US-China trade talks unveiled America's Achilles Heel

The recent trade talks in Geneva between the United States and China resulted in a surprising level of de-escalation in their ongoing trade conflict.

Both nations agreed to a reciprocal, point-for-point reduction in tariffs for an initial 90-day period. This agreement effectively rolls back many of the tariffs imposed during the height of the trade war, lowering the US tariff rate on Chinese imports to 30% and the Chinese rate on US goods to 10%. While this reduction marks a significant short-term improvement in relations, it doesn’t erase the lasting damage done to US trade credibility or the dollar’s standing in global markets. One of the most tangible outcomes of the trade war has been the weakening of the US dollar against major global currencies like the euro and the yen.

A weaker dollar means reduced purchasing power for American consumers, as highlighted in an article by the Council on Foreign Relations (CFR), and potentially higher prices for imported goods. At the same time, foreign investors—who had a record $16 trillion stake in US equities at the end of the previous year—have experienced losses due to the dollar’s fall. As a result, global investors may become more hesitant to commit capital to US markets, increasing volatility in both bond and stock markets. This erosion of trust is a long-term cost of the Trump administration’s unpredictable trade tactics.

Though the deal marks the most substantial reversal of the Trump administration’s “reciprocal tariffs” policy—first paused for other countries in April—it still leaves Chinese goods subject to a base 10% tariff and additional sector-specific levies. In practice, the effective US tariff on Chinese imports remains around 40%, a significant increase compared to levels a year earlier. This rollback may seem like a concession, but it comes too late to avoid several negative consequences already set in motion.

America's Achilles heel 

From Beijing’s perspective, the outcome of the talks is seen as a victory, albeit one understated in official messaging. 

The lack of triumphalist rhetoric on Chinese social media signals confidence that China endured the standoff and emerged with fewer concessions. The 39-day trade standoff, marked by high retaliatory tariffs that nearly constituted a trade embargo, tested each side’s resolve. In Beijing’s view, the Trump administration’s rollback shows it ultimately bowed to pressure from domestic businesses, many of which rely on complex supply chains rooted in China. China has learned that the Trump administration is not prepared to withstand domestic pressure from American businesses, whose supply chains remain heavily reliant on China—making their vulnerability lie in inventory logistics. 

Even if China doesn’t impose additional tariffs or export bans, it can still hinder US supply chains through more subtle methods, such as bureaucratic delays and technical holdups. China is also expected to continue building alternatives to direct US trade routes, including stronger trade partnerships with Southeast Asian countries. In fact, while trade with the US declined during the standoff, Chinese exports to neighbouring countries in Southeast Asia rose. These countries serve as potential transshipment hubs: Chinese goods receive minimal processing there before being re-exported globally, often bypassing tariffs aimed at China. 

This workaround has already begun reshaping regional trade dynamics and shows China’s capacity for long-term strategic planning in response to protectionist US policies. Though US officials may frame the outcome as progress toward "strategic decoupling" from China, the reality is that their credibility on trade policy has diminished. China has gained new leverage by demonstrating its resilience and ability to redirect trade flows. In the short term, the 90-day tariff pause provides a temporary cooling-off period, but deeper structural issues remain unresolved. 

Future negotiations will likely revisit points raised in the 2020 Phase One Trade Agreement, which was generally acceptable to Beijing. However, geopolitical uncertainties may repeatedly interrupt progress, potentially triggering new rounds of conflict. It’s probable that the initial 90-day reprieve will be extended, as both sides aim to negotiate a broader deal. Still, a further drop in tariff rates is unlikely. 

China appears willing to tolerate a modest trade disadvantage, with Chinese goods facing only a 20% higher tariff than other imports. Meanwhile, the Trump administration may shift focus toward securing deals with allies in Europe and Japan. These new deals will likely be announced quickly for political advantage, although truly substantive agreements usually take around 18 months to finalize. 

In the background of these diplomatic manoeuvres, Chinese small businesses—the engine of the country’s export economy—are unlikely to wait on further negotiations. They will continue expanding into foreign markets, seeking higher margins and lowering production costs by opening overseas facilities. This continued global expansion underscores China’s commitment to maintaining its export dominance, regardless of US trade policy fluctuations. 

By Nazrin Sadigova