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Time of India
13-05-2025
- Business
- Time of India
'US has chickened out': How Xi Jinping called Donald Trump's bluff on trade war
According to some observers, Xi didn't flinch. It was Trump who blinked. After months of tit-for-tat tariff escalations, the United States and China agreed to a sweeping de-escalation in their trade war, marking a significant retreat from President Donald Trump 's aggressive stance. In a deal announced after two days of high-level negotiations in Geneva, the US agreed to cut tariffs on Chinese goods to 30% from 145% for 90 days. In response, Beijing lowered its tariffs on US goods to 10% from 125%. The truce stunned markets and analysts alike, particularly because the agreement appeared to grant China most of what it had sought from the beginning - and without any major structural reforms to its economy. The deal includes the suspension of Trump's 'Liberation Day' tariffs, the establishment of a bilateral working group led by treasury secretary Scott Bessent, and a shared commitment to crack down on fentanyl trafficking, which could result in a further 20% tariff rollback. Why it matters For Chinese President Xi Jinping , the outcome is a validation of his high-stakes strategy to resist Trump's economic pressure campaign. The sharp reduction in tariffs not only sent global stock markets soaring but also defused growing anxiety within the US business community. Domestic political concerns, particularly among Republicans worried about midterm elections, also played a role in accelerating a deal. 'The lesson is economic power matters,' Gerard DiPippo, associate director of the RAND China Research Center, told Bloomberg. 'For Beijing, it's a strategic vindication.' 'This is arguably the best outcome that China could have hoped for - the US backed down,' Trey McArver, co-founder of research firm Trivium China, told Bloomberg. 'Going forward, this will make the Chinese side confident that they have leverage over the US in any negotiations.' The art of standing still What makes China's position remarkable is how little it changed. While Washington raised tariffs to historic levels and leaned on frenetic public threats, Beijing stuck to its script: stay silent, absorb the shock, and wait for the pressure to flip. by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like They Lost Their Money - Learn From Their Lesson Expertinspector Click Here Undo Xi refused to take Trump's calls. He ordered rate cuts, fortified the domestic economy, and sent diplomats on a global charm offensive to decry 'US bullying.' Beijing calculated that any short-term pain would be offset by long-term gains. It worked. As factories in China slowed and youth unemployment climbed, Xi's government leaned into nationalist messaging. The public was told this was not just a trade dispute, but a sovereignty issue. In Washington, Trump was met with a different kind of backlash-rising prices, corporate lobbying, and disquiet among Republican lawmakers worried about midterm fallout. The president's own allies began to call for a reset. Economists warned that Trump had overplayed his hand. 'The US blinked first,' Alicia García-Herrero, chief Asia-Pacific economist at Natixis, told the Financial Times. 'It thought it could raise tariffs almost infinitely without being hurt, but that hasn't been proven right.' Zoom in Under the Geneva truce, the 145% average US tariff on Chinese goods will fall to around 30%, with targeted rates as low as 10% for some sectors. The rollback excludes items like steel, aluminum, cars and pharmaceuticals - areas the US views as strategic. China, for its part, has suspended most of the non-tariff measures it imposed since April, including export controls on rare earths, but the details remain murky. 'We have learned our lesson from Trump 1.0, where we saw that tariff negotiations can go back and forth rather than being achieved overnight,' Dong Yan of the Chinese Academy of Social Sciences told Bloomberg. Economists at Bloomberg estimate the effective US tariff shock on China now sits just below 40%, down from over 100%. That still makes China the most heavily-tariffed major trading partner of the US Between the lines The speed and scope of the tariff rollback surprised many experts, not because a truce wasn't expected, but because of how much ground the US appeared to cede. The US had imposed punitive tariffs under the guise of economic 'shock therapy,' but in Geneva, that strategy unraveled. The choice of Switzerland - away from cameras and domestic audiences - was itself a sign that the US was ready to compromise. Deutsche Bank strategist George Saravelos told Bloomberg, 'All of this is a clear signal of negotiations moving into a more conciliatory and respectful phase.' US business lobbies and even defense contractors pressured the White House behind the scenes, alarmed by export controls from China on rare earth minerals and other retaliatory measures. According to one former Trump official, 'China's export restrictions to the United States worked. It created enough pain to compel the US government to plead with the Chinese government to reverse course.' Even as China refused to budge on key economic practices - including the structure of its state-owned enterprises - it managed to reset the table of negotiations, trading retaliation for stability. What they're saying 'The US has chickened out ,' said one popular Chinese social media post, as per a Financial Times report. 