Inside the Surprise U.S.-China Trade Deal - The Journal.

Wall Street Journal

14-05-2025

Leading the negotiations on the U.S. side was Treasury Secretary Scott Bessent . WSJ's Brian Schwartz , who covered the talks in Geneva, explains how Bessent became President Trump's man on trade policy and got China to 'yes' on a temporary truce. Jessica Mendoza hosts.
On Monday, to the surprise of global investors , the U.S. and China agreed to a 90-day trade deal. The deal slashed tariffs between the two countries and sent stocks surging .
Full Transcript
This transcript was prepared by a transcription service. This version may not be in its final form and may be updated.
Jessica Mendoza: Brian, welcome back. How was your trip?
Brian Schwartz: It was wild. It was a crazy few days. We landed on a Friday and it just carried in for 72 hours of pure, nonstop work. We did not stop working. It was nuts.
Jessica Mendoza: Our colleague Brian Schwartz covers economic policy, and he spent the weekend in Geneva, Switzerland, where trade negotiations between the US and China were taking place.
Brian Schwartz: So the United States and China were meeting really officially, at least, for the first time to talk about this ongoing trade war between both countries. It was a big deal going into it just for the fact that they were having these talks.
Jessica Mendoza: but beyond the fact that the two delegations were meeting, Brian didn't know much.
Brian Schwartz: The Trump administration were determined to keep these meetings a secret outside of the fact that they were happening in Switzerland. It wasn't even entirely clear based on their one-line announcement of their meetings with China if this was even going to be in Geneva itself. That is how secret this was. So I decided on the first day of talks on that Saturday to stake out the lobby of the Intercontinental Hotel very early in the morning.
Jessica Mendoza: Brian was on the lookout for US Treasury Secretary, Scott Bessent, and his entourage.
Brian Schwartz: And we're waiting there, and basically the way it went was they got into this convoy of black vehicles, tinted windows, and they were just waiting there, those vehicles, at the entrance of the hotel. And you've got basically a split second to make a really simple decision. You're either going to follow them there or you're not. And I decided to follow them there. So I ran to a taxi. There was a line of taxis there at the hotel naturally, and I told the taxi driver to follow the convoy of vehicles and do not stop until they stop driving, get out of the car.
Jessica Mendoza: The convoy with Brian's taxi tailing it made its way to a private estate just outside Geneva's city center, and it was there that the US delegation led by Bessent would hammer out a temporary truce in the trade war.
Scott Bessent: We have reached an agreement on a 90 day pause, and substantially moved down the tariff levels, both sides on the (inaudible).
Jessica Mendoza: How would you describe Treasury Secretary Scott Bessent's role during these talks?
Brian Schwartz: He's been key. He has been critical for this. And to tell you the truth, if it wasn't for Scott Bessent leading the way, I don't know if this would have happened.
Jessica Mendoza: Welcome to The Journal, our show about money, business and power. I'm Jessica Mendoza. It's Tuesday, May 13th. Coming up on the show, the treasury secretary and the trade deal. Before this weekend, trade relations between the US and China, the world's two largest economies, were at a low point. President Trump had set a 145% tariff on imports from China. In return, China hit back with a 125% tariff on goods coming in from the US.
Speaker 4: We are following the breaking news of President Trump threatening to slap China with additional tariffs.
Speaker 5: Trump's tariffs are causing a whole lot of confusion among a whole lot of Americans.
Speaker 6: Families are starting to feel it. E-commerce giants, Temu, Shein, and Amazon, they've all started raising some prices.
Jessica Mendoza: The moves shook the markets. Some businesses started stockpiling goods from China while others reassessed their plans. The deal marks a respite though it's set to expire after 90 days. So what are the key details in the deal? Can you give a summary?
Brian Schwartz: It's wonky, because there's been so many versions of different tariffs that we've slapped on China, but it's give or take 30% tariffs now. And it's the same story for China versus the United States, they brought down tariffs on the reciprocal side down to 10%.
