The decision of President Donald Trump to impose, and then withdraw, three -digit tariffs on Chinese products during the past month demonstrated the global power and reach of US commercial policy. But also showed the limitations of Trump’s aggressive approach.
Tariffs on Chinese products, which the United States increased up to a minimum of 145 percent in early April, paralyzed much of the trade between the two countries. They made companies redirect their businesses worldwide, importing less than China and more from other countries such as Vietnam and Mexico. They forced Chinese factories to close and led some US importers to the edge of bankruptcy.
In the end, tariffs affected US companies too much so that Trump could maintain them. In a few weeks, Trump’s officials said that the tariffs that the president had decided to impose one of the largest commercial partners in the United States were unsustainable, and that they were trying to reduce them.
Commercial conversations between the world’s largest economies, held this weekend in Geneva, concluded with an agreement to reduce the hard levies that had been made in a much greater percentage than many analysts had planned. Chinese imports will face a minimum tax of 30 percent, compared to 145 percent. China will reduce its tariffs on US products from 125 percent to 10 percent. The two countries also agreed to maintain conversations to stabilize the relationship.
It remains to be seen what agreements can be achieved in future negotiations. But the conversations of this weekend, and the tariff chaos last month, did not seem to generate any other immediate concession by China, apart from the commitment to continue talking. That has questioned that the commercial disturbances of last month – who took many US companies to cancel Chinese import orders, freeze expansion plans and warn of higher prices – have been worth it.
“The Geneva Agreement represents an almost complete withdrawal from the United States that claims Xi’s decision to make energetic reprisals,” said Scott Kennedy, an expert in China at the Center for Strategic and International Studies, referring to Xi Jinping, the Chinese leader.
Although Trump and his advisors argue that the United States has the strongest letters in commercial negotiations, the president’s acquiescence revealed some of the limitations of his bet.
Through its so -called reciprocal tariffs and maximalist levies to China, the president of the “art of negotiation” is using a strategy that consists of manufacturing commercial crises in the hope of extracting rapid economic concessions. But when facing an economic power with a similar power and perhaps more willing to endure hardships, Trump chose to retire, declaring as a victory China’s agreement of joining him at the negotiating table.
On the American part, officials essentially said that they had not wanted to be – no one intended – to follow the path that the president’s tariffs had marked the United States, to completely decoupulate their economy from China.
“We have concluded that we have a shared interest,” said Treasury Secretary Scott Besent, at a press conference in Geneva. “The consensus of both delegations is that none of the parties wanted a separation.”
That language was a radical change with respect to the previous proclamations of Besent that the commercial war would be much worse for China, given its dependence on exports to the United States.
“They have the most unbalanced economy in the history of the modern world,” Besent said at Fox Business Network last month. “And I can tell you that this climb is a defeat for them.”
The tariffs were painful for China, but were also harmful to the US economy. American companies had begun to warn of the difficulties that were coming for consumers in the form of higher prices and lower product availability.
American manufacturers were especially concerned with China’s restrictions on the export of vital minerals and magnets. And although the shipments from China to the United States fell 21 percent in April compared to the previous year, their exports to Southeast Asia countries increased 21 percent, suggesting that it was finding other channels to continue feeding its export machinery.
The decision to temporarily reduce tariffs to China provides a welcome respite for companies, but it will also do little to relieve the longest uncertainty that weighs on US companies. The two governments now have until mid -August to move towards a commercial agreement.
On Monday morning, Trump said that if countries did not reach an agreement within that period, tariffs on Chinese products would increase again until they were “substantially higher”, although not until 145 percent.
“At 145, you actually disconnect because nobody is going to buy,” he added.
The retailers and other importers expressed their relief due to the fact that more commerce could flow again, but crossed their fingers so that the extension would last more than 90 days.
Matthew Shay, Executive Director of the National Federation of Retails, which represents large and small retailers, described the temporary pause as “first crucial step to provide a certain short -term relief to retailers and other companies that are in full process of requested merchandise for the winter festivities season.”
Gene Seroka, executive director of the port of Los Angeles, said on Monday that the 30 percent tariff that remained on China remained substantial, and that the enthusiasm of US consumers and companies that depended on their purchase habits had been harmed by the threat of tariffs. Ninety days is also a relatively brief deadline for companies trying to resume shipments interrupted from China, he said, given the time that can take space in transatlantics and move the products per sea.
“It is still unknown territory, so we will see how people respond,” said Seroka. “But I don’t think that, based on the feeling and confidence of consumers, people are willing to launch immediately and say: ‘Ok, this is great. Let’s get run’.”
Commerce experts warned that 90 days was also a very brief deadline to achieve substantial advances in the long list of commercial disputes between the United States and China, including the bulky commercial surplus of Beijing.
Wendy Cutler, vice president of the Asia Society Policy Institute, said that three months was “an extremely brief period to address the series of controversial commercial issues that continue to exist between the United States and China, including the treatment of excess manufacturing capacity, excessive subsidies to Chinese companies and the reexpedition efforts of Chinese companies.”
“Similar negotiations usually last more than a year,” he added.
Trump has said that conversations would focus in part on “Open” China to US companies. The officials said they had agreed to establish a regular cadence of conversations with China, and suggested that some of them could focus on Chinese purchases of American products that would help balance trade.
It is not clear what could differentiate these efforts from the previous negotiations with China. Trump’s officials have criticized the type of recurring and low -level dialogue that the past US governments maintained with China because they essentially consider them a waste of time.
Chinese officials had also agreed important purchases in a commercial agreement signed with Trump in 2020 that should help balance trade between countries, but finally did not comply with them.
Even so, the Trump government now seems determined to reactivate that agreement. In an interview granted on Monday to the CNBC, Besent said that the 2020 agreement could serve as a “starting point” for future conversations and blamed the Joe Biden government for not having applied it.
During his confirmation hearing, Besent said he intended to press China to fulfill his commitments to buy more American agricultural products. Although Trump’s government has said in general terms that he wants China to reduce its “non -tariff” commercial barriers and open its market to US companies, the recent commercial confrontation could lead to the reactivation of Trump’s old trade agreement.
“Everyone thought in advance that the most important thing was to get China’s adhesion to the agreement of Phase 1 of 2020, which for many issues feels the foundations for moving forward,” said Michael Pillsbury, who was one of Trump’s main advisors on China in his first mandate.
Other analysts said that it is most likely that the Trump government will continue to press China to stop the flow of fentanyl precursors to the United States and try to advance other commercial issues, such as the broad subsidy and dominance of China in certain industries.
“The two governments have given a deadline to do something in relation to fentanil and purchases,” said Myron Brilliant, main counselor of DGA-Albright Stonebridge Group, who advises clients about China. “But it is still a great unknowns for the future that China will remember, given our persistent and prolonged concern for its commercial policies.”