The China deal – for now
Trump certainly keeps those announcements coming. Here’s the CNN spin on the deal with China revealed today:
The United States and China agreed Monday to drastically roll back tariffs on each other’s goods for an initial 90-day period, in a surprise breakthrough that has de-escalated a punishing trade war and buoyed global markets.
The announcement, which was made in a joint statement, comes after a weekend of marathon trade negotiations in Geneva, Switzerland by officials from the world’s two largest economies, during which both sides touted “substantial progress.”
Both sides recognize “the importance of a sustainable, long-term, and mutually beneficial economic and trade relationship,” they said in the statement.
Global investors are cheering a thaw in the trade war sparked by US President Donald Trump’s massive tariffs, which have roiled financial markets, disrupted supply chains and stoked recession fears.
A “surprise breakthrough”? Most people on the right are not the least bit surprised, having considered the “punishing trade war” an opening move from Trump. In fact, I don’t even think that CNN is surprised – they might be disappointed, perhaps, because I believe they’d rather “stoke” more “recession fears.”
At any rate, this is probably still early on in the jockeying for position between the US and China. It’s a good sign, however.
Some details:
The mutual tariff revisions will be imposed by May 14. Trump’s 20% fentanyl-related levies on China, imposed in February and March, will stay. However, each side has agreed to lower “reciprocal” tariffs on the other by 115 percentage points for 90 days.
That effectively means the US will temporarily lower its overall tariffs on Chinese goods from 145% to 30%, while China will cut its levies on American imports from 125% to 10%, according to the joint statement.
Under the agreement, China will also suspend or cancel its non-tariff countermeasures imposed on the US since April 2.
And here’s Treasury Secretary Scott Bessent:
The consensus from both delegations is neither side wants to be decoupled, and what have occurred with these very high tariffs … was an equivalent of an embargo, and neither side wants that. We do want trade. We want more balance in trade. And I think both sides are committed to achieving that.
Statements by the Chinese were similarly positive.
Which excludes cars, steel, and aluminum. Cars are probably irrelevant since we don’t really import full cars from China to any meaningful extent AFAIK. Of course we do import lots of electronics for cars that are assembled here, but I assume those will be at 30%. We do import large amounts of steel and aluminum for said cars as well as all sorts of other products though.
I noticed today on Newegg that PC part prices are quite high. I don’t expect that stuff to come down in a hurry. It’ll likely be more than a month before some stuff comes down perhaps a little bit, but with all the instability and uncertainty I’m not expecting much.
So far it seems like Trump wants at minimum a 10% on everything coming in from China. That’s certainly a lot more managable than 145%. He seems determined to keep higher tarrifs on steel and aluminum in hopes of incentivising more domestic production, or at least friendshoring more production to places like Canada. But who knows?
Circa 2013 , one of my elderly great uncles -my dad’s uncle- mentioned that before WW2 some of the older people were concerned that the Japanese were buying US scrap metal.
I often think about this when the subject of China comes up.
Except now its worse as we were not so dependent on Japan pre WW2 as we are on China now.
And China is a giant compared to Japan.
A “surprise breakthrough”? Most people on the right are not the least bit surprised, having considered the “punishing trade war” an opening move from Trump.
Exactly.
Jon baker:
From an e.e. cummings poem:
Well, the markets like the temporary suspension of economic “hostilities” between the US and China. Woohoo.
Listening to the commentary, it was suggested that this might mean that negotiations are going back to square one. I don’t doubt that we can inflict great pain on China with tariffs. But they will cause us some significant pain. My guess is that China (its government) is willing to tolerate a substantial amount of suffering, and we are not. (What did Churchill say about democratic governments?)
I think Trump has a moderately clear and reasonable idea of how he’d like US/China relations to end up. And he’s got some tools and weapons to help him get there. I am just doubtful it will work.
@TommyJay:My guess is that China (its government) is willing to tolerate a substantial amount of suffering, and we are not.
I really doubt that anything tariff-related is going to entail a substantial amount of suffering for the US, for two reasons:
1) We do not live in a free trade utopia and we never have. We have all kinds of non-tariff trade barriers and regulations that raise the cost of pretty much everything.
2) The things we buy are so marked up that the cost of the imported inputs is usually not that noticeable. For example, Nike makes shoes in Vietnam, Indonesia, and China. You pay $100 for them, but the store you buy them from didn’t pay $100 for them and Nike sure as hell didn’t pay $100 for them. Much of the cost of what we buy in the US goes to pay the wages and salaries and bonuses of the Americans we buy those things from, as well as the wages and fuel required to transport them, etc.
So if the imported input costs 20% of the retail price and that goes up 50% because of tariffs, you’re not going to see the price go up 50%. You might see it go up 5%, or 10%, or 7%, or not at all. The business may change its sourcing, cut other costs to make up the difference, charge retailers more, or any combination thereof that preserves its margin or market share.
Good points Niketas.
In my prior sentence, I inferred that the pain of these mutual tariffs is asymmetric, in that I expect China’s pain will be worse than ours. So, while I don’t expect a great deal of pain on our part; our tolerance for it is very much less. And yes, I am thinking that authoritarian governments are generally heartless about the welfare of their populace.
TommyJay on May 12, 2025 at 8:38 pm:
“… I am thinking that authoritarian governments are generally heartless about the welfare of their populace.”
This Federalist article comparing portions of Chinese labor as literally often slave labor was a bracing slap in the face, as something we tend to forget:
https://thefederalist.com/2025/05/12/trumps-tariffs-are-a-global-war-on-slave-labor/