Jessica Mendoza: So the US lowered its baseline tariffs all the way back down to 10% on Chinese goods, but there's an additional 20% tariff still in place tied to fentanyl.
Brian Schwartz: On the fentanyl tariffs, they're still on there because the US has concerns about China's alleged role in fentanyl distribution and creation out in that country. And I think the idea would be that the US is going to pitch to China that to have even better relations, they're going to insist that they crack down more and more on fentanyl and they have to prove that they're doing it pretty regularly.
Jessica Mendoza: Okay, so the deal gets done. And according to your reporting, Brian, a lot of the credit goes to Scott Bessent. How did he wind up in that position where he has President Trump's trust to negotiate such a high stakes deal?
Brian Schwartz: It was loyalty. Scott Bessent was during the campaign one of the handful of Wall Street financiers who's willing to go on a limb and say, "I am supporting Donald Trump."
Scott Bessent: President Trump capped off the week with a great speech outlining what four years of Trump 2.0 would be like. And I don't have to advise him what to do, he's already done it. He did it...
Brian Schwartz: He's very straightforward with the president. He doesn't tell the president, "Don't do tariffs at all, the markets are tanking." He just goes to him from what I've been told and lays out what he sees as the facts, and he lets the president decide what to do. And he only pushes so hard, and that's how, if you want to have success in the Trump administration, that's what you got to do. You've got to lay things out, let it stew for a little bit, and then the president is going to make a decision one way or another. And there is a reason some others from the administration were not brought to Geneva for these talks. Scott Bessent can be tough too, but he's very calm, cool, and collected in these meetings. That's what I've heard. That's what he's said. He's very direct. But there's a difference between being that way and being a brawler, and that makes a big difference when you're talking to people from the Chinese government who are trying to figure this out as well.
Jessica Mendoza: Bessent also worked well with US Trade Representative, Jamieson Greer, who was the other key figure on the US side in these talks. In Geneva, Brian was able to see the dynamic between them up close.
Brian Schwartz: Well, I'll tell you, those guys are thick as thieves. They're clearly very close. And during the meetings they came off to me like Batman and Robin. Scott Bessent is the leader in a way because he's more senior from Wall Street, this is somebody that's been in business for a long time, and Jamieson Greer is kind of like Robin.
Jessica Mendoza: Despite their good working relationship, the duo faced an uphill battle. Tensions with China were high, and this was the first time the two countries were officially meeting to discuss Trump's tariffs. Was it surprising that a deal got done?
Brian Schwartz: Yes, nobody in their right mind would've thought this was going to happen. You have to understand, from the Wall Street Journal's perspective, we were just following the ball here. And before the talks started, Scott Bessent effectively said, "These were just talks to start talks." That's what he said. And so we were going into this with almost zero expectation that anything was going to happen, and then it did.
Jessica Mendoza: How the deal went down is after the break. My colleague Brian Schwartz spent the weekend at the estate where the trade talks were happening.
Brian Schwartz: Listen, I get out of the cab, I look around and I said, "Where the heck am I?" And I arrived to this massive property with this over six, seven foot gate, and you look, the gates start to open for some reason. I don't know why they did that. And you see what's through there and you see this beautiful home, secret service and other security, including from Geneva police, are standing in there and you know you've got to the right place, because this is just not normal to be happening.
Jessica Mendoza: It turned out Brian was at the residence of the Swiss Ambassador to the United Nations, and inside the US and China delegations were having surprisingly cordial discussions, though there were areas of contention. One of the big ones was fentanyl. Trump has accused China of playing a role in the illicit fentanyl trade, something Beijing denies. And you touched on this earlier, what about fentanyl?
Brian Schwartz: It did come up, and it was a piece, not a focal point, but a piece of the conversation. So on the first day of talks, Scott Bessent sat down with China counterparts and picked up, there was a plate of sugar on the table, and he takes a little bit of sugar and says, "This is how much could kill a single person." Then he picks up a little bit more and he says, "This is how much could kill people across Geneva in terms of fentanyl," this is what he was trying to say. And he picks up some more sugar and he says, "This is how much fentanyl could kill people across Switzerland."
