A divorce between the world’s two largest economies no longer seems impossible
As GEOFOR predicted in its May 19 article, “US-China: Truce or Peace?” the U.S. Court of International Trade ruled on May 28 that many of Donald Trump’s tariffs were unlawful and blocked them. However, an appeals court overturned the decision, allowing the tariffs to remain in place until a final ruling is made on the Biden administration’s petition. As we previously reported, anticipating a potential reversal by the courts, the Trump administration has been racing to finalize as many trade deals as possible — or at least begin negotiations with key U.S. partners.
One such deal materialized with China. The two countries agreed to a preliminary arrangement reducing tariffs, effective May 14 for 90 days or until a new agreement is reached. During this time, «reciprocal» tariffs will be lowered to 10%. Consequently, China will impose a 10% tariff on American imports, while the U.S. will levy a 30% duty on Chinese goods since the 20% «fentanyl» tariff remains in effect. The deal excludes certain goods that Trump targeted during his first presidency. As the White House stated, many Chinese products will continue to face tariffs as high as 50%.
Trump initially justified the tariffs as a means to «restore the economy and prevent fraud», claiming that the U.S. had been «plundered and exploited for decades by both friends and enemies». He also said he was open to trade talks if other parties offered something «phenomenal».
However, the situation is becoming more complicated. The Trump administration’s trade policy now faces potential legal obstruction. On May 29, White House trade adviser Peter Navarro signaled continued commitment to economic confrontation, saying, «I assure the American people that President Trump’s tariff strategy is alive and well and will be implemented to protect your jobs and your factories».
However, opposition from Democrats and major U.S. businesses is bound to affect the outcome of negotiations with key partners, particularly China and the European Union. The talks are anything but smooth. Just last week, the U.S. president said negotiations with Brussels were «leading nowhere» and threatened to impose 50% tariffs on European imports starting June 1 — only to postpone the tariffs later.
China, for its part, continues to call on the U.S. to abandon trade wars and engage in dialogue. Yet, it shows no intention of backing down. Hopes of «breaking China» by cutting off its access to the U.S. market are fading. «Trade talks with China have somewhat stalled», Treasury Secretary Scott Bessent admitted last week.
The U.S. liberal press is sounding the alarm that Trump’s trade war with China may actually be helping Beijing. By blaming the U.S. for economic difficulties, China’s leadership is consolidating political unity. China analysts note that the campaign against American protectionism and «imperialism» is uniting society and the political elite. This, in turn, strengthens Beijing’s hand in negotiations and broadens its strategic position against the U.S.
Few in Washington or Beijing doubt that the rivalry will persist, regardless of its intensity. In the U.S., there is a growing consensus across the political spectrum that China poses the greatest long-term threat on the global stage. While opinions differ on the best way to contain China, there is widespread agreement that containment must continue.
As Vice President Vance has repeatedly stated, China is the most formidable and unprecedented competitor the U.S. has ever faced — more so than the Soviet Union during the Cold War. The challenge is not only economic or technological but also increasingly military. Washington believes that China is fully prepared for long-term strategic competition.
China’s GDP is now about 70 percent of the U.S.’s. By purchasing power parity, China has surpassed the U.S. for nine consecutive years, making it the world’s largest economy in real terms. American analysts point out that China now leads in key fields such as 5G communications, artificial intelligence, and quantum computing. China files more patent applications than any other country and graduates far more STEM students than the U.S.
China’s rapid rise is also enabled by the advantages of its political and economic system, including a planned economy, generous state subsidies, swift policy implementation, and the ability to quickly mobilize society.
Beijing’s growing cultural and ideological influence threatens America’s status as a global role model and could affect domestic U.S. politics. Washington fears China’s accumulated power could gradually displace the U.S. from its global leadership role, eroding its privileged position and the foundations of American prosperity.
Therefore, U.S. policymakers are convinced that they must reduce their dependency on China and develop domestic industries that will drive technological leadership. This includes critical minerals, especially rare earths; clean energy technologies; semiconductors; AI; quantum computing; biomedicine; and more.
The emerging strategy seeks to restrict bilateral investment and impose legal constraints on multinational corporations to curb their ties with China. A cornerstone of this policy is safeguarding sectors in which the U.S. still has an advantage and preventing the transfer of sensitive technologies to China. In effect, this dismantles the very conditions that allowed Beijing to rise.
Regardless of how current negotiations unfold, long-term trade between the two countries will likely remain under threat. In Washington, an increasing number of people are concluding that containing China and making America great again are incompatible goals. What once seemed unthinkable is now not only obvious but also perhaps inevitable.
In Beijing, they clearly understand the U.S. strategy. This is why China has long pursued self-reliance across all sectors. Although China is not inclined toward war, including trade wars, it recognizes fundamental contradictions that make tactical compromises on tariffs difficult to achieve.