Dr. Muhammad Akram Zaheer
The announcement on Monday of significant tariff reductions by both the United States and China marks a notable, albeit tentative, de-escalation in a trade war that has roiled global markets and strained diplomatic ties since its inception during Donald Trump’s presidency. Following high-level talks in Geneva, U.S. Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer confirmed that tariffs on Chinese goods would be reduced from 145% to 30%, while China announced a cut from 125% to 10% on U.S. goods. Though welcomed by investors and observers alike, the reductions are best understood not as a resolution, but as a strategic pause in a much larger geopolitical contest.
The Geneva talks, led on the Chinese side by Vice Premier He Lifeng, were conducted in a tone of mutual respect and cooperation, a marked shift from previous months of acrimony. The two sides issued a joint statement emphasizing continued dialogue and a 90-day pause in escalating trade measures. Both governments conveyed a shared desire to avoid complete economic decoupling a scenario that had become increasingly likely given the scale of prior tariff impositions and export restrictions. According to Bessent, the tariffs had effectively created a ‘“trade embargo,’“ and the new agreement aims to reset the tone of engagement.
Despite the optimistic headlines, analysts were quick to caution against overinterpreting the developments. The reductions are partial and selective and many of the most damaging measures remain in place. For example, U.S. tariffs imposed over China’s alleged inaction on fentanyl precursors and the reciprocal Chinese duties on American agricultural goods remain untouched. Moreover, non-tariff barriers such as blacklisting and export controls were only suspended, not eliminated. This selective rollback underscores the temporary and strategic nature of the agreement rather than any fundamental resolution of the underlying trade and political disputes.
The trade war’s economic impact has been profound for both countries. The U.S. economy, though relatively resilient, has faced supply chain disruptions and inflationary pressures due to high import costs. China, meanwhile, is grappling with economic stagnation marked by high youth unemployment, weak domestic consumption and deflationary trends. The April Consumer Price Index (CPI) figures revealed a third consecutive monthly decline, underscoring waning consumer confidence and forcing businesses to lower prices amid fierce competition. The trade war has added further strain to these systemic issues, incentivizing Beijing to seek a truce.
From a geopolitical standpoint, the agreement is as much about managing perceptions as it is about altering policy. Each side sought to portray the outcome as a diplomatic victory. U.S. officials presented the reduction as a consequence of Trump’s hardline stance compelling China to return to the negotiating table. Conversely, Chinese state media emphasized Beijing’s strength and resilience, with nationalist commentators framing the developments as evidence of China’s principled resistance. This dual narrative approach reflects the high domestic political stakes involved in any perceived concession.
Further complicating the picture is the continued mistrust between the two powers. While the Geneva meeting was reportedly cordial, the road ahead remains uncertain. Underlying issues such as intellectual property theft, state subsidies, technology transfer requirements and political tensions over Taiwan and the South China Sea remain unresolved. Additionally, accusations of transshipment the rerouting of Chinese exports through third countries to evade tariffs highlight persistent challenges to trade transparency and enforcement.
Market reactions were cautiously optimistic. Asian stock markets rose in response to the announcement, driven by investor hopes that the easing of tariffs might lead to more stable global trade flows. Yet, economists and political analysts maintain that the fundamental trajectory of U.S.–China relations remains tense. As Alicia Garcia-Herrero from Natixis noted, the tariff cuts are not a reconciliation but rather a way to manage the pace and cost of a broader decoupling. Her assessment that the agreement resembles a ‘“more civilized divorce’“ encapsulates the prevailing sentiment that economic bifurcation, while temporarily slowed, is still underway.
Looking ahead, the possibility of a meeting between President Trump and Chinese President Xi Jinping offers a potential venue for further breakthroughs. However, given the complex nature of the disputes and the political stakes involved, a comprehensive trade deal remains a distant prospect. The current agreement serves primarily as a cooling mechanism, buying time for both sides to reassess strategies and mitigate the risk of immediate economic fallout. The tariff reductions agreed upon in Geneva mark an important but limited step in addressing U.S.–China trade tensions. While they temporarily relieve some economic pressure and improve the diplomatic atmosphere, they do not resolve the structural issues at the heart of the dispute. As both nations seek to balance domestic political considerations with international economic realities, the global community watches with cautious hope and lingering skepticism. Whether this agreement leads to genuine progress or simply delays the inevitable will depend on the willingness of both sides to pursue not just dialogue, but meaningful compromise.
Dr. Muhammad Akram Zaheer
University of Okara
