President Trump’s decision to impose, and then walk back, triple-digit tariffs on Chinese products over the past month demonstrated the power and global reach of U.S. trade policy. But it was also another illustration of the limitations of Mr. Trump’s aggressive approach.
The tariffs on Chinese goods, which the United States ratcheted up to a minimum of 145 percent in early April, brought much trade between the countries to a standstill. They caused companies to reroute business globally, importing less from China and more from other countries like Vietnam and Mexico. They forced Chinese factories to shutter, and brought some American importers to the verge of bankruptcy.
The tariffs ultimately proved too painful to American businesses for Mr. Trump to sustain. Within weeks, Trump officials were saying that the tariffs the president had chosen to impose on one of America’s largest trading partners were unsustainable, and that they were angling to reduce them.
Trade talks between the world’s largest economies in Geneva this weekend concluded with an agreement to reduce stiff levies on each other’s products by more than many analysts had anticipated. Chinese imports will face a minimum tax of 30 percent, down from 145 percent. China will lower its import duty on American goods to 10 percent from 125 percent. The two countries also agreed to hold talks to stabilize the relationship.
It remains to be seen what agreements can be reached in future negotiations. But the talks this weekend, and the tariff chaos of the past month, did not appear to generate any other immediate concessions from the Chinese other than a commitment to keep talking. That has called into question whether the trade disruptions of the past month — which led many American businesses to cancel orders for Chinese imports, freeze expansion plans and warn of higher prices — were worth it.
“The Geneva agreement represents an almost complete U.S. retreat that vindicates Xi’s decision to forcefully retaliate,” said Scott Kennedy, a China expert at the Center for Strategic and International Studies, referring to Xi Jinping, the Chinese leader.
Although Mr. Trump and his advisers contend that the United States holds the strongest cards in trade negotiations, the president’s acquiescence revealed some of the limitations of his hand.
Through his so-called reciprocal tariffs and maximalist levies on China, the “Art of the Deal” president is employing a strategy that involves manufacturing trade crises in hopes of extracting quick economic concessions. But when confronting an economic power with similar might and perhaps more willingness to endure pain, Mr. Trump opted to stand down, declaring China’s agreement to join him at the negotiating table a win.
On the U.S. side, officials essentially said they had determined that they did not want — or intend — to go down the path that the president’s tariffs had set the United States on, of fully decoupling its economy from China.
“We concluded that we have a shared interest,” Treasury Secretary Scott Bessent said at a news conference in Geneva. “The consensus from both delegations is that neither side wanted a decoupling.”
That language was a stark change from Mr. Bessent’s earlier proclamations that the trade war would be much worse for China given its reliance on exports to the United States.
“They have the most imbalanced economy in the history of the modern world,” Mr. Bessent said on the Fox Business Network last month. “And I can tell you that this escalation is a loser for them.”
The tariffs proved painful for China, but they were also disruptive for the U.S. economy. American companies had started to warn of coming pain for consumers in the form of higher prices and less availability of products.
U.S. manufacturers were particularly concerned about China’s export restrictions on vital minerals and magnets. And while shipments from China to the United States plunged 21 percent in April from a year earlier, its exports to Southeast Asian countries surged 21 percent, suggesting it was finding some other channels to continue feeding its export machine.
The decision to temporarily lower tariffs on China provides a welcome reprieve for businesses, but it will also do little to ease longer-run uncertainty that is weighing on U.S. firms. The two governments now have until mid-August to make progress toward a trade deal.
On Monday morning, Mr. Trump said that if the countries did not reach an agreement in that time, tariffs on Chinese products would rise again to be “substantially higher,” though not to 145 percent.
“At 145, you’re really decoupling because nobody’s going to buy,” he added.
Retailers and other importers expressed relief that more trade would again be able to flow between the countries, but they were crossing their fingers that the reprieve would last longer than 90 days.
Matthew Shay, the chief executive of the National Retail Federation, which represents large and small retailers, called the temporary pause “a critical first step to provide some short-term relief for retailers and other businesses that are in the midst of ordering merchandise for the winter holiday season.”
Gene Seroka, the executive director of the Port of Los Angeles, said on Monday that the 30 percent tariff that remained on China was still substantial, and that the enthusiasm of American consumers and the companies that relied on their shopping habits had been damaged by the threat of tariffs. Ninety days is also a relatively brief time frame for companies to try to restart stopped shipments from China, he said, given how long it can take to book space on ocean liners and move products by sea.
“This still is kind of uncharted territory, so we’ll see how people respond,” Mr. Seroka said. “But I don’t think based on consumer sentiment, consumer confidence, people are willing to jump in right away and say: ‘OK, this is really great. Let’s get going.’”
Trade experts warned that 90 days was also a very brief window to make substantial progress on the long list of trade spats between the United States and China, including Beijing’s ballooning trade surplus.
Wendy Cutler, the vice president of the Asia Society Policy Institute, said three months was “an extremely short amount of time to address the range of contentious trade matters that remain between the U.S. and China, including dealing with excess manufacturing capacity, excessive subsidization of Chinese firms and transshipment efforts by Chinese companies.”
“Similar negotiations typically take well over one year,” she added.
Mr. Trump has said talks would be focused in part on “opening up” China to American businesses. Officials said they had agreed to set up a regular cadence of talks with China, and suggested that some of those could center on Chinese purchases of U.S. products that would help to balance trade.
It is not clear what might differentiate these efforts from past negotiations with China. Trump officials have criticized the kind of recurring, low-level dialogues that past U.S. administrations held with the Chinese as essentially a waste of time.
Chinese officials also agreed to significant purchases in a 2020 trade deal signed with Mr. Trump that were meant to help balance trade between the countries, but they ultimately did not fulfill them.
Still, the Trump administration now appears intent on reviving that deal. In an interview on CNBC on Monday, Mr. Bessent said the 2020 deal could serve as a “starting point” for future talks and blamed the Biden administration for failing to enforce the agreement.
During his confirmation hearing, Mr. Bessent said he intended to push China to honor its commitments to purchase more American farm products. While the Trump administration has said broadly that it wants China to lower its “nontariff” trade barriers and open up its market to American firms, the latest trade clash could result in the revival of Mr. Trump’s old trade deal.
“Everyone thought in advance that the most important thing is to get Chinese adherence to the 2020 Phase 1 agreement that for many issues provides a foundation for going forward,” said Michael Pillsbury, who was a top China adviser to Mr. Trump in his first term.
Other analysts said the Trump administration would most likely continue to push China to stem the flow of fentanyl precursors to the United States and try to make progress on other trade issues, like China’s vast subsidization and dominance of certain industries.
“The two governments have given themselves a window to get something done on fentanyl and purchases,” said Myron Brilliant, a senior counselor at DGA-Albright Stonebridge Group who advises clients on China. “But what else will China agree to remains a big question going forward, given our longstanding persistent concerns over their trade policies.”