'The US blinked first,' echoed Alicia García-Herrero, chief Asia-Pacific economist at Natixis. Trump struck a surprisingly conciliatory tone following the agreement, framing the deal as a mutual win. 'We're not looking to hurt China. China was being hurt badly,' he said. 'They were closing up factories. They were having a lot of unrest, and they were very happy to be able to do something with us.' Treasury secretary Scott Bessent, the lead US negotiator, emphasized that 'throughout the trade process, we have had a plan.' But even he acknowledged that the process moving forward will be complex: 'It's going to take a while to paper it. You know, that's not the easiest thing to paper.' Xi, speaking in Beijing at a summit with Latin American leaders, took a subtle swipe at US tactics: 'Bullying or hegemonism only leads to self-isolation.' 'There are no winners in tariff wars or trade wars,' Xi said. 'Great changes unseen in a century are accelerating, which have made unity and cooperation among nations indispensable.' The big picture Despite the détente, deep structural tensions between Washington and Beijing remain. Both sides continue to view trade through a national security lens. Trump, while portraying the deal as a reset, warned that tariffs could still rise 'substantially higher' if progress stalls over the next 90 days. 'The US-China trade negotiations are going to be like a rollercoaster,' Scott Kennedy of the Center for Strategic and International Studies told Bloomberg. 'Markets can breathe a temporary sigh of relief but we're nowhere near out of the woods.' Yet the broader message is clear: Xi's refusal to play by Trump's script -combined with a global economy that couldn't absorb further shocks -forced a major shift. China didn't just weather the storm; it reshaped it. 'Standing up to Trump does not mean that you win. But giving in guarantees that you lose,' wrote Jonathan Chait in The Atlantic. The coming months will determine whether the truce can evolve into a more durable arrangement. But for now, Beijing has demonstrated that economic resilience and diplomatic patience can be powerful tools -even against a president who prides himself on disruption. Stay informed with the latest business news, updates on bank holidays and public holidays . AI Masterclass for Students. 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The Star
13-05-2025
- Business
- The Star
Xi's defiance pays off as Trump meets most Chinese trade demands
BEIJING: Xi Jinping's decision to stand his ground against Donald Trump could hardly have gone any better for the Chinese leader. After two days of high-stakes talks in Switzerland, trade negotiators from the world's biggest economies announced Monday (May 12) a massive de-escalation in tariffs. In a carefully coordinated joint statement, the US slashed duties on Chinese products to 30% from 145% for a 90-day period, while Beijing dropped its levy on most goods to 10%. The dramatic reduction exceeded expectations in China, and sent the dollar and stocks soaring - providing some much-needed market relief for Trump, who is facing pressure as inflation looks set to speed up at home. Chinese equities also surged. The deal ended up meeting nearly all of Beijing's core demands. The elevated "reciprocal' tariff for China, which Trump set at 34% on April 2, has been suspended - leaving America's top rival with the same 10% rate that applies to all countries including the UK, a longtime ally that reached a deal with the US last week. The US met Beijing's call for a point person for talks by setting up a mechanism headed by Treasury Secretary Scott Bessent. And the two sides agreed to take "aggressive actions' to stem the flow of fentanyl, which could eventually lead to the elimination of the additional 20% tariff. "This is arguably the best outcome that China could have hoped for - the US backed down,' said Trey McArver, co-founder of research firm Trivium China. "Going forward, this will make the Chinese side confident that they have leverage over the US in any negotiation.' Xi struck a defiant tone ever since Trump began raising US tariffs to their highest level in a century. In contrast to other world leaders, he refused Trump's repeated calls to get on the phone with the US president - even as levies rose to levels that China called a "joke.' Officials in Beijing instead cut key interest rates and took other steps to fortify China's economy, while dispatching diplomats around the world on a charm offensive to secure fresh markets for Chinese products and decry US "bullying.' Although China began feeling