Plenty has been ensuing between China and the US since February, as the US President imposed tariffs on China phase by phase. Starting with a 10 per cent tariff on steel and aluminium, the US tariffs for importing goods from China eventually range between 145 per cent and 245 per cent, leading to an unavoidable trade war impacting the entire global economy. Sensing the heat on both sides of the table, the nations have finally decided to talk it out!
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In what could be a pivotal ice-breaker moment, US Treasury Secretary Scott Bessent and top trade envoy Jamieson Greer are set to meet China’s economic czar, He Lifeng, in Switzerland this weekend. The high-stakes talks come as tensions between the world’s two largest economies spiral into what Bessent bluntly called ‘the equivalent of a trade embargo’.
Washington’s announcement of the Geneva meeting late Tuesday triggered a rally in US equity futures, with stock markets in China and Hong Kong swiftly following suit.
Tariffs between the US and China have soared well over 100 per cent in recent weeks, roiling global markets and leaving supply chains in tatters. President Trump’s sweeping tariff blitz last month, which targeted dozens of countries, has only added fuel to the fire.
Two insiders familiar with the discussions said the Geneva summit will likely centre around scaling back broad-based tariffs. Specific items on the agenda include product-level duties, export controls, and Trump’s decision to end de minimis exemptions on low-value imports.
“My sense is this will be about de-escalation,” Bessent told Fox News. “We’ve got to de-escalate before we can move forward.”
China’s State Council has so far kept silent on the meeting, but a spokesperson for the commerce ministry confirmed China’s decision to return to the negotiating table.
“On the basis of fully considering global expectations, China’s interests, and the appeals of US industry and consumers, China has decided to re-engage the US,” the spokesperson said, referencing a proverb: actions speak louder than words.
The scheduled discussion is going to be the first face-to-face between senior officials from both sides since Senator Steve Daines met Chinese Premier Li Qiang in Beijing back in March. For months, Beijing had refused to negotiate unless Washington withdrew its tariffs. But Friday’s statement from China’s commerce ministry that it was evaluating a US proposal signalled a thaw.
When pressed on the change in stance, Foreign Ministry spokesperson Lin Jian said Wednesday that China’s “position of firmly opposing US abuse of tariffs has not changed.”
The ever-mounting stakes of imposing tariffs on China
China’s vast manufacturing sector is already reeling from the tariffs, and investment bank Nomura has warned the trade war could cost the country up to 16 million jobs. Analysts across the board have revised down China’s 2025 growth outlook.
In a calculated counterpunch, China’s central bank unveiled a fresh stimulus on Wednesday — rate cuts, a liquidity injection, and a reserve requirement ratio (RRR) cut designed to pump 1 trillion yuan into the system.
“There’s almost certainly also an element of signalling to the US government ahead of the upcoming meeting,” said Christopher Beddor of Gavekal Dragonomics. “The message is that Chinese officials are not panicked or scrambling to shore up economic growth, and they’re not going to be negotiating from a position of weakness.”
While Saturday’s meeting could serve as a pressure valve, insiders caution that it may not yield sweeping resolutions.
“For more comprehensive geopolitical negotiations to be possible, tariffs would need to be lowered first,” said Bo Zhengyuan of Plenum. “The key is whether both sides can agree on the extent and scope of tariff rollbacks, as well as on follow-up talks.”
Bessent echoed that cautious optimism. “Look, we have a shared interest that this isn’t sustainable,” he said. “And 145 per cent, 125 per cent is the equivalent of an embargo. We don’t want to decouple. What we want is fair trade.”
Trump officials have been scrambling to stitch together trade deals with other countries to avoid imposing massive import duties. Bessent told lawmakers that 17 negotiations are underway, with some agreements potentially ready this week.
Talks with Britain and Indonesia are showing traction, while, ironically, the US trade deficit hit a record in March as businesses front-loaded imports to dodge new tariffs. However, the deficit with China shrank sharply as Trump’s levies bit into Chinese exports.
The Chinese economy is clearly feeling the heat. Factory output is shrinking, deflationary pressures are mounting, and policymakers have had to act. Wednesday’s stimulus package included a 10 basis-point cut to the PBOC’s 7-day repo rate and a 50 basis-point RRR cut, effective May 15. Authorities also pledged more support for A-share listed companies and will expand insurance company investment quotas by 60 billion yuan.
Additional measures include new relending facilities to boost tech bonds and elderly care services, along with tweaks to mortgage rates.
“A weaker dollar certainly gives China more room to make monetary adjustments,” said Xu Tianchen of the Economist Intelligence Unit. “I don’t have very high expectations of the credit impact of these measures,” he added, “but they inject renewed confidence.”
Even so, analysts at Capital Economics warn that demand and not credit supply is the real bottleneck. Fiscal support, they argue, would likely be more effective.
Citi analysts believe the moves are tactical. “Timely domestic support could create more leverage for China,” they noted.
All eyes now turn to Geneva, where this weekend’s dialogue could determine whether the world is heading toward detente or deeper disruption.
Information credit: Reuters
