Can the US and China Sustain Trade Talks Momentum?
Post Content
In May 2025, the world witnessed a rare diplomatic breakthrough as Washington and Beijing agreed to a 90-day tariff truce, temporarily lowering duties by over 100% on each other’s imports. This ceasefire has not only injected fresh optimism into global markets but also rekindled hopes that the two largest economies can negotiate a lasting solution to a trade war that has spanned nearly four years. In this analysis, we explore the details of the agreement, gauge market reactions, examine expert viewpoints, and dive into Yahoo Finance’s readers’ poll to assess whether this progress is built to last.
What the 90-Day Truce Entails
On Monday, May 12, US Treasury Secretary Scott Bessent announced that, following high-level talks in Switzerland, the US would slash its reciprocal tariffs on Chinese goods from 145% down to 30%, while China would cut retaliatory duties from 125% to 10%. This dramatic rollback marks one of the steepest mutual tariff reductions since the trade tensions began under the Trump administration.
- Scope: Applies to a broad range of industrial and agricultural imports on both sides
- Duration: Effective for 90 days, expiring on August 10, 2025
- Objective: Create breathing space for deeper negotiations toward a permanent agreement
By offering a temporary relief valve to industries battered by rising costs, the truce aims to stabilize trade flows and rebuild trust. Yet, the agreement stops short of addressing core issues such as intellectual property theft, forced technology transfers, and state subsidies—key sticking points that have dogged negotiations for years.
Market Rally: Stocks Respond to De-Escalation
Investor sentiment turned markedly positive following the announcement. De-risking positions and reallocating capital into equities, traders drove major indices higher throughout the week:
- S&P 500 (^GSPC): Gained 4.7% over five trading days
- Nasdaq Composite (^IXIC): Jumped 6.8%, led by technology stocks
- FTSE 100 (^FTSE): Rose 1.2%, reflecting strength in UK exporters
- Stoxx Europe 600 (^STOXX): Advanced 1.7% on broad European optimism
These moves underscore how sensitive markets remain to trade-war developments. Lower tariffs on Chinese imports help US manufacturers reduce input costs, while cheaper American goods in China can boost export-oriented sectors—creating a powerful multiplier effect across global supply chains.
Trump’s Unilateral Tariff Warning
Despite the lift from the truce, volatility returned when President Donald Trump signaled that the US would impose new unilateral tariff rates on several countries “over the next two to three weeks.” Speaking in the United Arab Emirates, Trump emphasized that his administration lacks the capacity to negotiate with every nation simultaneously:
“I think we’re going to be very fair. But it’s not possible to meet the number of people that want to see us,” he told business leaders.
This comment introduced ambiguity about the truce’s longevity. The prospect of fresh duties could undercut confidence in the temporary deal, suggesting that Washington is keeping its negotiating leverage top of mind even as it de-escalates with China.
Long-Term Outlook: Uncertain Road Ahead
While the 90-day window offers a welcome pause, achieving a durable settlement will demand compromise on both sides. Key challenges include:
- Scope of Concessions: How much each country is willing to remove from its “positive list” of tariff lines
- Enforcement Mechanisms: Designing a reliable dispute-resolution path to prevent future flare-ups
- Broader Geopolitical Tensions: Taiwan, South China Sea, and technology security remain flashpoints
Absent progress on these fronts, the ceasefire risks fizzling out once duties revert to previous levels. Diplomats note that timelines are tight: preparatory talks must accelerate in the coming weeks or the truce could collapse under the weight of unresolved issues.
Expert Insight: Capital Economics Weighs In
Mark Williams, Chief Asia Economist at Capital Economics, cautioned that the truce does not guarantee a permanent ceasefire. In a Monday note, he pointed out that:
“The US still has much higher tariffs on China than on other countries and still appears to be trying to rally other countries to introduce restrictions of their own. In these circumstances, there is no guarantee that the 90-day truce will give way to a lasting ceasefire.”
Williams argues that Washington’s broader strategy may involve building a coalition of allies to impose parallel measures, raising the prospect of a fragmented global trading system rather than a bilateral détente.
Yahoo Finance Poll: Readers’ Verdict
To gauge public sentiment, Yahoo Finance UK invited readers to vote on whether they believe the US and China will sustain progress on trade talks beyond the truce. Out of 215 respondents:
- 46% said Yes—confident that momentum can carry forward
- 39% said No—skeptical of a long-term deal
- 15% were Undecided, citing the many moving parts
The near-even split reflects widespread uncertainty. Voters in favor cited mutual economic dependencies and the high stakes involved, while dissenters pointed to entrenched positions and political headwinds on both sides.
Interpreting the Poll Results
The 46% majority expressing optimism may reflect a belief that neither economy can afford a protracted trade war. US exporters rely on Chinese demand for agricultural and energy products, while Chinese manufacturers need access to US technology and capital markets. However, the 39% dissent suggests that many see the deal as a tactical reprieve rather than strategic resolution.
Undecided respondents underscore the complexity of modern trade diplomacy: unforeseen events, such as shifts in political leadership or new security concerns, could rapidly alter the calculus. The poll highlights that, for a significant portion of stakeholders, lasting progress requires more than a simple tariff rollback.
Key Factors for Sustained Progress
For the truce to evolve into a stable peace, negotiators must address core issues:
- Tariff Normalization: Phasing out steep reciprocal duties in a balanced, verifiable manner
- Intellectual Property Protections: Ensuring robust safeguards and enforceable penalties
- Technology Transfer Controls: Agreeing on fair licensing practices without coercive requirements
- State Subsidy Discipline: Limiting government support that distorts competition
- Regular Dialogue Mechanisms: Establishing a joint committee to monitor compliance and resolve disputes
Success in these areas could lay the groundwork for a comprehensive framework, but failure on any could trigger a swift return to escalation.
Possible Scenarios
Analysts outline two broad scenarios:
- Optimistic Path: The 90-day window yields enough concessions and trust-building measures to extend talks, leading to a phased removal of tariffs over six months.
- Reversion Path: Negotiations stall, domestic political pressures mount on both sides, and duties snap back to previous levels, plunging markets into renewed volatility.
The ultimate trajectory will hinge on diplomatic agility, economic imperatives, and unforeseen geopolitical developments.
Conclusion: Watching the Clock
With just over two months before the 90-day truce expires on August 10, 2025, all eyes are on Washington and Beijing to see if they can translate temporary relief into lasting accommodation. Investors, policymakers, and business leaders will be scrutinizing every communique, trade delegation, and press statement for signs of breakthrough—or backsliding.