economic pain, with factory activity starting to slump, Xi enjoyed a surge of nationalism at home encouraging him to avoid bending to US coercion. Trump, meanwhile, faced increasing pressure from business lobbies, market players and members of his party who feared losing their seats in mid-term elections next year. "The lesson is economic power matters,' said Gerard DiPippo, associate director of the RAND China Research Center. "For Beijing, it's a strategic vindication, and one that makes Xi's focus on manufacturing and self-reliance harder to argue against, at least from an economic security perspective.' Trump said Monday that he could speak to Xi as soon as the end of this week, as he touted a "total reset' in ties with China. He noted that the deal doesn't include sectoral tariffs on cars, steel, aluminum and potentially pharmaceuticals. Bessent told CNBC separately that the US doesn't want a generalised decoupling but wants to protect strategic necessities including steel, medicines and semiconductors. "The relationship is very good,' Trump said of China at a briefing on Monday. "We're not looking to hurt China. China was being hurt badly. They were closing up factories. They were having a lot of unrest, and they were very happy to be able to do something with us.' Once the trade talks were announced last week, the choice of Geneva already indicated the US was ceding some ground. China has long preferred that substantive talks take place in private, away from television cameras and prying reporters. The highly stage-managed truce was notable along with the fact Trump didn't front-run the news on social media, according to Deutsche Bank strategist George Saravelos. "All of this is a clear signal of negotiations moving in to a more conciliatory and respectful' phase, he added, citing that as another Chinese demand. For China's part, Vice Premier He Lifeng's team agreed to roll back "non-tariff' measures imposed since Liberation Day, without elaborating. Getting relief on export controls imposed on rare earths was a priority for the White House, after it came under pressure from firms using such minerals for industrial magnets. Beijing also didn't pledge to increase investment from the US, and Bessent said purchase agreements might come later. US Trade Representative Jamieson Greer made clear the "phase one' deal from Trump's first trade war, which committed China to buying US$200 billion of US goods, hadn't been under discussion. "The talks were very much focused on how do we get the tariff levels to something that is not an embargo, but still allows the United States to pursue its goal of trade deficit reduction,' he said. China now has a three-month window to strike a broader deal with the US that rebalances trade, while safeguarding its own interests. Beijing has devoted years since Trump's first term to reducing its dependence on the US for key imports, buying more agricultural products from partners in emerging markets such as Brazil. Just like during Trump's first term, China will not compromise on key parts of its economic and political system, including how state-owned enterprises are run, according to Song Hong, deputy director of the Institute of Economics at the Chinese Academy of Social Sciences, a ministry-level institution under the State Council, akin to China's cabinet. "Beyond the red lines, there are a lot of gaps we can fill through negotiations,' he added, citing things like tariffs, intellectual property rights and subsidies. Dong Yan, director of the trade department at another institute under the Chinese Academy of Social Sciences, said it was a good development while cautioning that Trump could yet hike them again. "We have learned our lesson from Trump 1.0, where we saw that tariff negotiations can go back and forth rather than being achieved overnight,' she said. The reduction in tariffs should make it easier for Chinese policy makers to hit a growth target of about 5% this year. ING bank upgraded its gross domestic product forecast to 4.7% for this year after the deal, saying May and June exports to the US are likely to bounce back sharply. The suspension window could lead to more frontloading of shipments and production, according to Robin Xing, chief China economist at Morgan Stanley, who also cautioned that a "durable resolution remains challenging given the complex bilateral relationship.' Still, the Trump administration's retreat from sky-high tariffs wouldn't have occurred if China hadn't responded so forcefully, not only with retaliatory duties but also export controls and other steps, according to Scott Kennedy, a China expert at the Washington-based Center for Strategic and International Studies. "This will strengthen Xi's political standing at home and his diplomatic standing internationally,' Kennedy said. "He's the big winner from this round of the conflict.' - Bloomberg
Malaysian Reserve
13-05-2025
- Business
- Malaysian Reserve
Xi defiance pays off as Trump meets most China trade demands
