US-China Suspend Tarrifs Amid Talks
A temporary respite that doesn't solve fundamental disagreements.
WaPo (“U.S., China agree to lower most tariffs for 90 days amid trade talks“):
China and the United States have agreed to lower tariffs on goods from each other’s countries for 90 days, offering a temporary reprieve in a trade war that threatens to cause a global recession and deepen a widening rift between the world’s two largest economies.
Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer said Monday, after weekend talks in Geneva with a Chinese delegation led by Vice Premier He Lifeng, that U.S. tariffs on Chinese goods would be reduced from 145 to 30 percent.
Beijing said it would cut its blanket tariffs on American products from 125 to 10 percent. Both reductions will take effect on Wednesday.
Stock markets across Asia rose on Monday as investors waited for details of the talks, including hopes of a partial rollback of the tariffs. But analysts cautioned that the announcement fell far short of a trade deal and was merely the beginning of more rounds of negotiations.
[…]
“The consensus from both delegations this weekend is that neither side wants a decoupling, and what had occurred with these very high tariffs was the equivalent of a trade embargo, and neither side wants that,” Bessent said in a news conference in Geneva.
“We do want trade. We want more balanced trade and I think both sides are committed to achieving that,” Bessent said, adding that the Trump administration would push for China to open up more to U.S. goods. China’s trade surplus with the United States topped $100 billion last year.
Greer said the two sides had agreed on a pause to continue negotiations, which “both the Chinese and the United States remain very committed to,” but did not offer any clues as to how the underlying issues might be addressed.
[…]
The agreement, although temporary, marks the first tangible move to de-escalate tensions that have been rising since Trump took office in January and almost immediately began imposing tariffs on China.
Since then, Trump and Chinese leader Xi Jinping have been engaged in a high-stakes game of chicken that has seen both sides levying higher and higher duties on the other.
[…]
Analysts said Monday’s joint statement lowers the temperature in their trade war but does little to change the overall direction of deteriorating ties between Beijing and Washington, which are closer than ever to a full economic break.
“It’s a more civilized way to divorce. The bifurcation will continue,” said Alicia Garcia-Herrero, chief economist for Asia Pacific at the investment bank Natixis.
“The deal is not a solution. It’s a smoothing of the impact of the bifurcation, just to happen more slowly and less costly. This meeting is a basically an attempt, hopefully successful, of avoiding a global recession,” she said.
This morning’s episode of The Daily, “A Vulnerable China Comes to the Table,” featured an interview with NYT Beijing bureau chief Keith Bradsher. It’s worth a listen. The transcription won’t be available until tomorrow morning but the gist was:
- China’s economy is in much worse shape than commonly understood
- It’s almost entirely dependent on exports owing to a series of longstanding government policies
- Relatedly, almost all private Chinese assets are invested in real estate, especially apartments and factories, and the bubble burst years ago
- Massive government investments in factories and automation were banking on continued access to the US market
Bradsher is extremely pessimistic that the negotiations will amount to much. While there are marginal compromises to be had, the two governments have mutually incompatible goals. China wants to dominate the world export market and US and EU leaders increasingly want to protect domestic jobs and reduce dependence on China.
Temporary my ass. Trump backed down, and he’ll keep backing down. I would not be at all surprised if he was simply paid off.
Ok. Say you paid 145% in tariffs for an order received last week… Can you apply for a rebate today? Probably not?
Multiply that whiplash across the thousands of businesses trying to navigate the minefield of randomly invoked tariffs. Try to plan your business with 90-day windows of opportunity while dealing with 6 to 12 months of lead times for delivery.
Antacid producers are making a killing in this market.
90 days ‘suspension’ means moving empty shelves from the back-to-school season, into the Christmas shopping season. Will he bring back that 145% tariff so that the effects come at the worst time for shoppers and at a time when families are getting together and conversing? No. As for the 30%, he’s already created a loophole for tech, more carve-outs will follow.
@Argon: My sister in law is a small business owner (toy store). She has totally stopped purchasing now because of the uncertainty. Will make do with existing inventory and has started a consignment section in her store. In other words, a huge decline in economic activity.
So, it’s still a massive, absurd, increase from what was the prior baseline. I wonder what the break even point is for someone to load a plane full of shit and bring it over. Boats are too slow and the idiot might change his mind again.
This is such a massacre of language that it’s basically a lie.
As MG alluded to above, it’s all about corruption and bribery.
Pay your indulgences, get your exceptions. That’s the plan with FEMA as well.
Oh, and in unrelated news, a new Trump Tower Beijing was announced on Sunday. (/s in case anybody was wondering if I’m serious)
From FOX spin central:
And THIS is why 40% of voters think they are winning with Trump.
@Argon:
What I expect will happen is that those businesses are going to attempt to import as much as possible during this window. Which ironically is going to drive up the very trade deficits that all of these tariffs were supposed to solve.
I say “supposed to solve” because it’s not entirely clear what they intended to do in the first place. Or rather, their explanation changes depending on who you talk to in the administration. Some say it was to close the trade gap. Others say it was to reduce the federal deficit and replace funding lost through tax cuts. Others suggest that they were to stop illegal fentanyl coming from China. And then you have the they are designed to move manufacturing back to the US.
And of course, the Administration has no interest in any sort of reporting against any of those measures.
Trump will just find a way to try to declare victory. It’s hard to figure out what his actual goals were, other than looking like he could dominate everyone. If the supposed goal was to bring jobs back to the US I just dont see many people building new factories with such low levels of certainty. That said, my prediction is that a few companies will open new factories and Trump will use those to declare victory, but the new factories will largely be the result of tax breaks and/or subsidies by state and local sources. My other prediction is that just like Trump’s prior admin there will be many announcements about new factories and businesses that will never actually happen.
