Tariff Truce: Why the US-China Trade Talks Might Be Too Good to Last
US and China hit pause on their tariff war—but is this relief real, or merely the calm before another storm? We break down the stakes, the risks, and why global markets should pay close attention.
Jun 1, 2025
A Temporary Truce—Or a Real Deal?
After months of escalating tariffs and tense standoffs, the US and China have called a 90-day truce. Both sides agreed to substantially cut tariffs by 115% from recent peaks, now leaving a modest 10% reciprocal tariff in place (World Economic Forum). But before businesses start celebrating, economists and global trade experts caution that this relief might not be as lasting as it appears.Tariff Relief: Real or Temporary?
Despite a significant rollback, key tariffs on critical sectors remain untouched—including a 20% tariff on all Chinese imports containing fentanyl and notable exclusions like steel, aluminum, and pharmaceuticals (World Economic Forum). Industry leaders remain skeptical that full trade normalization will quickly return, given the conditional nature of these reductions.
Diplomatic Dance or Genuine Shift?
The trade agreement highlights promising diplomatic language, emphasizing "mutual respect and benefits." However, analysts point out this isn't the first time optimism has been dashed in US-China relations. Historical precedents, such as the failed Strategic and Economic Dialogue initiated under President Bush and Hu Jintao, underscore just how quickly diplomatic goodwill can erode under practical strains (U.S. State Department).
Structural Challenges Remain
The fundamental issues driving the US-China conflict—China’s industrial policy, state subsidies, and market practices—remain unresolved. This makes the possibility of a quick resolution doubtful. Each side continues to approach negotiations with starkly different priorities: the US is keen on reducing its vast trade deficit, while China emphasizes a balanced view, including service trade flows (Peterson Institute).
Strategic Pressure and Third-Party Influence
Moreover, the US isn’t limiting pressure tactics to China alone. Recent agreements between the US and other allies like the UK include conditional tariff cuts contingent upon stringent security requirements clearly targeted at China’s trade practices (Financial Times). This adds another layer of complexity, as China bristles against perceived attempts to isolate it economically.
The Real Impact on Global Markets
Market volatility is likely to continue, driven by uncertainty over whether the 90-day window can yield a meaningful resolution. Commodity markets, in particular, are highly sensitive—especially sectors directly tied to Chinese manufacturing like metals, rare earth minerals, and agriculture. Traders and supply-chain managers are watching carefully, knowing a breakdown in talks could swiftly disrupt global trade routes and pricing stability.
Why This Matters Globally
US-China relations are the cornerstone of global economic stability. While immediate relief is tangible, businesses must prepare for potential volatility. Any failure to address fundamental structural tensions could quickly reignite a full-blown trade war, impacting global growth, commodity prices, and supply chain resilience.