US-China meetings might cut tariffs. Uncertainty won't go away.

Mint

10-05-2025

A path for the U.S. and China to back away from tariffs that have virtually halted traded between the two could emerge this weekend. Yet it isn't clear how they would move beyond that, and whether that initial step would reduce the uncertainty gripping the global economy.
The economic and political stakes are high. With 145% tariffs on Chinese imports and levies of 125% on U.S. goods entering China, direct trade between the two countries has been paralyzed. Shipments of cargo to the West Coast are tumbling, and companies are warning of disruptions.
While retailers have only a couple of weeks to put in orders for the Christmas season, substantial relief isn't likely unless tariffs are rolled back below 60%, if not further. That means the Trump administration risks becoming the Grinch that spoiled Christmas.
Whether this weekend's meetings in Geneva bring tariffs low enough to restart trade, or unthaw the relationship enough for Xi Jinping and President Donald Trump to seek a truce via a phone call, is still unclear. But former trade officials and geopolitical analysts expect both sides to scale back tariffs in the coming week—the U.S. is likely to set them below 50% to 60%—as long as something doesn't go wrong in Geneva.
Both sides want a de-escalation and have signaled a shift in their messaging. Earlier in the week, Trump said he wouldn't roll back tariffs before the meeting, and Treasury Secretary Scott Bessent has stressed that Trump is the final decision maker on trade. But on Friday, Trump seemed to give Bessent the green light to de-escalate, posting on Truth Social, "80% tariff on China seems right! Up to Scott B."
Still, anyone looking for a quick fix may want to lower their expectations. Investors should think of these talks—Bessent and U.S. Trade Representative Jamieson Greer will meet with their Chinese counterparts—as disarmament negotiations, rather than discussions likely to bring a resolution, says Ambassador Kurt Tong, managing partner of consultancy The Asia Group, who held senior roles throughout Asia in a 30-year State Department career.
A tariff rate of 80% wouldn't be low enough to restart trade, or necessarily get Beijing's attention. There is also growing evidence that tariffs aren't returning to where they were before April 2, even for friends, as the administration looks to the revenue they bring in to help its tax-cut legislation get through Congress. Take the United Kingdom. Despite being an ally and having a trade deficit with the U.S., rather than a surplus like China's, the U.K. was still stuck with 10% tariffs in the agreement the White House heralded on Thursday. In any case, deals such as the one with the U.K. are more promises to keep talking than detailed agreements. Though the White House called it a 'full and comprehensive deal," Trump left open the possibility for adjustments 'because we are flexible and think we could do better."
Any deal with China is likely to be even less substantive. 'I see the potential for some sort of agreement with China that is even less detailed than the deal with the U.K. and de-escalates a bit, but I would be surprised if any announcement takes tariffs to low double-digit levels," said Ryan Majerus, a partner at the law firm King & Spalding, who previously worked in the Commerce Department and Office of the U.S. Trade Representative.
Analysts point to a list of potential negotiating topics if U.S.-China talks continue, from fentanyl flows and the sale of TikTok to China opening up U.S. access to certain markets. But those are likely to be the subject of further talks, not this weekend's discussions.
'If President Donald Trump insists on a whole raft of measures to do an equal reduction of tariffs by both sides, he isn't going to get it," says Tong, the Asia Group managing partner. 'China feels it has more leverage, more than it did eight years ago, and is less likely to quickly make a lot of concessions."
While both sides are feeling economic pain, Washington may be under more pressure to act than Beijing. China's exports to the U.S. have tumbled, but its exports elsewhere have risen—an indication that it is shipping goods around the tariffs, through Vietnam or elsewhere, to cushion the blow.
Beijing also has a bigger tool kit and patience on its side to manage the economic hit. Analysts expect the government to ramp up fiscal and monetary support—including aid for exporters—while the U.S. is trying to cut spending and the Federal Reserve has made it clear it is in no hurry to cut interest rates.
An additional challenge is that the Chinese have been wary about negotiating with Trump, given his tendency to go back with new demands, making them less likely to offer much in concessions, says Derek Scissors, a senior fellow at the American Enterprise Institute who focuses on China. What most investors want is some sort of stable framework as the countries move to delink their economies and navigate a deteriorating relationship. That is something Scissors thinks isn't going to come out of the weekend talks.
'It's going to be very messy analytically because we have uncertainty around where the tariff rates are set, timing, how long a de-escalation would be in place and what is next in terms of exemptions, how much rerouting of trade there will be via other countries, which offers a safety valve," says Michael Hirson, a former Treasury official who heads China research at 22V Research.
In other words, neither markets nor the economy may be off the hook even if the Geneva talks go off without a hitch and result in a rollback of tariffs. And there still is the risk that the meetings don't yield a de-escalation, or worsen tensions.
'Unless there is a real dramatic reversal where the Trump administration openly, or privately, waves a white flag, the stalemate the U.S. is in with China and others is likely to endure, certainly through the end of 2025," says Scott Kennedy, a senior adviser focused on China at the Center for Strategic and International Studies.
Write to Reshma Kapadia at [e-mail]