XI JINPING'S decision to stand his ground against Donald Trump could hardly have gone any better for the Chinese leader. After two days of high-stakes talks in Switzerland, trade negotiators from the world's biggest economies announced Monday a massive de-escalation in tariffs. In a carefully coordinated joint statement, the US slashed duties on Chinese products to 30% from 145% for a 90-day period, while Beijing dropped its levy on most goods to 10%. The dramatic reduction exceeded expectations in China, and sent the dollar and stocks soaring — providing some much-needed market relief for Trump, who is facing pressure as inflation looks set to speed up at home. Chinese equities also surged. The deal ended up meeting nearly all of Beijing's core demands. The elevated 'reciprocal' tariff for China, which Trump set at 34% on April 2, has been suspended — leaving America's top rival with the same 10% rate that applies to all countries including the UK, a longtime ally that reached a deal with the US last week. The US met Beijing's call for a point person for talks by setting up a mechanism headed by Treasury Secretary Scott Bessent. And the two sides agreed to take 'aggressive actions' to stem the flow of fentanyl, which could eventually lead to the elimination of the additional 20% tariff. 'This is arguably the best outcome that China could have hoped for — the US backed down,' said Trey McArver, co-founder of research firm Trivium China. 'Going forward, this will make the Chinese side confident that they have leverage over the US in any negotiations.' Xi struck a defiant tone ever since Trump began raising US tariffs to their highest level in a century. In contrast to other world leaders, he refused Trump's repeated calls to get on the phone with the US president — even as levies rose to levels that China called a 'joke.' Officials in Beijing instead cut key interest rates and took other steps to fortify China's economy, while dispatching diplomats around the world on a charm offensive to secure fresh markets for Chinese products and decry US 'bullying.' Although China began feeling economic pain, with factory activity starting to slump, Xi enjoyed a surge of nationalism at home encouraging him to avoid bending to US coercion. Trump, meanwhile, faced increasing pressure from business lobbies, market players and members of his party who feared losing their seats in mid-term elections next year. 'The lesson is economic power matters,' said Gerard DiPippo, associate director of the RAND China Research Center. 'For Beijing, it's a strategic vindication, and one that makes Xi's focus on manufacturing and self-reliance harder to argue against, at least from an economic security perspective.' Trump said Monday that he could speak to Xi as soon as the end of this week, as he touted a 'total reset' in ties with China. He noted that the deal doesn't include sectoral tariffs on cars, steel, aluminum and potentially pharmaceuticals. Bessent told CNBC separately that the US doesn't want a generalized decoupling but wants to protect strategic necessities including steel, medicines and semiconductors. 'The relationship is very good,' Trump said of China at a briefing on Monday. 'We're not looking to hurt China. China was being hurt badly. They were closing up factories. They were having a lot of unrest, and they were very happy to be able to do something with us.' Once the trade talks were announced last week, the choice of Geneva already indicated the US was ceding some ground. China has long preferred that substantive talks take place in private, away from television cameras and prying reporters. The highly stage-managed truce was notable along with the fact Trump didn't front-run the news on social media, according to Deutsche Bank strategist George Saravelos. 'All of this is a clear signal of negotiations moving in to a more conciliatory and respectful' phase, he added, citing that as another Chinese demand. For China's part, Vice Premier He Lifeng's team agreed to roll back 'non-tariff' measures imposed since Liberation Day, without elaborating. Getting relief on export controls imposed on rare earths was a priority for the White House, after it came under pressure from firms using such minerals for industrial magnets. Beijing also didn't pledge to increase investment from the US, and Bessent said purchase agreements might come later. US Trade Representative Jamieson Greer made clear the 'phase one' deal from Trump's first trade war, which committed China to buying $200 billion of US goods, hadn't been under discussion. 'The talks were very much focused on how do we get the tariff levels to something that is not an embargo, but still allows the United States to pursue its goal of trade deficit reduction,' he said. China now has a three-month window to strike a broader deal with the US that rebalances trade, while safeguarding its own interests. Beijing has devoted years since Trump's first term to reducing its dependence on the US for key imports, buying more agricultural products from partners in emerging markets such as Brazil. Just like during Trump's first term, China will not compromise on key parts of its economic and political system, including how state-owned enterprises are run, according to Song Hong, deputy director of the Institute of Economics at the Chinese Academy of Social Sciences, a ministry-level institution under the State Council, akin to China's cabinet. 