Both sides blinked, but this is Trump’s capitulation to own

Singapore: Was it all worth it? As the clock starts on the 90-day armistice for the United States and China to clinch a longer-lasting trade deal of sorts – though it remains unclear what form this will take – let’s be clear on one thing. This is a US backdown.

Both sides blinked. But the capitulation is US President Donald Trump’s to own. Not that he will, of course. The Trump team procured a truce in the trade war it started, but with no spoils to show for it.

Chinese President Xi Jinping and US President Donald Trump, pictured in 2017, will have 90 days to broker a trade deal, after the two sides agreed to a tariff truce. Credit: AP

Washington extracted no major concessions from Beijing other than an agreement to match its 115 percentage point rollback of tariffs and suspend other non-tariff barriers imposed since Trump’s April 2 “Liberation Day”, and a commitment to continue trade talks over the next three months.

Trump has hailed the outcome as a “total reset” in US-China relations. But on the trade front at least, it largely rewinds to pre-April 2 settings, before the head-spinning week that saw Washington and Beijing go tit-for-tat in hiking tariffs three times in quick succession, obliterating two-way trade between the world’s two biggest economies. On the political front, America’s standing as a stable international actor has been ravaged.

Both sides have now temporarily adopted a new baseline tariff of 10 per cent. However, the US has retained a 20 per cent tariff imposed earlier this year to punish China for its role in the fentanyl trade, putting its levy on Chinese goods at 30 per cent, down from 145 per cent, for the next 90 days. Other sector-specific tariffs from the first Trump administration and the Biden era remain in place.

Beijing has cut its US tariff from 125 per cent to 10 per cent, but it too appears to have maintained its targeted 10 to 15 per cent tariffs on certain US goods, such as soybeans, chicken, farm equipment, coal and LNG, imposed across February and March in response to the punitive fentanyl duties.

The damage incurred on the way to securing this truce has been immense. For almost six weeks, Trump’s trade war unleashed chaos on global markets, threatened to wipe out hard-earned retirement savings, upended global supply chains, levelled untold costs on businesses at both ends (and in other countries) as goods languished in warehouses and export orders evaporated, and left consumers facing exorbitant price hikes and supply shortages.

And for what? It’s hard to see how the US enters the 90-day negotiations with a strengthened hand. Even before the Trump team took office, Beijing had for months been signalling its desire to strike a deal with the incoming administration.

If anything, the past few weeks have demonstrated the willingness of the Chinese to endure extreme economic hardship rather than lose face by instigating talks or being the first to make concessions.

An analysis by Dan Wang, the China director of political risk firm Eurasia Group, calculated that the impact of the US tariffs would knock 2 percentage points off China’s GDP – equating to at least 3 million job losses in the short term and another 30 million urban workers being subjected to at least a one-third wage cut. Undoubtedly, the severity of this pain underscored Beijing’s willingness to secure a swift de-escalation at the truce talks in Geneva on the weekend.

For now, Trump’s backdown largely puts paid to one of the core rationales for his tariff policy – it would usher in a great new epoch of US industry and re-onshore American manufacturing.

As US Treasury Secretary Scott Bessent, who was America’s lead on the trade talks, put it: “Neither side wants a decoupling.” That might come as rude news to some of the more extreme China hawks in Trump’s team.

“This is a win of Bessent over Peter Navarro,” says Chucheng Feng, a Beijing-based analyst and founder of Hutong Research, an independent consultancy. Navarro has been a key architect of Trump’s tariff policy.

“Had Trump ignored Peter Navarro and opted for a 10 per cent tariff as a starting point for broader trade negotiations, the US might have avoided the chaos it finds itself in today.”

Trump wagered America’s reputation as a reliable trading partner and lost, handing Chinese President Xi Jinping a card to play as the victim of US bullying – a not entirely unfounded appeal given that all of America’s trade allies have been swiped in the White House’s attempts to remake the global trading order.

Meanwhile, Beijing will be chalking up a win, viewing Xi’s decision to stand up to Trump as vindicated, and having positioned China as the alternative, rational global superpower that believes in the fundamentals of free trade abandoned by the US. It’s a line that will mostly land flat in countries such as Australia, where we are all too familiar with China’s capacity for trade vindictiveness, but will resonate in parts of the globe where US supremacy is already viewed with suspicion.

De-escalation is a welcome outcome, but the next 90 days contain no guarantees of a deal at the end. As economist Justin Wolfers points out, the half-life of this White House’s tariffs is about six to eight days. It’s a fraught environment to negotiate in.

We shouldn’t forget too quickly the pathway here. Trump and Xi subjected the world to a precarious gamble that racheted tensions and risked spilling over into areas beyond trade. It may still. We should all feel great unease when two superpowers stand eyeball to eyeball.

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