Tactical Pause in the Tariff War: A New Round of U.S.-China Rivalry Looms

U.S. President Trump announces a 34% tariff increase on Chinese goods. (Video screenshot)

[People News] The U.S.-China trade talks in Switzerland, which had been widely underestimated beforehand, unexpectedly yielded “substantial progress” and produced a consensus.

On May 12, the two countries announced a new trade agreement: the U.S. will reduce tariffs on most Chinese imports from as high as 145% down to 30%, while China will lower its tariffs on U.S. goods to 10%. This temporary ceasefire will last for 90 days.

The global financial markets reacted strongly. On the same day, U.S. stocks surged, with the S&P 500 index jumping 2.8% at the opening, breaking past early April highs. At the same time, the U.S. dollar strengthened, Treasury prices fell, and gold prices declined, reflecting increased investor confidence in the U.S.

Geoffrey Yu, a currency and macro strategist for Europe, the Middle East, and Africa at BNY Mellon, said in an interview: “This news was much better than expected. We suspected the market wouldn’t forget the downturn in April, but the worst now seems like a distant memory, and investors are adjusting their portfolios accordingly.”

However, does reaching an agreement and a temporary ceasefire mean the end of the U.S.-China tariff war? Not at all. At best, it’s a tactical pause. What lies ahead is undoubtedly another round of rivalry, potentially even more intense. As one industry insider put it: “This handshake looks more like both sides resetting their stance to prepare for the next bout.”

In reality, the U.S.-China trade friction has long since evolved from a mere “economic and trade disagreement” into a full-scale strategic competition encompassing supply chains, technology, security, and rules-making. This means future U.S.-China economic relations will no longer be about “comprehensive cooperation,” but a complicated structure of “limited cooperation plus deep strategic rivalry.”

It’s important to recognise that the just-signed agreement, though involving mutual concessions and gains, does not address the deeper issues in U.S.-China trade. Problems such as China’s large trade surplus with the U.S., full market access, structural reforms, and ending industrial subsidies remain unresolved. In other words, the ultimate goals of Trump’s tariff war on China have yet to be achieved. On the other hand, the Chinese Communist Party (CCP) will not surrender its core interests for the sake of its regime’s survival. This fundamentally ensures that the U.S.-China rivalry will be long-term, with occasional pauses along the way.

Indeed, barely had the ink dried on the agreement when Trump issued a warning on Monday: if Washington and Beijing fail to reach a final deal within the 90-day ceasefire, the U.S. will again raise tariffs on Chinese goods, though not back to pre-agreement levels.

U.S. Treasury Secretary Besant said in an interview with CNBC on May 12 that the agreement reached over the weekend is another step in reducing U.S. dependence on Chinese products. “This is just a pause,” he stated. He added, “We’re not pursuing full decoupling from China. What we really want is decoupling in strategic essentials.”

CNN reported that in the next round of negotiations, the U.S. will focus on expanding its supply chain for “strategic essentials,” particularly semiconductors and steel, aiming to reduce dependency on China.

Besant explained: “We want to produce steel ourselves. Tariffs can protect our steel industry, and this also applies to key pharmaceuticals and semiconductors.” He added, “We are already doing this, and the tariffs in these sectors have nothing to do with reciprocal tariff logic.”

As Japanese veteran journalist and Indo-Pacific Strategy Institute executive director Akio Yaita put it, if China truly wants to conduct fair business, it must implement many reforms—including stopping covert subsidies to export manufacturers, halting environmental destruction, and respecting intellectual property rights. Otherwise, the next wave of the tariff war is likely to arrive very soon.