A New Dawn for U.S.-China Trade? Geneva’s 90-Day Truce Buys Time, Not Resolution

IndraStra Business News Desk

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The announcement on Monday that the United States and China have agreed to a 90-day tariff rollback marks a critical pause in a trade war that threatened to destabilize the global economy. This unexpected détente, forged after intensive weekend talks in Geneva, sees the U.S. reducing tariffs on Chinese goods from a staggering 145% to 30%, while China cuts its levies on American imports from 125% to 10%. The agreement, described by Treasury Secretary Scott Bessent as reflecting a "shared interest" in avoiding economic decoupling, has sparked a surge in global markets, with the Dow Jones Industrial Average climbing over 2% and the Nasdaq Composite surging more than 3.5%. Yet, while this deal offers a reprieve from the brinksmanship that has roiled markets and businesses, it is a temporary measure, laden with unresolved tensions and lofty ambitions that may prove difficult to realize.
The backdrop to this agreement is a trade conflict that escalated rapidly since April, when President Donald Trump imposed steep tariffs on Chinese imports, citing decades of unfair trade practices. China retaliated, and the tit-for-tat spiral culminated in tariffs so high they nearly froze trade between the world’s two largest economies. The impact was immediate and severe: U.S. retailers warned of empty shelves, small businesses feared collapse without access to Chinese manufacturing, and economists raised alarms about reigniting inflation. In China, the threat was equally dire, with millions of jobs tied to U.S. consumer markets at risk and deflationary pressures worsening as factory prices fell for over two years. The global economy teetered on the edge of recession, with financial markets reflecting the uncertainty—until Monday’s breakthrough.
The scale of the tariff reductions stunned analysts. Just days earlier, Trump had suggested an 80% tariff on Chinese goods "seems right," making the drop to 30%—including a 20% punitive tariff tied to the fentanyl crisis—a "dream scenario," as Wedbush Securities analyst Dan Ives put it. China’s reciprocal cut to 10%, alongside promises to ease nontariff measures like export restrictions on critical minerals, signals a willingness to de-escalate. The agreement also establishes a mechanism for ongoing talks, led by Chinese Vice Premier He Lifeng, Bessent, and U.S. Trade Representative Jamieson Greer, with the aim of crafting a "long-lasting and durable trade deal," in Bessent’s words. For now, the deal has restored confidence, evidenced by a rallying dollar, rising bond yields, and a 3.8% drop in gold prices as investors scaled back bets on economic turmoil.
Yet, the optimism must be tempered by the deal’s limitations. The 90-day window is a tight timeframe to resolve deep-seated issues that have plagued U.S.-China trade relations for decades. The U.S. remains concerned about China’s currency management, manufacturing subsidies, and its role in American factory-job losses. These issues, Bessent noted, will be central to future negotiations. Meanwhile, the 20% fentanyl-related tariff remains in place, a sticking point that underscores broader mistrust. In a private meeting, Bessent illustrated the stakes vividly, using sugar to demonstrate how minute quantities of fentanyl could kill across Geneva or even Switzerland. The inclusion of China’s public security minister, Wang Xiaohong, in the trade talks—an unusual move, as Bessent observed—suggests Beijing’s responsiveness to U.S. concerns, but no concrete agreement on fentanyl was reached.
For businesses and consumers, the immediate relief is palpable. U.S. companies like Amazon, Apple, and Tesla, battered by the trade war, saw their shares climb as the prospect of restored supply chains loomed. In China, the deal averts a potential surge in unemployment and further deflationary pressure. Both sides are likely to see a rush of trade during this 90-day window, as businesses frontload orders to capitalize on lower tariffs, a pattern observed earlier this year. But this short-term boost masks longer-term challenges. The U.S. tariffs on steel, aluminum, autos, and certain goods from Trump’s first term and Biden’s administration remain untouched, and China’s nontariff measures, while partially eased, are not fully dismantled. The agreement is less a resolution than a ceasefire, with the potential for renewed escalation if talks falter.
The deal also reflects a shift in U.S. policy dynamics. Bessent’s leadership in the negotiations, backed by Trump’s confidence—he named Bessent as the one to "make the call" on tariffs—signals a pragmatic approach over the president’s earlier rhetoric. Unlike Trump’s quick-win tariff strategies with Mexico and Canada, Bessent is pursuing structural reforms, particularly transforming China’s export-driven economy into one driven by domestic consumption. This ambition, while economically sound, faces steep hurdles. China has long promised to boost consumption as a share of GDP but has made little progress, and its mercantilist policies are deeply entrenched. Convincing Beijing to overhaul its economic model, especially under the shadow of geopolitical rivalry, is a tall order. As Bessent himself acknowledged, the U.S.-China trading relationship remains "imbalanced," and resolving this will require more than a 90-day truce.
The market’s enthusiasm also stems from confidence in Bessent’s stewardship. Investors see him as a steady hand, prioritizing economic stability over populist tariff hikes. His vision aligns with reducing the U.S. trade deficit not by choking imports but by boosting exports, a strategy that could benefit global trade if successful. However, competing voices within the administration and Congress complicate this outlook. Some, including Trump, view tariffs as a tool to raise revenue for tax cuts or to counter China’s strategic rise, goals that could derail Bessent’s reformist agenda. The fentanyl issue, too, remains a flashpoint, with Trump’s accusations of Beijing’s complicity—denied by China—adding a layer of diplomatic friction.
Globally, the deal buys time but does not erase the specter of broader trade tensions. Other nations, wary of a flood of Chinese exports if U.S. markets reopen, may tighten their own trade policies, complicating China’s economic calculus. For the U.S., the challenge is balancing domestic priorities—protecting jobs, curbing inflation—with the benefits of open trade. The agreement’s success hinges on whether both sides can sustain the goodwill generated in Geneva. As Morgan Stanley’s Robin Xing noted, the tariff pause averts a "bilateral trade embargo," but the path to a comprehensive deal is fraught with obstacles.
In the end, this truce stands as a testament to the power of diplomacy to pull back from the brink. It reflects a mutual recognition that neither the United States nor China can afford a full-scale trade war. Yet the underlying issues — economic imbalances, strategic rivalry, and deep-seated distrust — remain unresolved. The 90-day window is both an opportunity and a test. If Bessent and his counterparts can capitalize on this momentum, they might lay the foundation for a more stable trade relationship. If not, the market’s current euphoria could quickly give way to renewed volatility. As always, time will tell.
With reporting by The Wall Street Journal.

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