After months of tit-for-tat tariff escalations, the United States and China agreed to a sweeping de-escalation in their trade war, marking a significant retreat from President Donald Trump ’s aggressive stance. In a deal announced after two days of high-level negotiations in Geneva, the US agreed to cut tariffs on Chinese goods to 30% from 145% for 90 days. In response, Beijing lowered its tariffs on US goods to 10% from 125%.
The truce stunned markets and analysts alike, particularly because the agreement appeared to grant China most of what it had sought from the beginning - and without any major structural reforms to its economy. The deal includes the suspension of Trump’s “Liberation Day” tariffs, the establishment of a bilateral working group led by treasury secretary Scott Bessent, and a shared commitment to crack down on fentanyl trafficking, which could result in a further 20% tariff rollback.
Why it matters
What makes China’s position remarkable is how little it changed. While Washington raised tariffs to historic levels and leaned on frenetic public threats, Beijing stuck to its script: stay silent, absorb the shock, and wait for the pressure to flip.
Xi refused to take Trump’s calls. He ordered rate cuts, fortified the domestic economy, and sent diplomats on a global charm offensive to decry “US bullying.” Beijing calculated that any short-term pain would be offset by long-term gains.
It worked.
As factories in China slowed and youth unemployment climbed, Xi’s government leaned into nationalist messaging. The public was told this was not just a trade dispute, but a sovereignty issue. In Washington, Trump was met with a different kind of backlash-rising prices, corporate lobbying, and disquiet among Republican lawmakers worried about midterm fallout. The president’s own allies began to call for a reset.
Economists warned that Trump had overplayed his hand. “The US blinked first,” Alicia García-Herrero, chief Asia-Pacific economist at Natixis, told the Financial Times. “It thought it could raise tariffs almost infinitely without being hurt, but that hasn’t been proven right.”
Zoom in
Under the Geneva truce, the 145% average US tariff on Chinese goods will fall to around 30%, with targeted rates as low as 10% for some sectors. The rollback excludes items like steel, aluminum, cars and pharmaceuticals - areas the US views as strategic. China, for its part, has suspended most of the non-tariff measures it imposed since April, including export controls on rare earths, but the details remain murky.
“We have learned our lesson from Trump 1.0, where we saw that tariff negotiations can go back and forth rather than being achieved overnight,” Dong Yan of the Chinese Academy of Social Sciences told Bloomberg.
Economists at Bloomberg estimate the effective US tariff shock on China now sits just below 40%, down from over 100%. That still makes China the most heavily-tariffed major trading partner of the US
Between the lines
The speed and scope of the tariff rollback surprised many experts, not because a truce wasn’t expected, but because of how much ground the US appeared to cede. The US had imposed punitive tariffs under the guise of economic “shock therapy,” but in Geneva, that strategy unraveled.
The choice of Switzerland - away from cameras and domestic audiences - was itself a sign that the US was ready to compromise. Deutsche Bank strategist George Saravelos told Bloomberg, “All of this is a clear signal of negotiations moving into a more conciliatory and respectful phase.”
US business lobbies and even defense contractors pressured the White House behind the scenes, alarmed by export controls from China on rare earth minerals and other retaliatory measures. According to one former Trump official, “China’s export restrictions to the United States worked. It created enough pain to compel the US government to plead with the Chinese government to reverse course.”
Even as China refused to budge on key economic practices - including the structure of its state-owned enterprises - it managed to reset the table of negotiations, trading retaliation for stability.
What they’re saying
Despite the détente, deep structural tensions between Washington and Beijing remain. Both sides continue to view trade through a national security lens. Trump, while portraying the deal as a reset, warned that tariffs could still rise “substantially higher” if progress stalls over the next 90 days.
“The US-China trade negotiations are going to be like a rollercoaster,” Scott Kennedy of the Center for Strategic and International Studies told Bloomberg. “Markets can breathe a temporary sigh of relief but we’re nowhere near out of the woods.”
Yet the broader message is clear: Xi’s refusal to play by Trump’s script -combined with a global economy that couldn't absorb further shocks -forced a major shift. China didn’t just weather the storm; it reshaped it.
“Standing up to Trump does not mean that you win. But giving in guarantees that you lose,” wrote Jonathan Chait in The Atlantic.
The coming months will determine whether the truce can evolve into a more durable arrangement. But for now, Beijing has demonstrated that economic resilience and diplomatic patience can be powerful tools -even against a president who prides himself on disruption.
(With inputs from agencies)
The truce stunned markets and analysts alike, particularly because the agreement appeared to grant China most of what it had sought from the beginning - and without any major structural reforms to its economy. The deal includes the suspension of Trump’s “Liberation Day” tariffs, the establishment of a bilateral working group led by treasury secretary Scott Bessent, and a shared commitment to crack down on fentanyl trafficking, which could result in a further 20% tariff rollback.
Why it matters
- For Chinese President Xi Jinping , the outcome is a validation of his high-stakes strategy to resist Trump’s economic pressure campaign.
- The sharp reduction in tariffs not only sent global stock markets soaring but also defused growing anxiety within the US business community. Domestic political concerns, particularly among Republicans worried about midterm elections, also played a role in accelerating a deal.
