” adding that it “sets an example and is bound to inspire other countries to defend their own rights.”

Wang Yiwei, director of the Institute of International Affairs at Renmin University in Beijing, said China’s tough stance was a matter of principle in terms of upholding the multilateral and free trade principles of the World Trade Organization.

“This is something China must stand firm on. If even China can’t hold the line, wouldn’t that mean the whole world has to beg the US for mercy?” he said.

But China also showed flexibility in coming to the negotiation table, Wang said, instead of insisting on its demand that the US must remove all of its unilateral tariffs before any discussion. The agreement bought both sides time, he added.

“Because the economic and trade ties between China and the US are so deeply intertwined, both sides are feeling the pain. So the idea is to ease the tension for now and push the problem down the road a bit to resolve the complex and deep-rooted differences gradually,” he said. “It’s like shifting from the original shock therapy to a gradual treatment approach.”

Although the Trump administration is touting the temporary tariff truce with China as a “win,” the trade war has inflected great damage to US credibility, including with its allies, Wang said, and that gives China opportunity to strengthen ties with other countries.

 

‘Ready to join hands’

For weeks, China had stood firm against US pressure and launched a diplomatic charm offensive, presenting itself as a supporter of global trade, rallying countries to push back against what it calls “US bullying.”

On Tuesday, Xi continued that push despite the trade truce, vowing to strengthen “solidarity” with Latin America and the Caribbean, a region that Trump has sought to pull closer to Washington’s orbit. Trade between China and the region exceeded $500 billion for the first time last year, the Chinese leader said.

Xi was speaking at the opening of the fourth ministerial meeting of the China-CELAC Forum, a gathering founded in 2014 to strengthen China’s influence in Latin America and the Caribbean — and challenge America’s traditional dominance in the region. CELAC stands for the Community of Latin American and Caribbean States.

“China and Latin American and Caribbean countries are important members of the Global South. Independence and autonomy are our glorious tradition. Development and revitalization are our inherent right. And fairness and justness are our common pursuit,” Xi said.

“In the face of seething undercurrents of geopolitical and bloc confrontation, and the surging tide of unilateralism and protectionism, China stands ready to join hands with our Latin American and Caribbean partners,” he added.

The Chinese leader also vowed to provide 66 billion yuan ($9.2 billion) worth of credit lines to CELAC countries to support their development. The credit lines will be denominated in yuan, a move that is part of larger efforts to popularize the Chinese currency in the region.

Countries in Latin America are among Beijing’s top trading partners. Last year, China was the main destination for Brazil’s soybeans, accounting for more than 73% of the country’s total soybean exports.

US Treasury Secretary Scott Bessent (L) and US Trade Representative Jamieson Greer speak to the media in Geneva.

President Donald Trump’s shock-and-awe tariff approach threatened to rupture the global financial system and drive the US economy into recession. Nervous about the prospect of empty store shelves and reignited inflation, Trump sent in his even-keeled and professional negotiators to Geneva to snag a win.

The unexpectedly dramatic de-escalation with China laid the groundwork for a growing series of trade negotiations that may produce a handful of rapid-fire, if less than fulsome, bilateral agreements to reduce US trade deficits.

“We have a fresh start with China,” National Economic Council Director Kevin Hassett said in the interview. “That’s the way to think about these negotiations.”

The decision by both the United States and China to drop stratospheric tariffs by 115 percentage points after two days of talks marked the most significant development in a policy approach that has been equal parts maximalist and messy. The de facto trade embargo between the world’s two largest economies had produced domestic and global economic pressure that appeared on the brink of calamity.

The de-escalation sent markets soaring across the world Monday, as it shed light on the Trump administration’s strategy to maintain significantly higher tariffs while incentivizing its largest trading partners to come to the table with offers.

 

Sending the serious people

In Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer, Trump sent lead negotiators who are viewed by market participants and their Chinese counterparts as serious, levelheaded and empowered.

As those talks start in earnest, the ongoing effort to secure deals with roughly two-dozen other countries was given a boost last week after a small-scale agreement with the UK. That provided a model for what Trump wanted in the urgent scramble to secure bespoke deals with the US, according to several foreign diplomats involved in the bilateral talks.

The negotiators, parameters for negotiation, and serious approach from both sides that will drive the next three months are all viewed as tangibly positive signs by Trump’s advisors. Whether they lead to a substantive outcome remains an open question, but as one advisor put it, “this is a hell of a lot better than the alternative both of us were staring down.”

“This is the first time it’s been possible to see the path to land this plane without some cataclysmic economic disaster,” a Republican senator said. “Doesn’t mean we will, but that’s a lot better than where we’ve been.”

The path from the market-panic-inducing “Liberation Day” tariff announcement on April 2 to this point was hardly linear. Trump’s advisors have long insisted, against plenty of evidence to the contrary, that it was all a deeply strategic roadmap that incorporated every possibility.

The fallacy of that insistence is laid bare by Trump’s own view that “flexibility” is paramount. Bessent, who is fond in private settings of talking through the game theory he sees as animating Trump’s approach, cites the value of the “strategic uncertainty” created by his boss.

It was Trump, after all, who hit the pause button on his hardest hitting “reciprocal” tariff rates on roughly 100 countries. And it was Trump who first publicly floated significant de-escalation with China after, in private internal discussions, his team weighed even more dramatic off-ramps to step back from the brink.

The bond market, supply chains blinking red and increasingly apocalyptic warnings from executives across major industries all served as critical accelerants for Trump’s personal pivots. The actions in some cases had the effect of hanging his own advisors out to dry hours after they’d been on television pledging there would be no exceptions, delays or revisions.

There has, however, been a broad strategy designed to push trading partners to the very place the administration finds itself now, officials say.

 

The new reality

In the end, the Trump administration has somehow managed to lock into place dramatically higher tariffs – a 10% universal rate across the globe and sector tariffs that largely stand untouched. And, while recognizing that tariffs aren’t going back to zero, trading partners are still lining up to get a deal done with the United States.

That lawmakers and foreign diplomats alike appear willing to overlook, or even outright accept, that a 10% global tariff rate is a non-negotiable reality at this point is perhaps the best window into the moment Trump has led the world into.

Trump’s team said that a shock-and-awe strategy to get a “win,” even out of significant tariffs that remain in place was the strategy all along.

“We have had a plan, we have a process in place, now with the Chinese, we have a mechanism in place for future talks,” Bessent told reporters in Geneva.

The China talks would always be the most difficult, labor-intensive and time consuming. The lessons from Trump’s first term negotiations are deeply internalized among not just his advisors, but Trump himself.

For Trump, trade is the lynchpin to everything. That includes the India-Pakistan ceasefire agreement, he told reporters, was, in his view, primarily attributable to his promises of rapid increases in trade flows to both nations.

It seemed fitting that the most astute observation in the rush to analyze the dramatic de-escalation in US-China trade relations came from the man who drove them to the brink on an entirely unrelated yet no less consequential matter.

“People have never really used trade how I use trade,” Trump told reporters Monday morning.

 

 

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