'Beyond the red lines, there are a lot of gaps we can fill through negotiations,' he added, citing things like tariffs, intellectual property rights and subsidies. Dong Yan, director of the trade department at another institute under the Chinese Academy of Social Sciences, said it was a good development while cautioning that Trump could yet hike them again. 'We have learned our lesson from Trump 1.0, where we saw that tariff negotiations can go back and forth rather than being achieved overnight,' she said. The reduction in tariffs should make it easier for Chinese policy makers to hit a growth target of about 5% this year. ING bank upgraded its gross domestic product forecast to 4.7% for this year after the deal, saying May and June exports to the US are likely to bounce back sharply. The suspension window could lead to more frontloading of shipments and production, according to Robin Xing, chief China economist at Morgan Stanley, who also cautioned that a 'durable resolution remains challenging given the complex bilateral relationship.' Still, the Trump administration's retreat from sky-high tariffs wouldn't have occurred if China hadn't responded so forcefully, not only with retaliatory duties but also export controls and other steps, according to Scott Kennedy, a China expert at the Washington-based Center for Strategic and International Studies. 'This will strengthen Xi's political standing at home and his diplomatic standing internationally,' Kennedy said. 'He's the big winner from this round of the conflict.' –BLOOMBERG
Politico
12-03-2025
- Business
- Politico
China throws money after tech, while Trump pivots away
With help from Alfred Ng As the world's two biggest economies race to dominate technologies of the future, like artificial intelligence and quantum computing, they're betting on opposing industrial strategies. China just previewed a new state VC fund, intended to support startups focusing on cutting-edge fields like semiconductors, quantum, AI and renewable energy, with an eye-popping target of $1 trillion yuan, or roughly $138 billion. President Donald Trump, meanwhile, used his first address before Congress to attack America's largest attempt at directly investing in high-tech manufacturing. He called for lawmakers to undo the CHIPS and Science Act, the 2022 law that has been pouring some $50 billion into rescuing the domestic semiconductor sector. 'China is dialing its industrial policy up to 11 while the U.S. is rolling back its industrial policy,' is how Gerard DiPippo, the acting associate director of the RAND China Research Center, put it. The conventional wisdom lately has been a little different. For a while, it looked like America was re-embracing high-tech government intervention. The CHIPS Act and the Inflation Reduction Act, another signature Biden-era policy that Trump wants to repeal, represented a return to industrial policy on a scale the U.S. had not seen in decades. Trump himself ordered the creation of the U.S.'s first sovereign wealth fund, an ill-understood idea that he's said could invest in state-of-the-art manufacturing hubs and may be closer to what China has in mind. But in the broader sense, U.S. tech policy largely amounts to assuming the private sector will carry the ball. More structured, long-term government investments have been subject to powerful political winds that can change from administration to administration, and recently even month to month. Trump's upcoming budget request is expected to make major cuts to the science agencies that conduct basic tech research. And his U.S. sovereign wealth fund — first suggested by former President Joe Biden last fall — is still a purely 'look into it' proposal. Meanwhile, China plows forward with a strong emphasis on industrial policy — one that, on tech, actually dates over a full decade. Its ongoing 2015 'Made in China 2025' plan was designed to upgrade its manufacturing of high-tech goods and achieve self-sufficiency in the most critical supply chains. The dueling statements last week were a striking reminder of the persistency gap between Beijing's continuous, state-backed policies versus the U.S.'s more fragmented and sometimes reactive market-driven approach, said Kyle Chan, a researcher at Princeton University who writes the popular newsletter 'High Capacity' on industrial policy. Consistency matters a lot in certain industries like semiconductors, where factories cost so much that some chipmakers bet their entire future when they plan a new investment. China's semiconductor-specific war chest, known as the 'Big Fund,' goes back to 2014 and started spending its third installment in January. There's no true U.S. counterpart to Chinese industrial policy. 