US-China trade truce: To the untrained eye, the dramatic tariff rollback agreed by US Treasury Secretary Scott Bessent and China’s Vice Premier He Lifeng in Geneva may seem like the end of the bruising US-China trade war that rocked global commerce for over a month. Tariffs as high as 145% on Chinese goods are now slashed to a still-hefty 30%, and China has removed non-tariff retaliatory measures. But to call this a deal is to mistake a truce for peace, and a recess for closure.
This is not détente. This is the economic equivalent of catching one’s breath before returning to the ring.
The Trump administration was staring down a recessionary barrel, with factory orders collapsing, layoffs creeping in, and the port economy slipping into paralysis. In China, slowing domestic demand and industrial contraction were threatening the regime’s promise of growth-led legitimacy. The Geneva deal is, in essence, an admission by both parties that economic decoupling is not feasible in the short term. Yet, neither side has conceded its core demands, nor signalled a genuine shift in strategic orientation.
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Beneath the calm, pain persists
Markets celebrated, but the ground reality remains harsh. The effective US tariff rate is still 13%—a notable decline from 22.8% before the truce with China. Businesses continue to pay a steep price. From retailers to longshoremen, from truckers to warehouse owners, the pain has only been deferred, not deleted.
One thing is clear—someone will have to pay for it. That someone, inevitably, is the American consumer and small business. The reduced tariff of 30% still renders many Chinese imports economically unviable. And for China, the damage to its critical export sector—contributing nearly 20% to its GDP—remains significant. Beijing’s factories are not humming; they’re sputtering.
The reprieve may soften the recession’s edges, but will not avert it. Economic growth forecasts for the US in 2025 have been halved. Goldman Sachs lowered the recession probability from 45% to 35%, which is cold comfort when inflation is rising and hiring is slowing.
US-China trade truce just a recess
Why then the sudden US-China trade truce? The answer lies in political and economic necessity.
For Trump, under pressure from industrial lobbies—including automakers and the defence sector anxious about rare earth supplies—the truce buys time before election cycles heat up. For Xi Jinping, whose administration is navigating a property sector implosion and slowing consumer demand, the rollback averts social unrest and regime embarrassment.
But neither leader has walked back the fundamental mistrust that triggered this conflict. Treasury Secretary Scott Bessent has openly stated that “a generalised decoupling” is not on the agenda, but hawks within the Trump camp, such as Steve Bannon, see the Geneva pact as “only the beginning of serious engagement”—code for a long war of attrition.
The spectre of strategic decoupling
China is preparing for the next round. It continues to flex muscle in the South China Sea, warns of external threats to its border regions, and conducts military drills around Taiwan. On the very day of the Geneva announcement, a Chinese Coast Guard helicopter intruded into disputed airspace over the Senkaku islands. This is not coincidence; it is choreography.
China’s national security white paper reads more like a wartime communiqué than a peace offering. Beijing, experts say, has already internalised the idea that US hostility is structural and not personality-driven. The current détente is seen in Beijing as a “tactical retreat by the US”, not a durable shift.
Trade negotiations, therefore, are only one front. The technological blockade, Indo-Pacific military realignment, and tightening export controls on semiconductors suggest a wider, ideological confrontation—one that will outlast this temporary trade lull.
The fragile promise of supply chain stability
Some may argue that the 90-day tariff reprieve offers breathing room to restore supply chains. But that view is optimistic, if not naïve.
Experts know that healthy supply chains depend on consistency and reliability. What we have instead is a new normal of uncertainty. Retailers are rushing to front-load inventory before tariffs possibly return. But re-routing vessels and renegotiating supplier contracts cannot happen overnight.
Moreover, tariffs above 25% become significant enough to permanently alter procurement strategies. Even a 30% rate can cripple small businesses and deter large ones from long-term investment. A number of companies are now redirecting their orders toward Southeast Asia and Latin America, and this diversification will not be reversed easily.
The trade war will resume
Economists are unanimous: inflationary pressure is building. The monthly consumer price report in June will likely reflect the catch-up effect of port congestion, restocking, and scarcity-led price hikes.
They expect a slowdown in hiring. The Port of Los Angeles reports a 25% year-on-year drop in import volumes. Forecasts from UBS and Goldman Sachs indicate a tepid GDP growth of around 1% for 2025. The message is clear—Monday’s truce is too little, too late to prevent economic contraction.
To describe the current US-China dynamic as a trade war is, perhaps, too narrow. It is a geopolitical contest over technology, influence, ideology, and strategic autonomy. Trade is only its most visible front.
The US-China trade truce is not a peace treaty. It is a ceasefire born of economic pain and political calculation. As Shen Dingli, a Shanghai-based scholar, noted, the temporary calm may last a year or two, but conflict will resume “because we have too many points of disagreement.”
When the curtain rises again, the stakes will be higher, the rhetoric sharper, and the wounds deeper.