What's happening with US-China trade talks?

by Jenny Leonard and Hugo Miller

The US and China both reported “substantial progress” after two days of talks in Switzerland aimed at de-escalating a trade war, marking what Chinese Vice Premier He Lifeng called “an important first step” toward resolving differences.

While neither side immediately announced specific measures on Sunday, He said the world’s two biggest economies agreed to create a mechanism for further talks, led by US Treasury Secretary Scott Bessent and himself. Bessent said the US would share details on Monday and He promised a joint statement.

“As we say back in China, if the dishes are delicious, the timing doesn’t matter,” Chinese Vice Commerce Minister Li Chenggang, who last month was appointed trade representative, told reporters in Geneva. “Whenever it gets released, it will be good news for the world.”

Bessent and Trade Representative Jamieson Greer will hold a press briefing at 9 a.m. in Geneva on Monday to discuss the talks, according to a US official familiar with the preparations. 

Negotiators sought to convey a positive tone in separate comments to reporters at the weekend, with He complimenting the US side’s professionalism and US Greer suggesting trade clashes between the two sides may be overrated.

“It’s important to understand how quickly we were able to come to an agreement, which reflects that perhaps the differences were not as large as maybe thought,” Greer said. “That being said, there was a lot of groundwork that went into these two days.” 

As the trading week got underway in Asia, Chinese stocks posted modest gains and the yuan strengthened. The benchmark CSI 300 Index for onshore shares rose as much as 1.2% on Monday and was close to recouping its losses since US President Donald Trump’s “Liberation Day” announcement of tariffs on April 2.  

What Bloomberg Economics Says ...

“As we wait to see what ‘substantial’ means, our analysis shows that even a big drop in tariffs from their current sky-high levels would still leave a big hole in bilateral trade ... In our lower tariff scenarios, the drop in exports — and the impact on China’s GDP — is smaller. Even so, with tariffs on many products above 30% even under the ‘Success’ scenario — substantially higher than those faced by competitors — China’s exports to the US could still drop by nearly 60% over the medium term.”

— Jennifer Welch, Chief Geoeconomics Analyst 

“While we remain skeptical that anything of substance could be agreed upon after only two days of talks, it’s clear that both sides are looking to de-escalate the situation,” Win Thin, global head of markets strategy at Brown Brothers Harriman & Co., wrote in a note.

The announcements followed hours of meetings between Bessent, Greer and He, hosted by the Swiss ambassador to the United Nations, whose residence served as the venue. Bessent and He both said the two sides made “substantial progress.” 

The Chinese team also included Vice Finance Minister Liao Min, a veteran of negotiations from the first US-China trade war.

Breaking the stalemate in talks and establishing a channel for negotiations helps clear the path for a first leaders’ call between the two nations since Trump returned to office. The US president told reporters Friday he might speak to his Chinese counterpart after the meetings, depending on what Bessent advised him.

Tensions between the world’s biggest economies reached a new high point after Trump steadily increased tariffs on Beijing to 145%. The duties are supposed to address China’s role in the fentanyl trade, its massive trade surplus with the US, and respond to Beijing’s retaliatory measures imposed after Trump’s opening salvo. China in response increased its tariffs on US goods to 125%.

The tariff tit-for-tat led to a standoff with neither side wanting to budge and no off-ramp in sight. Eventually, both sides acknowledged it’s necessary to reduce tensions and tariffs and announced public talks. 

Going into the weekend, the US wanted to secure the removal of China’s export restrictions on rare earths used to make magnets as a range of industries face disruption, according to people familiar with the preparations. The US was targeting bringing tariffs below 60% as a first step and wanted to discuss ways Beijing could reduce exports of the ingredients used to make fentanyl, the people said.

Fears of empty shelves may have contributed to the urgency for the meetings, with Chinese exports to the US plummeting by 21% last month. Trump and his economic team have gotten pleas from retail executives who explained in meetings with senior officials that the result of sustained high tariffs would be pandemic-level shortages and supply-chain shocks.

The Chinese went into talks with the upper hand because, unlike Trump, they aren’t facing mid-term elections in 2026, according to Dexter Roberts, nonresident senior fellow at the Atlantic Council Global China Hub. “Sitting here in the United States, this has been very damaging for Trump,” he said, adding that the Chinese can “eat bitterness” for longer.

President Xi Jinping’s officials sought to fortify his nation’s economy ahead of the talks, unleashing a series of rate cuts and more cash for banks. But data shows signs of weakness ahead. China’s consumer deflation extended for a third month in April as the trade war worsened a drag on prices from weak domestic demand.

The US team went into the first day of talks somewhat hemmed in by their boss. Trump posted on Truth Social before the meetings even started: “80% Tariff on China seems right!” He added that it was “up to” his Treasury chief, without elaborating.

The US and China already have a trade deal on the books, which was signed at the end of Trump’s first term in January 2020. At the time, the president called it “historic” and said it was “righting the wrongs of the past.”

As part of that agreement, Beijing committed to purchase more than $200 billion in additional US goods and services and open up its market to America’s agriculture and financial services sectors.  

While the positive rhetoric is encouraging, it’s still unclear where the final tariff numbers will land, said Martin Chorzempa, senior fellow at the Peterson Institute for International Economics.

“At least a short term resolution with China — which has the thorniest and most complicated bilateral relationship with the US — will also be seen widely as a good sign for the potential on constructive negotiations with other countries,” he added.

Copyright Bloomberg News