Steve
Are we supposed to have forgotten that tariffs were good (could in fact replace the income tax) and that these would bring back manufacturing?
Maybe the resident MAGAts can let us know what we ought to believe today.
That is, only after Trump was talked off the edge of the cliff that he walked up to under his own locomotion. But this plays differently in MAGAlandia.
So going from 145% to 30% and still confusion, volatility and uncertainty for the future is now considered “winning” and great news that gets the AI stock market trading machines to pump into overdrive…weird. I don’t even know where I am living anymore, nothing makes sense.
The big question is if shipping is going to resume?
A 30% tariff is still no bargain for American consumers.
@Tony W:
One quick analysis I read claimed China kept 145% tariff on agricultural products. If that is true many sectors of the farming community will be demanding large subsidies.
@Argon: “Ok. Say you paid 145% in tariffs for an order received last week… Can you apply for a rebate today? Probably not? ”
But if you order now, you can take advantage of lower, but still prohibitive tariffs!
Unless Trump changes his mind in the next 100-150 days.
@Michael Reynolds: “90 days ‘suspension’ means moving empty shelves from the back-to-school season, into the Christmas shopping season.”
Assuming that the pause in shipping has not been taken care of.
And the ‘taken care of’ might mean paying premium prices for priority production or priority shipping.
@Matt Bernius: “What I expect will happen is that those businesses are going to attempt to import as much as possible during this window. Which ironically is going to drive up the very trade deficits that all of these tariffs were supposed to solve.”
While praying over the next few to several months that the Tariff King does not change his mind.
@Jc: “So going from 145% to 30% and still confusion, volatility and uncertainty for the future is now considered “winning””
If you
had paid for advanced informationforesaw the future through your ubermensch Businessman skills, you could make a lot of money…….@Barry:
I wouldn’t put past the felon rapist and his band of Dunning-Kruger rejects to attempt to make tariffs retroactive if they raise them after a while.
The Dow is 42,164 right now. It was 44,675 on December 5, 2024. I’m rolling in dough. We all are. Trump has built a great economy with the added benefit of enjoyable large swings which everybody loves.
Wife was watching CNBC while I was reading. I listened to some of Trump’s announcements about drug prices and other stuff. During this he advocated again for tariffs and claimed that US steel production flourished/increased during his prior term due to his policies. Fortunately, there is a lot fo data to look at this which shows that steel/iron production actually decreased during his prior term compared with the OBAMA terms. Noah Smith has most of the numbers in one longish piece. It’s also interesting as it notes that for the steel producing countries of the world production largely mirror usage. Also, the US imports very little steel from China, mostly from Mexico and Canada, our imports have been pretty steady since the 90s and the big drop in US steel production was in the 70s. This was partially due to our decrease in use of steel but also related to US companies being slower in adapting new tech.
Anyway, Trump glibly lied and few will challenge him on it but the numbers matter and show him wrong.
https://www.noahpinion.blog/p/why-the-us-steel-industry-is-dying
Yeah, unfortunate that this had occurred during this administration. Or just weaselly use of the passive voice for something that he did, in concert with the administration’s co-conspirators including the principal tariffista.
Couldn’t the rapist’s brain-dead trust have done this from the start, without disrupting the supply chain for weeks?
Oh, wait. The question contains the answer.
It takes about 30 days to cross the Pacific in a cargo ship. This means that stuff that had been paid for and is now sitting in warehouses in Shanghai, etc., can probably be shipped, in spite of the higher duty load than what was calculated when these goods were ordered.
Whether new orders will be placed is another question. Particularly if those orders will not be completed and ready to ship in 60 days or less. Can anyone say with confidence that the 90-day period will be extended?
@Jay L Gischer:
Ha. Can anyone say with confidence the 90-day period will last 90 days?
@Jay L Gischer:
Good point… I had forgotten when the tariffs are paid.
@Jay L Gischer:
The existing orders may still ship but I’m not paying 30% tax on my new MAGA hat.
For now, we’re in the ‘Art of the Unsubstantiated Tariff Claims’ zone.
@Daryl: Given the markup on that type of cap, you’ve probably been paying the 30% tariff all along. Even before it was levied.
It should be noted that the de minimus exception has still been repealed (and I’m still not sure under what authority Trump did that), but in practice, USPS has no ability to actually collect duty on such packages, so .
As with so many of Trump’s policies, there’s (maybe) a identified problem, but the complete lack of planning, misunderstanding of the world, and shortsightedness means there’s no chance of meeting the goal, which hasn’t even. ERN fully identified.
(On a related nite, I have no idea how to talk about so much that’s happening, because Trump will claim th ability to do something he probably can’t do, legally, but then people start doing it anyway. Extralegal, maybe.)
I have to say Trump’s action can easily lead to market manipulation. I wonder who has been selling and buying several times over. I won’t put it past anybody in the administration profiting from these shenanigans.
@Raoul: My few Trumper friends are already praising him as a genius. Several of them said they were waiting for Trump to signal the “buy” moment, which they claim was Monday morning. They don’t see it as him backing down, just a genius at work and if you pay attention to him you can make big money. I think Trump knows what he is doing and is manipulating the market. Luckily, I sold everything in my 401K in January and put it all in CD’s and CDARS between 4 – 5.5%, and as they expire I’ll reinvest, but I’m not going to play his games.