- “The lesson is economic power matters,” Gerard DiPippo, associate director of the RAND China Research Center, told Bloomberg. “For Beijing, it’s a strategic vindication.”
- “This is arguably the best outcome that China could have hoped for - the US backed down,” Trey McArver, co-founder of research firm Trivium China, told Bloomberg. “Going forward, this will make the Chinese side confident that they have leverage over the US in any negotiations.”
What makes China’s position remarkable is how little it changed. While Washington raised tariffs to historic levels and leaned on frenetic public threats, Beijing stuck to its script: stay silent, absorb the shock, and wait for the pressure to flip.
Xi refused to take Trump’s calls. He ordered rate cuts, fortified the domestic economy, and sent diplomats on a global charm offensive to decry “US bullying.” Beijing calculated that any short-term pain would be offset by long-term gains.
It worked.
As factories in China slowed and youth unemployment climbed, Xi’s government leaned into nationalist messaging. The public was told this was not just a trade dispute, but a sovereignty issue. In Washington, Trump was met with a different kind of backlash-rising prices, corporate lobbying, and disquiet among Republican lawmakers worried about midterm fallout. The president’s own allies began to call for a reset.
Economists warned that Trump had overplayed his hand. “The US blinked first,” Alicia García-Herrero, chief Asia-Pacific economist at Natixis, told the Financial Times. “It thought it could raise tariffs almost infinitely without being hurt, but that hasn’t been proven right.”
Zoom in
Under the Geneva truce, the 145% average US tariff on Chinese goods will fall to around 30%, with targeted rates as low as 10% for some sectors. The rollback excludes items like steel, aluminum, cars and pharmaceuticals - areas the US views as strategic. China, for its part, has suspended most of the non-tariff measures it imposed since April, including export controls on rare earths, but the details remain murky.
“We have learned our lesson from Trump 1.0, where we saw that tariff negotiations can go back and forth rather than being achieved overnight,” Dong Yan of the Chinese Academy of Social Sciences told Bloomberg.
Economists at Bloomberg estimate the effective US tariff shock on China now sits just below 40%, down from over 100%. That still makes China the most heavily-tariffed major trading partner of the US
Between the lines
The speed and scope of the tariff rollback surprised many experts, not because a truce wasn’t expected, but because of how much ground the US appeared to cede. The US had imposed punitive tariffs under the guise of economic “shock therapy,” but in Geneva, that strategy unraveled.
The choice of Switzerland - away from cameras and domestic audiences - was itself a sign that the US was ready to compromise. Deutsche Bank strategist George Saravelos told Bloomberg, “All of this is a clear signal of negotiations moving into a more conciliatory and respectful phase.”
US business lobbies and even defense contractors pressured the White House behind the scenes, alarmed by export controls from China on rare earth minerals and other retaliatory measures. According to one former Trump official, “China’s export restrictions to the United States worked. It created enough pain to compel the US government to plead with the Chinese government to reverse course.”
Even as China refused to budge on key economic practices - including the structure of its state-owned enterprises - it managed to reset the table of negotiations, trading retaliation for stability.
What they’re saying
- “The US has chickened out ,” said one popular Chinese social media post, as per a Financial Times report.
- “The US blinked first,” echoed Alicia García-Herrero, chief Asia-Pacific economist at Natixis.
- Trump struck a surprisingly conciliatory tone following the agreement, framing the deal as a mutual win. “We’re not looking to hurt China. China was being hurt badly,” he said. “They were closing up factories. They were having a lot of unrest, and they were very happy to be able to do something with us.”
- Treasury secretary Scott Bessent, the lead US negotiator, emphasized that “throughout the trade process, we have had a plan.” But even he acknowledged that the process moving forward will be complex: “It’s going to take a while to paper it. You know, that’s not the easiest thing to paper.”
- Xi, speaking in Beijing at a summit with Latin American leaders, took a subtle swipe at US tactics: “Bullying or hegemonism only leads to self-isolation.”
- “There are no winners in tariff wars or trade wars,” Xi said.
- “Great changes unseen in a century are accelerating, which have made unity and cooperation among nations indispensable.”
Despite the détente, deep structural tensions between Washington and Beijing remain. Both sides continue to view trade through a national security lens. Trump, while portraying the deal as a reset, warned that tariffs could still rise “substantially higher” if progress stalls over the next 90 days.
“The US-China trade negotiations are going to be like a rollercoaster,” Scott Kennedy of the Center for Strategic and International Studies told Bloomberg. “Markets can breathe a temporary sigh of relief but we’re nowhere near out of the woods.”
Yet the broader message is clear: Xi’s refusal to play by Trump’s script -combined with a global economy that couldn't absorb further shocks -forced a major shift. China didn’t just weather the storm; it reshaped it.
“Standing up to Trump does not mean that you win. But giving in guarantees that you lose,” wrote Jonathan Chait in The Atlantic.
The coming months will determine whether the truce can evolve into a more durable arrangement. But for now, Beijing has demonstrated that economic resilience and diplomatic patience can be powerful tools -even against a president who prides himself on disruption.
(With inputs from agencies)
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