The illusion of progress in US-China tariff talks — why the pause is not a reset

Australia Broadcast Center

13-05-2025

Many Chinese workers may not realise the origin of their standard five-day, 40-hour work week.
Before 1995, workers in China only had one day off per week. Weekends, as they are understood today, simply didn't exist for the 1.2 billion Chinese population.
That changed when then-premier Li Peng issued a directive to align China's labour standards with international norms, facilitating its bid to join the World Trade Organization (WTO).
The policy shift marked a significant change in everyday life — an early and powerful example of how the Chinese government can reshape the rhythm of society overnight to serve strategic goals.
It symbolised Beijing's willingness to use its power to change the lifestyle of everyone in the country, as one of the outcomes of its 15-year negotiation with the United States.
The breakthrough of the working-hour system in China not just enhanced Beijing's will to open its door to the global market.
It was a symbol of adaptation — a gesture to a rules-based global economy.
But it also laid the foundations for today's differences with the US — tensions rooted in structural mismatches over trade, regulation and state power.
While the 90-day tariff truce between China and the US is seen as a relief and an optimistic message for the world, at the heart of the stand-off is a clash between fundamentally different systems.
The US increasingly views trade policy through a national security lens, aiming to reduce dependency on foreign supply chains, particularly those involving China.
Conversely, China remains committed to a model of state-led capitalism that prioritises global manufacturing dominance.
What's unfolding now is not a negotiation between equals, but a contest over who sets the rules — and whose system can withstand the pressure.
It's a clash of Xi Jinping's Chinese Dream and Donald Trump's America First.
Trade is no longer just about economics for the US — it has become a central part of its national security strategy.
The supply chain crisis during the COVID-19 pandemic exposed the fragility of relying on a single country — particularly China — for critical goods like pharmaceuticals and medical equipment.
In response, Washington has moved aggressively to "de-risk" and re-shore industries deemed strategic, including semiconductors, rare earths, and clean energy components.
The Biden administration's CHIPS and Science Act and Inflation Reduction Act are designed with this in mind: to reduce reliance on Chinese supply chains and invest in domestic capacity.
The logic is straightforward — if a geopolitical rival controls your access to essential goods, your security is compromised.
That logic now underpins bipartisan consensus in Washington. The Pentagon, the Commerce Department, and even Treasury are aligned in this approach.
Meanwhile, China continues to rely on the US to maintain its global trade dominance. The US remains one of China's largest export markets.
Access to the US not only brings revenue but also legitimises China's role in global commerce.
Since joining the WTO in 2001, China has used its manufacturing strength to climb the value chain, becoming the world's factory. But with that rise has come growing scrutiny.
At the core of the issue is how China uses its state apparatus to direct entire industries.
The Party can create a sector seemingly overnight — from solar panels to electric vehicles — through massive subsidies, cheap land, tax incentives, and government procurement.
The solar industry is one of the starkest examples.
In the early 2000s, Beijing picked it as a strategic priority. Within years, Chinese firms, backed by billions in subsidies, flooded the global market with low-cost panels, undercutting foreign competitors and forcing several Western manufacturers into bankruptcy.
The same playbook is now being applied to electric vehicles and battery technology.
But the Chinese system doesn't just build industries — it can also destroy them. Once state subsidies are withdrawn or redirected, whole sectors can collapse.
For domestic and international players alike, the uncertainty generated by this top-down industrial policy is a risk.
This dynamic — of building with the state and eroding competition through state support — has angered not only the US, but also the EU, Canada, and others.
The US has long accused China of failing to fulfil its WTO commitments.
These include promises to reduce subsidies, increase market access, and protect intellectual property.
However, over the years, Beijing has doubled down on support for state-owned and strategically chosen enterprises.
Despite entering the WTO as a developing country, China now dominates sectors it once pledged to liberalise.
In areas like digital trade and cloud services, the barriers to foreign firms remain high, while Chinese companies enjoy global access and home-market protection.
For Washington, this is no longer just about economics — it's about rules, reciprocity, and the contract of trust.
Trade deficits can be tolerated; systemic manipulation cannot.
That's why, even with a temporary tariff easing, the tone in Washington remains sceptical.
The current round of tariffs is broader than the last.
"Firstly, to prevent China from rerouting exports through third countries into the US.
"Secondly, this is no longer just economic competition — it's a mix of economic and national security concerns. Ultimately, it's about who controls the supply chains."
On the Chinese side, there is deep resistance to changing course.
Under Xi Jinping, the role of the Party in economic life has only strengthened.
Private firms are now expected to align with state goals. National champions like Huawei and BYD are not just businesses — they are arms of Beijing's broader global ambition.
The Belt and Road Initiative, too, is part of this strategy: to shape global economic flows in ways that favour Beijing's economic influence and geopolitical leadership.
So while China wants access to the US market to maintain growth, legitimacy, and influence, it's unwilling to concede control.
The ideological difference is stark.
In the West, competition is seen as a process governed by rules and independent oversight.
In China, the outcome — national strength — justifies the means.
"China should stop giving companies excessive subsidies. Its economic policy is not built on a fair system — but on doing whatever it takes to crush competitors.
"The US should focus on the fiscal deficit and public debt. Even after the 90-day truce ends, major structural issues will remain."
Even within the Asia-Pacific, this tension is playing out.
Countries like Japan, Indonesia and Malaysia, which once emulated aspects of China's state-driven model, are increasingly distancing themselves.
As their economies mature, they recognise the need to reduce market distortions and avoid over-reliance on a single dominant player.
This growing scepticism toward China's approach reflects a broader unease in the region.
In this context, the 90-day pause looks less like a breakthrough and more like a holding pattern.
It buys time — politically useful for both Trump and Xi, given the domestic pressures. But it postpones rather than resolves the conflict.
For Australia, this presents both risks and opportunities.
The trade relationship with China is strong, largely due to complementary rather than competitive industries.
But Canberra faces a strategic dilemma.
Economically, it can benefit from global supply chain shifts and Chinese demand.
Politically and militarily, it is tied closely to the US and must respond to the changing security environment.
Prime Minister Anthony Albanese will ultimately have to choose a side between national security and economic gains.
Australia stands to benefit economically from the rising geopolitical rivalry between China and the US.
"Compared with other countries, trade difficulties between China and Australia will be less."