In a significant development for international trade, President Donald Trump has opted to extend a tariff truce between the United States and China, setting the stage for potential high-level discussions later this year with Chinese leader Xi Jinping.
With the midnight Tuesday deadline looming, Trump’s executive order acknowledged China’s efforts to address American concerns regarding economic and national security matters.
Simultaneously, Beijing announced its own extension of the truce, a move that may prevent both nations from confronting massive tariff hikes that could severely disrupt trade between the world’s two largest economies.
Under the terms of the new arrangement, the U.S. will maintain a 30% tariff rate on imports from China, while China will keep its tariffs on American goods at 10%.
The truce extension grants both nations an additional 90 days to resolve outstanding issues as President Trump aims to reshape the global economy, focusing particularly on revitalizing U.S. manufacturing.
This period of negotiation comes alongside recent trade agreements announced by the U.S. with various countries, including South Korea and Japan. However, tension remains, as President Trump has threatened to raise tariffs on Indian exports to America to 50% in response to the country’s ongoing purchases of Russian oil.
David Meale, head of Eurasia Group’s China Division and a former diplomat, noted that the truce’s extension stabilizes the trade situation, nurturing confidence among American consumers and importers as well as manufacturers in China.
“I think it is very likely the U.S. and China will arrive at some sort of trade arrangement,” Meale asserted, suggesting that further meetings between trade officials would prepare the ground for a more substantial agreement ahead of a potential summit between Presidents Trump and Xi.
The trade relationship between the U.S. and China has seen considerable tension. Following his inauguration, President Trump renewed a trade war initiated during his first term, imposing significant tariff increases on Chinese imports.
In retaliation, China enacted its own tariffs and restrictions, particularly on rare earth minerals crucial for electronics production.
Through a series of negotiations, tariffs on Chinese goods eventually climbed to 145%, while those on American exports reached 125%.
Tensions temporarily eased during a meeting in Geneva in May, when both countries agreed to a 90-day truce that included reduced tariffs and relaxed trade barriers for Chinese rare earth minerals. However, mutual accusations of noncompliance soon followed.
After recent discussions in Stockholm, officials from both sides left without reaching a concrete agreement. U.S. Treasury Secretary Scott Bessent conveyed optimism about the state of negotiations, saying that the two nations were close to a deal but had minor technical details to finalize.
Despite this optimism, the road toward a final agreement remains complex. Key issues include American concerns about excessive Chinese production and its ongoing purchases of Russian oil, as well as Chinese grievances regarding U.S. restrictions on semiconductor exports essential for AI technology.
Meale emphasized that the United States’ priority in these discussions will be to reduce its trade deficit with China, diversify its supply chains to lessen dependence on China, and ensure a reliable flow of rare earth minerals from Chinese sources.
Expecting significant tariffs to remain on Chinese goods entering the U.S. once an agreement is finalized, Meale stressed that both sides are navigating a delicate balance in their negotiations.
On the Chinese side, there is a desire for stability in its relationship with the U.S., particularly as it confronts a slowing economy and the need for a predictable business environment.
China aims to secure continuous access to high-end American technologies, including semiconductors and jet engines, which are vital for its technological advancements.
Nicholas Lardy, a nonresident fellow at the Peterson Institute for International Economics, elaborated on possible outcomes of a U.S.-China deal, which may involve the easing of technology restrictions. He also highlighted the uncertain potential for Chinese commitments to invest in U.S. manufacturing.
Regardless of progress, Lardy cautioned that in President Trump’s vision, there would be a significant reduction in bilateral trade, a trend that is already observable.
The outcome of these discussions could redefine not only U.S.-China relations but also have profound implications for the dynamics of global trade moving forward, as both countries navigate a path towards a possible resolution of their longstanding trade conflicts.
image source from：npr
