Fri, 09 May 2025

Fri, 09 May 2025 The US and China are finally talking. Why now?

Economic pressures are forcing Donald Trump and Xi Jinping to seek an off-ramp in the trade war.
High-level talks between the US and China are set to begin in Switzerland, marking a potential easing of tensions in the ongoing trade war. The meeting on Saturday will be the first since January when US President Donald Trump imposed tariffs on Chinese imports. Beijing retaliated immediately, and both sides have since engaged in a heated standoff with levies on each other's goods. Despite weeks of fiery rhetoric, both countries appear to be willing to negotiate a resolution. Experts suggest that neither side wants to appear to back down, but instead are seeking to break the deadlock while maintaining their positions. The timing of the talks is significant, as China's President Xi Jinping is visiting Moscow and presenting himself as an alternative global leader. This allows Beijing to project strength even as it heads into negotiations with Washington. China has been hit hard by the tariffs, with factory output declining and manufacturing activity reaching a seven-month low. Chinese exporters have also been reeling from the steep levies, leading some to stockpile goods in warehouses. The US has also felt the effects of the trade war, with its economy contracting for the first time in three years due to uncertainty caused by tariffs. Industry experts warn that a deal may take months to materialize and will likely focus on "touching base" and setting an agenda for future talks. Some experts predict that a new deal could be a "phase one" agreement on steroids, addressing key issues such as Chinese government subsidies and the timeline for scrapping remaining tariffs. However, this is still far down the line, and experts caution that systemic frictions between the two countries will not be resolved anytime soon. The talks are seen as an attempt by both sides to provide reassurance to increasingly nervous markets, businesses, and domestic constituencies. With optimism surrounding the negotiations, it remains to be seen what concrete outcomes can be achieved.
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