Jessica Mendoza: Wow, that's pretty dramatic.
Brian Schwartz: Yes. And he made it extremely clear with that example how important this was to figure this out, at least down the road between the US and China.
Jessica Mendoza: In the end, the two sides didn't come to an agreement on fentanyl, but China had brought a senior official to discuss the issue, which Bessent said was a positive sign. After two days of negotiations, Bessent came out to make a statement to the press.
Scott Bessent: Both countries represented their national interests very well. We concluded that we have shared interest and we both have an interest in balanced trade.
Jessica Mendoza: So what did China get from this deal, and are they happy with it?
Brian Schwartz: I think that China should be very happy with the deal, because now the US got the reciprocal tariffs down, and it's in a way, albeit with tariffs still on China from the US side, from what Secretary Bessent said, "A clean slate, a fresh start between both sides." That's clearly how the US are going at this from what China said around the same time of the deal. It is clearly how China's looking at this, that this is restarting negotiations between both countries, which a month ago, I'll tell you, I didn't think was ever going to happen. And that's why it's super positive for China. China's goal was to have some of the tariffs dropped. I don't think it was any more complicated than that. I don't know if they expected the agreement to be made this weekend and then the tariffs were going to be announced to be dropped. But I think that the goal short and long-term by China was to get these tariffs dropped off of them a little bit, and the US gave them that.
Jessica Mendoza: And for the US, did the US get the deal that they wanted?
Brian Schwartz: Well, I think that the US got as close to an equal deal with getting the tariffs off of US goods from China, at least a chunk of them. And I think that is a win. I think that as the president said in these negotiations with China and other countries, the US holds the cards. And I do agree with him there. I do think that's true.
Jessica Mendoza: For Scott Bessent was this a win?
Brian Schwartz: Yes, 100%. And a major win, because again, dealing with China has been among his top priorities, and if not arguably his number one priority since being brought into the trade negotiations with the other US officials. And it is a momentous moment for Scott Bessent's career as treasury secretary, and I think if he can keep racking up wins with China, it's a big deal for his career.
Jessica Mendoza: At this point, where does US and China trade go from here?
Brian Schwartz: I think that there's going to be future talks. The expectation is in a matter of weeks, they're going to be talking again. I think they're still a long ways away from getting some sort of major trade back and forth deal happening beyond the drop of tariffs, but we'll have to wait and see.
Jessica Mendoza: After the deal was announced, stock markets in the US and elsewhere surged. The dollar rose, bond yields went up, and exporters breathed a sigh of relief, at least temporarily. These talks and the deal that was reached, what does this tell other countries about what negotiating with the US going forward might look like?
Brian Schwartz: I think the administration has been clear that if you come there with reasonable expectations, which I think the Chinese to be fair to them did. I think that the Chinese came in knowing they could not ask for the barn, you have to come in and ask for a half the barn or space somewhere else, and you have to be realistic because of who's running the show on the US side, and that's President Trump, who is a big believer in the tariffs.
Jessica Mendoza: Does this say to you that maybe the Trump administration's approach to tariffs, as wild as it has been the last few weeks, that it's effective?
Brian Schwartz: I think it has put the squeeze on a lot of countries to come to the table, and renegotiate trade deals and renegotiate business with the United States. It may not be changing anything in the short term with how we deal with other countries on trade, but it does pressure other nations, China included, to really take the US seriously now. That they're not playing around when it comes to trade, and that there is going to be a realignment on how the United States deals with other countries in trade and it shows that the President isn't playing around. And politically for other countries, for other country leaders, that's an important signal to take in, frankly.
Jessica Mendoza: That's all for today, Tuesday, May 13th. The Journal is a co-production of Spotify and The Wall Street Journal. Additional reporting in this episode from Jason Douglas, Rebecca Fung, and Lingling Wei. Thanks for listening. See you tomorrow.