Someone forgot to tell China. So far, Chinese have refused to fold under the pressure of Trump’s massive tariffs. Instead, they retaliated with their own triple-digit tariffs.
“All bullies are just paper tigers,” China’s foreign ministry declared in a video last week.
This interest has risen between the two world’s largest economies, with trade exceeding $660 billion last year. Bescent and Trump’s top trade negotiator Jamieson Greer head to Geneva this weekend for their first trade talks with top Chinese officials. Trump proposed on Friday that the US could lower China’s tariffs, saying in the True Social Post, “80% tariffs seem right! Even Scott.”
While businesses and investors welcome tension relief, the outlook for a quick and important breakthrough appears dim. “These are talks about discussions, and China may be coming to assess what’s on the table or simply to buy time,” said Craig Singleton, senior singleton of the Democracy Defense Foundation, a Washington-based think tank foundation. “There is no shared roadmap or clear pathway to escalation.” However, if both countries finally agree to reduce their large-scale taxes (duty) they will ease global financial markets and businesses on both sides of the Pacific that rely on US-China trade, as they are slapping each other’s goods.
“The companies involved in this trade on both sides can’t afford to wait any longer,” said John Gong, an economist at Beijing’s International University of Business and Economics. In the worst-case scenario, if the US felt that it was not treating China as equal or that it would not take the first step towards discovery, Gong said.
“I think this can be very difficult if (Best) doesn’t enter this negotiation with this kind of mindset,” he said.
For now, the two countries are unable to even agree who requested consultations. “The meeting is being held at the request of the US,” Lin Jiang, a spokesman for China’s Foreign Ministry, said Wednesday. Trump opposed. “They should go back and study the files,” he said.
Trump’s faith in tariffs meets economic reality
What’s clear is that it hasn’t proven as powerful as Trump’s favorite economic weapon – import taxes, or tariffs – as they hoped.
“For Trump, what happened here is that the rhetoric of his campaign had finally had to face economic realities,” said Jeff Moon, a trade official with the Obama administration who now runs China Moon Strategy Consultant. “The idea of him putting China on his knees when it comes to tariffs never worked.”
Even issues like immigration and drug trafficking, Trump sees a general-purpose economic tool that could raise funds from the US Treasury, protect American industry, seduce factories to the US, and pressure other countries to bend over his will.
He used tariffs in his first term and was even more aggressive and unpredictable about imposing them in his second term. He slapped 10% tariffs in almost every country in the world, blowing up rules that ruled world trade for decades.
But his trade war with China has really put the markets and businesses in the upper hand. It began in February when he announced the collection of 10% on Chinese imports. By April, Trump had ratcheted China’s taxes to an astounding 145%. Beijing has raised tariffs on American products to 125%.
Trump’s escalation has caused financial markets to fall, and US retailers warned that goods could disappear as US-China trade collapses. U.S. consumers worrying about empty shelves and prospects for price rises have lost faith in the economy.
“This wasn’t planned very well,” said Zongian Zoe Liu, a senior Chinese researcher at the Foreign Relations Council.
China was ready for a rematch
When Trump struck China’s imports with tariffs during his first term, he accused Beijing of using unfair tactics, including cyber theft, to give tech companies an edge.
Both countries reached an armistice (so-called phase 1 contract) in January 2020. China agreed to buy more US products, and Trump reduced even higher tariffs. But they didn’t solve the major problems splitting them, such as subsidies to China’s own tech companies.
When Trump returned to the White House, China was ready for a rematch. According to Dexter Roberts of the Atlantic Council, it worked to reduce US reliance on large markets in the United States and reduce its US share last year to 15% from over 19% in 2018.
Beijing is confident that Chinese people are more hoping than Americans to endure fallout from the trade war, including drops in exports and closed factories. “It’s painful for China, but it’s essential to endure it and we’re ready to deal with it,” said Sang Yun, director of China Programs at Stimson Centre.
Dependencies work in both ways
In addition to China’s mistaken determination, the Trump administration may underestimate how much America is dependent on China.
For decades, Americans have become dependent on Chinese factories. They produce 97% of American imported baby carriers, 96% of artificial flowers and umbrellas, 95% of fireworks, 93% of children’s coloring books, and 90% of combs.
“If we’re not there, what should they sell?” Chinese toy maker Chen Zengren told Beijing News. “Their shelves will be empty.”
Showerhead Company Afina last month reported on an experiment that suggests that American consumers are less willing to pay more for American-made products. Affina makes filtered shower heads filtered in China and Vietnam and sells for $129. Making the same product in the US will raise the price to $239. When the company website customers were selected among them, 584 chose cheap Asian ones. No one chose the more expensive US-made version.
And it’s not just consumers who are dependent on China. The same goes for America’s own factories. The National Manufacturers Association calculates that in 2023 47% of US imports from China are “manufacturing” – industrial goods, auto parts and capital equipment. This is because American manufacturers used other products to manufacture domestically, so Trump’s tariffs increase costs, reduce supply relying on US factories, and reduce competitiveness.
Louise Lou, a Chinese economist at Oxford Economics, a consulting firm, said China’s ability to reduce its dependence on the US market in recent years “they will likely be able to find a buyer alternative that is much easier than the US side can find suppliers.”
Still, China does not emerge from an unharmed trade war either. Citing the effects of the trade war, the International Monetary Fund downgraded its outlook for China’s economy this year and this year.
“China needs America,” White House spokesman Caroline Leavitt said in a news briefing on Friday. “They need our market. They need our consumer base. And Secretary Bescent knows he will be heading to Switzerland at home with full support and confidence and confidence from the president this weekend.”
In fact, Moon, who served as a diplomat in China, said tariffs were cut in both ways.
Jens Eskelund, chairman of China’s EU Chamber of Commerce, has expressed relief that US and Chinese officials are meeting.
“So good,” he said. He chose the new Pope as his inspiration, referring to the Vatican Conclave.