'The closest equivalent would be maybe DARPA or In-Q-Tel, which supports the intelligence community, but those are dealing with much smaller investments,' said Will Rinehart, an economist specializing in tech policy at the American Enterprise Institute. 'Just generally speaking, the U.S. doesn't have equivalently sized, government-owned investment funds.' At times, it has seemed to inch closer in recent years. The Obama Department of Energy extended large loans to startups like Abound Solar and the controversial Solyndra to help them bring advanced green technologies to market. Biden's ability to get CHIPS passed with bipartisan votes marked a notable shift among Republicans, a party that traditionally balked at industrial policy as inefficient government interference. Will Trump's reversion make a difference? That hinges on broader questions, like whether industrial policy even works — and what it means for two vastly different countries to make it work. Compared to other advanced economies, the U.S. has historically been the most averse to any consistent use of industrial policy. 'The U.S. is a market-oriented, commercially-oriented system. China is increasingly actually a national security and capacity-oriented system,' said DiPippo. 'We're playing different games, and that means the rules are different, and it's hard to say who wins if you're both playing by different rules.' The effectiveness of industrial policy depends, too, on the technology in question. For AI, the U.S.'s leadership in the best models and chips largely came from the private sector. Even China's notable win — DeepSeek, the powerful-and-cheap new AI model — is no obvious poster child for industrial policy. 'There might have been some sort of broader support in terms of data access,' said DiPippo. 'But it seems like they were just a scrappy firm that had some really good engineers.' The difference could matter more in industries like chip manufacturing and quantum computing, where national security implications may require long-term investments to arrive faster than the market demands. That's where some Republicans continue seeing a role for subsidies — as recent hesitancy toward Trump's demands to repeal Biden-era laws shows. Trump's approach hasn't exactly been a model of free-market thinking, of course: Like Biden, he has used federal power as a tool to drive economic outcomes. Unlike Biden, his favorite lever is tariffs, which he treats as a blunt force to get desired policy outcomes out of chipmakers like TSMC, 'for free' as he says. While it may be where the comparison ends, that tactic to prod the private sector into action is one similarity the two countries still appear to share. 'There's a very strong, almost like parallel between what Trump is trying to do and how he's trying to do it, and honestly, what China's whole sort of industrial policy approach has been,' Chan said. 'Use your greatest asset — which is access to your market — to bring foreign companies, to bring your own companies and keep them within your own borders.' TAPPING THE BRAKES The California Privacy Protection Agency fined Honda $632,500 in a settlement resolving alleged unfair data collection practices, as my colleague Tyler Katzenberger reported from Sacramento this morning. The agency claimed Honda made it difficult for customers to opt out of having their data sold or shared with advertisers in violation of state law. Along with the fine, Honda agreed to make it easier for owners to opt out, and is required to consult a designer to review its methods for privacy requests. The settlement marks the first time California went after an automaker, but the industry has found itself under the microscope as of late over how it handles people's data. Texas and Arkansas sued General Motors for alleged privacy violations, while the Federal Trade Commission banned the company from sharing drivers' data to consumer reporting agencies for five years. Cars over the last decade have quietly become a major source of data for companies to collect and sell, siphoning information on a car's location, a person's phone contacts, and even the air pressure in the tires. Digital Future Daily took a look at this trend and the potential data risks back in 2022. CRYPTO RULE HEADED FOR REPEAL A crypto regulation requiring financial transparency may soon be revoked after the House voted to repeal it Tuesday. The Biden-era rule required certain cryptocurrency brokers to report digital asset transactions to the Internal Revenue Service and collect customer information, which supporters said would provide more visibility into unreported transactions, POLITICO's Bernie Becker reported. The House voted 292-132 to repeal the rule, and it is headed to the Senate for final action before it goes to President Trump's desk, who is expected to sign it. POST OF THE DAY THE FUTURE IN 5 LINKS Stay in touch with the whole team: Derek Robertson (drobertson@ Mohar Chatterjee (mchatterjee@ Steve Heuser (sheuser@ Nate Robson (nrobson@ Daniella Cheslow (dcheslow@ and Christine Mui (cmui@
