If anything, the past few weeks have demonstrated the willingness of the Chinese to endure extreme economic hardship rather than lose face by instigating talks or being the first to make concessions.
An analysis by Dan Wang, the China director of political risk firm Eurasia Group, calculated that the impact of the US tariffs would knock 2 percentage points off China’s GDP – equating to at least 3 million job losses in the short term and another 30 million urban workers being subjected to at least a one-third wage cut. Undoubtedly, the severity of this pain underscored Beijing’s willingness to secure a swift de-escalation at the truce talks in Geneva on the weekend.
For now, Trump’s backdown largely puts paid to one of the core rationales for his tariff policy – it would usher in a great new epoch of US industry and re-onshore American manufacturing.
As US Treasury secretary Scott Bessent, who was America’s lead on the trade talks, put it: “Neither side wants a decoupling.” That might come as rude news to some of the more extreme China hawks in Trump’s team.
“This is a win of Bessent over Peter Navarro,” says Chucheng Feng, a Beijing-based analyst and founder of Hutong Research, an independent consultancy. Navarro has been a key architect of Trump’s tariff policy.
“Had Trump ignored Peter Navarro and opted for a 10 per cent tariff as a starting point for broader trade negotiations, the US might have avoided the chaos it finds itself in today.”
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Trump wagered America’s reputation as a reliable trading partner and lost, handing Chinese President Xi Jinping a card to play as the victim of US bullying – a not entirely unfounded appeal given that all of America’s trade allies have been swiped in the White House’s attempts to remake the global trading order.
Meanwhile, Beijing will be chalking up a win, viewing Xi’s decision to stand up to Trump as vindicated, and having positioned China as the alternative, rational global superpower that believes in the fundamentals of free trade abandoned by the US. It’s a line that will mostly land flat in countries such as Australia, where we are all too familiar with China’s capacity for trade vindictiveness, but will resonate in parts of the globe where US supremacy is already viewed with suspicion.
De-escalation is a welcome outcome, but the next 90 days contain no guarantees of a deal at the end. As economist Justin Wolfers points out, the half-life of this White House’s tariffs is about six to eight days. It’s a fraught environment to negotiate in.
We shouldn’t too quickly forget the pathway here. Trump and Xi subjected the world to a precarious gamble that racheted tensions and risked spilling over into areas beyond trade. It may still. We should all feel great unease when two superpowers stand eyeball to eyeball.
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