On Thursday, President Donald Trump expressed confidence in reaching an agreement that could potentially conclude the escalating trade war with China within the next three to four weeks. During an executive order signing session held in the Oval Office, Trump remarked, "I believe we're going to have a deal with China." His statement came alongside Secretary of Commerce Howard Lutnick, as they discussed the implications of the ongoing trade tensions.
Despite Trump's optimistic outlook, there was no immediate confirmation from Beijing regarding the likelihood of a deal. When pressed about whether Chinese President Xi Jinping had initiated discussions to resolve the tariffs conflict, Trump declined to provide a definitive answer. This marks a significant moment, as it is the first time since Trump raised tariffs on Chinese imports—up to 245%—that the possibility of a resolution appears to be on the horizon.
According to Nick Vyas, the founding director of USC Marshall's Randall R. Kendrick Global Supply Chain Institute, the trade situation is akin to a high-stakes game where both parties are waiting for the other to make a move. "It's a game between China and the US in terms of who's going to blink first," Vyas stated. He noted that while China believes it holds the upper hand, Trump feels empowered due to the US's larger consumption of Chinese goods compared to China's exports to the US.
However, experts specializing in geopolitics and supply chain management suggest that Xi may possess greater leverage in this situation. Andrew Collier, a senior fellow at the Mossavar-Rahmani Center for Business and Government at the Harvard Kennedy School, explained that while Xi can impose challenges on American tech firms and farmers, the repercussions for China could be much more severe if the US continues its aggressive trade policies. Collier highlighted that the political pressures faced by Trump in a democratic system could soon intensify if economic conditions deteriorate.
Vyas further elaborated on the inherent advantages of China's authoritarian governance, which allows Xi to operate without the constraints of electoral cycles. "Xi is the lifetime president of China with a long horizon," Vyas noted. This contrasts sharply with Trump's four-year term, and it raises concerns that the trade conflict could become a protracted struggle.
Additionally, Vyas pointed to China's dominance in the electric vehicle (EV) market and its control over 85% of the processing capacity for rare earth minerals. These resources are vital for US defense capabilities and advancements in artificial intelligence (AI). Any disruption in China's supply could significantly hinder the US's technological and defense progress.
Trump's administration has a documented history of increasing tariffs on China with the aim of decreasing the US trade deficit and reviving domestic manufacturing jobs. In 2017, investigations into China's trade practices commenced, leading to the imposition of a 25% tariff on select Chinese exports, including electronics and auto parts in 2018. By February 2023, Trump had escalated tariffs to 20%, which further increased to 34% in April. Following retaliatory measures from China, tariffs surged to 245%, significantly impacting US-China trade relations.
China has also responded with counter-tariffs on US goods, establishing a 125% tariff by April 11 and halting exports of essential rare earth elements critical for US industries. Despite efforts to rectify the trade deficit, previous measures yielded limited success, with the trade deficit in 2024 recorded at approximately $295 billion—still more than double the total annual US exports to China.
As the US adopts a stricter stance on global trade, Ilaria Mazzocco, a senior fellow in Chinese business and economics at the Center for Strategic and International Studies, indicated that China is leveraging this moment to enhance its diplomatic relations. Conversations between the European Union (EU) and China have reportedly taken on a softer tone, suggesting an opportunity for China to present itself as a more stable and reliable global partner.
Recent engagements, including a meeting between Xi and Spanish Prime Minister Pedro Sánchez, underscore China's efforts to sign trade and infrastructure deals across Southeast Asia. However, Mazzocco cautioned that while China is seeking to improve its foreign relations, it is unlikely that Southeast Asian nations will replace the US as their primary trading partner due to China's insufficient internal consumer demand.
Simultaneously, the US is actively engaging with EU leaders, with Trump asserting that a deal between the US and EU is inevitable. Mazzocco highlighted that the unpredictability of Trump's policies poses risks to forging lasting agreements and may lead US allies to reconsider their reliance on the US for trade and diplomatic relations.
As the trade war with China continues to evolve, the global economic landscape remains uncertain. Stakeholders around the world are keeping a close watch on how these developments will shape future relations and market dynamics.
