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President Donald Trump’s return to the White House in January 2025 brought an aggressive reboot of the U.S.–China trade war. Drawing on unresolved issues from his first term, Trump raised import duties to unprecedented levels. By April, the average U.S. tariff across all imports surged from 2% to 27%, the highest in over a century.
Tariffs on Chinese goods hit a staggering 145%, while Beijing retaliated with 125% tariffs on U.S. exports and began restricting the export of rare earth minerals vital to electronics and green energy production. The result: a rapid deterioration in trade flows, soaring input costs, and shaken investor confidence.
Markets dipped sharply, and major U.S. retailers warned of looming price hikes and empty shelves. By late April, U.S. GDP data revealed the first quarterly contraction since 2022, exacerbated by pre-tariff stockpiling and supply chain chaos.
In early May 2025, following secret backchannel negotiations, the U.S. and China announced a surprise 90-day suspension of further tariffs. The U.S. slashed duties on Chinese goods from 145% to 30%, composed of a 10% baseline tariff and a 20% fentanyl-linked surcharge—targeting China’s role in the opioid crisis.
China reciprocated, cutting its tariffs on U.S. goods from 125% to 10%. Both countries also agreed to suspend non-tariff retaliation. China lifted export restrictions on rare earth elements and paused regulatory investigations into U.S. firms. Meanwhile, the U.S. waived tariffs on over $100 billion worth of Chinese goods based on 2024 import volumes.
Importantly, both sides agreed to a renewed negotiation track. Talks are now being led by U.S. Treasury Secretary Scott Bessent and China’s Vice Premier He Lifeng. Discussions will rotate between Washington, Beijing, and neutral venues like Geneva.
The decision to pause didn’t come from a place of ease as it came under pressure. Internally, White House staff including Chief of Staff Susie Wiles warned Trump that the trade war was “hurting Trump’s people” — a reference to the farmers, manufacturers, and blue-collar workers central to his electoral base.
Polling showed frustration growing in swing states where exports had collapsed. Retail executives warned that continued tariffs could send inflation soaring again. Facing these pressures, Trump signaled openness to compromise, stating on April 22 that tariffs “will come down substantially, but it won’t be zero”.
For China, the decision was equally strategic. According to Reuters, with exports to the U.S. drying up and industrial output contracting at its fastest pace in over a year, Beijing needed to stabilize its economic outlook. The truce offered a lifeline to factories and exporters without appearing to capitulate to U.S. demands.
Global markets responded with relief. The Dow Jones Industrial Average rose 2.4% the day after the announcement. Nasdaq jumped 3.5%, and Hong Kong’s Hang Seng Index gained nearly 3%. Investors interpreted the truce as a sign that neither side was willing to push the trade war into full-scale decoupling.
Retailers and importers, who had halted orders during the tariff surge, moved quickly to resume shipments. Companies relying on Chinese inputs—such as electronics, automotive, and seasonal goods—rushed to place orders during the lower-tariff window. Soybean prices also rose as Chinese buyers re-entered the U.S. agricultural market.
Currency markets also responded. The yuan, which had weakened during the peak of the standoff, stabilized against the dollar. Gold, a common safe haven during geopolitical stress, fell on the news—signaling easing investor anxiety.
The truce, set to expire in mid-August 2025, is being closely watched. Trade negotiators on both sides are under pressure to reach progress—or face the reimplementation of steep tariffs.
Key agenda items include:
Analysts are skeptical that such deep structural reforms can be resolved in 90 days. The memory of the failed 2018–2019 truce still looms large. Then, too, the U.S. and China agreed to a 90-day pause—only for talks to collapse over enforcement mechanisms.
Even if an agreement is reached, the Trump administration has made it clear: tariffs are here to stay. In speeches and statements, Trump has reiterated that a 10% baseline tariff on all imports will remain a permanent feature of U.S. trade policy, regardless of partner or agreement terms.
This marks a shift from traditional U.S. policy, which has generally sought to reduce barriers to trade. The Trump view sees tariffs as a revenue source and a tool for industrial policy—a way to reward domestic manufacturing and reduce reliance on foreign supply chains.
Congress is already considering legislation that would bake this baseline into future trade deals, making the 10% tariff a non-negotiable floor.
China’s leadership is also recalibrating. While the country remains committed to export-led growth, the trade war has accelerated its push for supply chain resilience and domestic demand.
Beijing has used the 90-day window to signal that it remains open to negotiation—but on equal terms. It has also resumed purchases of American energy, agricultural, and tech products, potentially to build goodwill during the talks.
At the same time, China is hedging its bets: boosting trade ties with Europe, Southeast Asia, and Latin America, and ramping up its Belt and Road Initiative investments to reduce dependence on Western markets.
Allies and trading partners are watching closely. Japan, the EU, and Canada had also been threatened with tariffs during Trump’s broad April 2025 “reciprocal tariff” announcement. While their surcharges were delayed by 90 days, the same expiration deadline looms.
There is concern that, should U.S.–China talks stall, the administration may pivot back to targeting traditional allies—especially those with large surpluses. The EU, for example, has been publicly called “worse than China” by Trump on trade.
Meanwhile, international institutions like the IMF and WTO have urged both powers to return to rule-based trade systems and reduce global uncertainty.
Multinational companies aren’t betting on a smooth resolution. Many firms that faced steep tariffs in Q1 2025 are accelerating diversification efforts—moving production to Mexico, Vietnam, India, and other lower-risk countries.
The phrase “China Plus One” has returned to boardroom discussions, and logistics providers report a sustained uptick in inquiries about alternate sourcing strategies. Even with a deal, few expect a return to pre-2018 trade conditions.
The 90-day tariff truce offers a much-needed cooling off period, but whether it leads to lasting reform remains uncertain. Both countries face internal pressures and global scrutiny. While the rollback has soothed markets and restarted trade flows, the underlying issues remain unresolved.
The next few months will determine whether the truce becomes a platform for deeper cooperation—or simply a lull before the next confrontation.
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