What’s Next After Trump’s Trade War Truce with China?
President Donald Trump’s recent agreement to temporarily ease tariffs on Chinese goods has provided a brief moment of relief for global markets. But beneath the headlines, uncertainty continues to loom large — and the long-term economic consequences may already be unfolding.
A Temporary Ceasefire in the U.S.-China Trade War Over the weekend, U.S. and Chinese negotiators met in Switzerland and reached a temporary deal The U.S. agreed to reduce tariffs on Chinese imports from 145% to 30%. China, in turn, lowered its retaliatory tariffs on U.S. goods from 125% to 10%.
President Trump declared the agreement a victory and announced plans to speak with Chinese President Xi Jinping about maintaining stability in the economic relationship between the world’s two largest economies. Despite the de-escalation, tariffs remain significantly higher than when Trump first took office. Investors, CEOs, and consumers are now grappling with an uncertain outlook that complicates business decisions and discourages risk-taking.
A New Tariff Baseline: 10% Is Here to Stay
The current truce does not mark a return to pre-Trump trade policy. The administration has signaled that a 10% tariff will remain the minimum rate for most imports going forward — effectively making it the “new normal.”
This baseline has been applied across multiple recent trade negotiations, including with the United Kingdom. The updated 30% tariff on Chinese goods reflects this 10% base rate, along with an additional 20% tariff tied to China’s alleged role in fentanyl exports.
In addition, 25% sector-specific tariffs remain in place for critical industries Trump also stated that tariff revenues should be factored into budget discussions — particularly as Congress considers new income tax cuts. This move reinforces the central role tariffs now play in both trade and domestic fiscal policy.
A Dose of Reality: More Grounded Expectations on Both Sides
According to Taisu Zhang, a law professor at Yale University who specializes in comparative economic history, the chaotic events of recent months may have helped both countries better understand their respective positions.
“As recently as February, both sides probably harbored unrealistic assumptions,” said Zhang. “Americans overestimated their leverage, and the Chinese underestimated their exposure.”
This new agreement, while limited in scope, may create a more realistic foundation for further negotiations. The U.S. wants to revive its manufacturing sector, while China is looking to strengthen domestic consumption — aligning their long-term goals in some key areas.
Published on 16/05/2025
By Michael S.