Sudden pause in US-China tariff war: A turning point or temporary truce?
While it looks like the US-China trade talks in Geneva achieved a win-win outcome for now, the fundamental nature of competition between the two countries has not changed, observes academic Gu Qingyang.
Just as the US-China tariff war was escalating and sending shockwaves through global markets, both sides surprised the world by holding two days of talks in Geneva, Switzerland. The negotiations resulted in a series of breakthroughs and mutual concessions in multiple areas. This unexpected development has sparked widespread speculation about the future of US-China relations.
After the talks, Chinese Vice-Premier He Lifeng unusually praised the American delegation as “professional and diligent”, while US trade representative Jamieson Greer remarked that the differences between the two countries were “not as large as maybe thought”. Why did the world’s two largest economies — locked in recent years in fierce competition over trade, technology and geopolitics — suddenly decide to shake hands?
Let us revisit how this tariff war started. On 2 April, President Trump announced a policy of reciprocal tariffs on almost all countries. The move shocked the world, disrupted the global trading order, and triggered severe turbulence in international markets. US stock markets fell, the dollar came under pressure and US Treasury bonds faced a sell-off.
... this global tariff offensive ended up isolating the US itself.
Global tariff offensive backfired on the US
More critically, traditional American allies publicly voiced their dissatisfaction, exposing the deepest cracks in the Western alliance since World War II. A subtle but significant shift in global geopolitical dynamics began to take shape. Ironically, this global tariff offensive ended up isolating the US itself.
China, on the other hand, positioned itself as a defender of global free trade and called for a collective stand against trade bullying. This not only earned China moral high ground in global public opinion but also gave it added leverage at the negotiating table.
Importantly, China did not enter this confrontation hastily. Since the start of the US-China trade tensions in 2017, China has adopted a “prepare for the worst” mindset. It has worked systematically on strengthening technological self-reliance, expanding its domestic market, and building supply chain networks across the global south. These long-term strategic efforts over the past eight years have given China more flexibility in handling external pressure.
In contrast, while the US struck hard with tariffs, it was less prepared to deal with the full costs of confrontation. Rising prices, financial market volatility and the potential weakening of the dollar’s global status sparked internal disagreements within the White House. China’s move to restrict rare earth exports also caused severe supply chain problems for US businesses, forcing Washington to reassess China’s real strengths.
... China’s deeper strategic concern is securing a relatively stable and manageable external environment to support its modernisation. Prolonged external pressure could slow that process. This explains China’s willingness to engage in dialogue...
China much to lose from prolonged external pressure
That said, China has also felt significant pressure from high tariffs. Faced with weakening global demand and rising export costs, China’s deeper strategic concern is securing a relatively stable and manageable external environment to support its modernisation. Prolonged external pressure could slow that process. This explains China’s willingness to engage in dialogue to stabilise its external environment.
Global pressure has also played an important role. Together, China and the US account for over 40% of the world economy. Continued confrontation would cast a long shadow of uncertainty over the global outlook. Countries such as those in the EU and ASEAN have voiced their hope that the two giants will resolve disputes constructively. Ultimately, a mix of internal pressures and strategic calculations brought both sides back to the negotiating table.
This is a negotiation that both sides can claim as a win.
The outcome of the talks is promising. Not only did the two countries agree to lower tariffs, but more importantly, they also established a formal US-China economic and trade consultation mechanism. This aims to manage differences and rebuild trust through structured dialogue.
... the fundamental nature of competition between the two countries has not changed. Their structural conflicts won’t be resolved in the short term...
A win-win?
This is a negotiation that both sides can claim as a win. For China, the economy gets some breathing room. More significantly, the talks gave the US a clearer understanding of China’s principles and bottom lines, laying the groundwork for future relations. For the US, the results help ease domestic criticism, calm turbulent financial markets, and offer a way to reduce its trade deficit with China. Washington can also cite this deal as a model for negotiations with other countries.
Still, while this agreement offers a moment of relief, it’s no reason for blind optimism. The future of US-China relations remains highly uncertain. Though there may now be more space for rationality and cooperation, the fundamental nature of competition between the two countries has not changed. Their structural conflicts won’t be resolved in the short term, and volatility will likely remain the norm for years to come.
The US will probably continue to restrict China in high-tech and strategic sectors, while taking a more pragmatic approach in general commercial areas. As US Treasury Secretary Scott Bessent puts it, the US does not seek a generalised decoupling from China but rather a decoupling for strategic necessities.
China will continue its current path — strengthening its technological capabilities, upgrading its manufacturing sector, and expanding its presence in international markets, especially across the global south. These strategies have already proven effective in countering US pressure, and there is no reason to abandon them. Going forward, China will likely approach relations with the US with greater confidence and a more rational mindset.
