Talks or no talks: who blinks first in US-China trade war?

Talks or No Talks: Who Blinks First in the US-China Trade War?

The protracted trade conflict between the United States and China has entered a critical juncture. Recent developments suggest a potential thaw in relations, yet underlying tensions persist. This article delves into the current state of the trade war, examining the recent agreements, economic impacts, and the strategic calculations of both nations.

The 90-Day Tariff Reduction Agreement: A Fragile Deal In a significant development, the United States and China have agreed to a 90-day partial suspension of tariffs, aiming to de-escalate the ongoing trade tensions. China will reduce its tariffs on U.S. goods from 125% to 10% in accordance with this agreement, while the United States will reduce tariffs on Chinese imports from 145% to 30%. This accord was reached during high-level talks in Geneva between U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng.

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The agreement also establishes a permanent dialogue mechanism to facilitate ongoing negotiations and prevent future escalations . While this truce marks a positive step, it remains a temporary measure, with the potential for renewed tensions if substantive progress is not achieved within the stipulated period.

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Economic Repercussions: Markets React to the Truce

The global market was immediately affected when the tariff reduction was announced. U.S. stock futures surged, with the S&P 500 recovering much of the ground lost after the index plunged 10% in early April following President Trump's tariff announcements . Similarly, investor optimism was reflected in the 0.6% increase in China's CSI 300 index. markets.businessinsider.com

However, analysts caution that the progress might falter if there is no meaningful reduction in tariffs. Nomura analysts noted that while the truce is a positive development, the underlying issues remain unresolved, and the potential for future escalations persists .

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Strategic Calculations: The U.S. Perspective

The Trump administration has justified the imposition of tariffs as a means to address long-standing grievances, including intellectual property theft, forced technology transfers, and the trade imbalance. Additionally, the administration has linked the tariffs to efforts to combat the fentanyl crisis, accusing China of failing to curb the export of the deadly opioid .

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The recent talks, which he characterized as a "total reset" of relations between the United States and China, have sparked optimism from President Trump. Nevertheless, the administration faces domestic pressures, particularly from American farmers and retailers affected by the tariffs. The upcoming July 8 deadline for new trade agreements makes the negotiations more pressing. The Times

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China's Response: Defiance and Diplomacy

China has taken reciprocal measures in response to American tariffs, such as putting tariffs on American exports and launching investigations into American businesses. Despite these actions, China has set an ambitious 5% growth target for 2025, signaling confidence in its economic resilience .

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Chinese officials have emphasized the importance of stabilizing relations with the U.S., acknowledging the challenges posed by the trade war. The recent agreement to reduce tariffs and establish a dialogue mechanism reflects China's willingness to engage in negotiations while maintaining a firm stance on its core interests.

The Path Forward: Challenges and Opportunities

While the 90-day truce offers a window of opportunity, significant challenges remain. Key issues such as intellectual property rights, market access, and the trade imbalance require comprehensive solutions. In addition, the necessity of ongoing communication and concessions on both sides is emphasized by the agreement's short duration. The Times

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Both nations must navigate domestic political pressures and economic considerations as they work toward a more stable and equitable trade relationship. The establishment of a permanent dialogue mechanism is a positive step, but its effectiveness will depend on the willingness of both parties to engage constructively and make meaningful compromises.

Conclusion: A Delicate Balance

The U.S.-China trade war has entered a critical phase, with recent developments offering a glimmer of hope for de-escalation. The 90-day tariff reduction agreement and the establishment of a dialogue mechanism signal a mutual recognition of the need to stabilize relations. However, the path forward remains fraught with challenges, and the potential for renewed tensions persists.

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Ultimately, the resolution of the trade conflict will depend on the ability of both nations to balance strategic interests with economic realities. As negotiations continue, the world watches closely to see who will blink first—or whether both sides can find common ground for a lasting peace.