Recent trade negotiations between the United States and China held in Geneva have led to a significant reduction in customs tariffs, marking an unexpectedly broad de-escalation in the trade war between the world’s two largest economies.
However, this 90-day truce is not enough to erase the negative effects of the previous escalation, and the U.S.’s credibility as a reliable trade partner remains damaged.
The parties agreed on a point-by-point tariff reduction, bringing rates back to near pre-conflict levels. The U.S. reduced the tariff applied to Chinese imports to 30%, while Beijing imposed a 10% tariff on American goods. Nevertheless, additional sectoral tariffs keep the effective customs duty on Chinese products at around 40% — a level far above that of a year ago.
This easing of trade tensions had an immediate positive effect on investor and economic sentiment, which interpreted the development as a sign of temporary stability. However, this stability comes at a price: increased inflationary pressure due to rising logistics costs and accelerated demand for Chinese products, in the context of preventive stockpiling by American retailers.
Who Wins and Who Loses?
This partial suspension of tariffs effectively seals the Trump administration’s retreat from its “reciprocal” tariff policy, a move announced earlier in April. Unfortunately for Washington, the reputational damage is already done: the dollar has experienced a significant depreciation against the euro and yen, thereby affecting the purchasing power of American households.
International investors, holding approximately $16 trillion in U.S. assets, are now feeling the market volatility and are less willing to keep their capital in the United States. This financial uncertainty is one of the less visible costs of the political compromise achieved.
China, on the other hand, appears to have gained diplomatic capital. The authorities’ measured responses and the absence of aggressive propaganda suggest that Beijing sees itself as the winner of this round. The mutual tariff embargo, which lasted 39 days, harmed both sides, but China demonstrated greater structural resilience.
U.S. Logistic Weakness: Beijing’s Lesson
A strategic conclusion drawn by the Chinese side is that the U.S. administration is sensitive to pressure from its own business environment. American supply chains are heavily dependent on imports from China, and the just-in-time logistics model proved to be a major vulnerability in the context of the trade confrontation.
This dependency offers China a new bargaining tool. Without resorting to tariffs or explicit restrictions, Beijing can use subtle administrative measures to delay shipments to the U.S. At the same time, China is strengthening its regional trade relations, using Southeast Asian countries as re-export platforms to circumvent direct sanctions.
A Fragile Pause in an Endless War
The Trump administration is trying to frame this phase as a victory of strategic decoupling, but the reality is that it has compromised its position of strength. The 90 days gained from the Geneva negotiations provide an opportunity to resume talks, perhaps even from the point left by the 2020 Phase One Agreement. However, the road to a comprehensive agreement is full of geopolitical uncertainties.
China seems willing to accept a 20% tariff gap compared to the rest of the world, considering this level manageable. In contrast, Washington will focus on achieving quick wins in trade relations with its traditional allies — Europe and Japan — although meaningful trade deals typically require 18 months of intense negotiations.
Conclusion: A Risky Strategy with Global Reverberations
Although the tariff truce has averted an imminent crisis in bilateral trade, the price paid by the United States is significant. The weakening dollar, loss of investor appeal, and exposed logistical vulnerability provide China with a stronger negotiating position in the future.
Meanwhile, small Chinese exporters are not waiting for political clarity. They are diversifying their markets and production, quickly adapting to an uncertain international environment. In the absence of a solid and lasting agreement, any new impasse in the Washington-Beijing relationship could trigger another spiral of escalation.
