After just two days of talks (it was not even a negotiation), an agreement – despite a 90-day validity – has been reached between the United States and China in Switzerland. The best part is President Donald Trump is still waiting for a call from President Xi Jinping. That alone speaks volumes who actually has won the tariff war started by Trump seeking to bring the Chinese down to its knees.
Surprisingly, it was a quick surrender after President Trump bent down in defeat as his boys sent to Geneva agreed to slash “reciprocal” tariff on China from 125% to 10% (excluding two rounds of 10% tariff each imposed earlier this year for allegation of China’s role in the flow of illegal fentanyl drug into the U.S.). In other words, the tariff on Beijing will be down to 30% from 145%.
China, meanwhile, will cut its retaliatory levies on American goods from 125% to 10%. This also means both the U.S. and China agree to slash taxes on each other by the same amount of 115%. Essentially, the latest trade talks ended up with a total reset – as if the U.S. “Trade War 2.0” against China, which Trump started on Liberation Day (April 2, 2025) with a 34% tariff on Beijing, had not happened.
You don’t need a rocket scientist to tell who has chicken out again and forced to make another huge U-turn. Just a day before Treasury Secretary Scott Bessent was set to begin trade talks with Chinese officials in Geneva, President Trump on Friday (May 9) voiced his willingness to ease tariffs on China, saying on social media it “seems right” to slash levies from 145% to 80%.
From 145% to 80% before dropping to 30% within 48 hours – that’s a huge “white flag” from the White House in a talk which Beijing has not even promised to buy anything extra from the U.S. Washington was seeking to reduce its US$295 billion goods trade deficit with Beijing, while Bessent had bragged that China will have no choice but to make a deal, and Trump said he won’t lower China tariffs without concessions.
In fact, White House press secretary Karoline Leavitt had previously said – “The ball is in China’s court: China needs to make a deal with us, we don’t have to make a deal with them”. Likewise, Bessent had arrogantly crowed that the U.S. was winning the tariff war because he predicted that China could lose 10 million jobs quickly due to tariffs and that Beijing will see over time that Chinese tariffs are not sustainable.
Yet, despite all the tough talks and boasting that the U.S. was winning, the White House quietly requested talks before surrendering 115% tariff. Heck, Donald Trump has even said that not only China deserved the steep tariffs he imposed on their exports, but also told everyone that China will “eat tariffs”. He said – “China was making US$1 trillion dollars a year. They were ripping us off like nobody has ever ripped us off.”
Of course, Trump will never admit defeat, therefore, we can expect his half-baked Treasury Secretary Scott Bessent, Commerce Secretary Howard Lutnick and Trade Advisor Peter Navarro to issue self-proclaim victory in the days to come. It doesn’t matter because Beijing gets its demand – all unilateral tariffs imposed on China must be removed before any talks can begin.
There was a reason why Li Chenggang, China’s trade representative, replied with a smile and an old saying – “Good food is never too late” – when an impatient reporter asked when the results of talks in Geneva would be announced. Unlike Trump’s Art of the Deal which says you must fight to win; Sun Tzu’s Art of War suggests winning without fighting because the battlefield wastes assets and life.
Crucially, the Chinese Art of War recommends psychological warfare in winning without fighting – “If the enemy is in superior strength, avoid him. Pretend as if you are incompetent. If the enemy has a combustible temper, seek to irritate him. Pretend to be weak, that he may grow arrogant.” This explains why China pretended to be weak during Trump’s first term, but retaliated with unexpected force today.
Trump became arrogant during first tenure (2017-2021) when he launched his Trade War 1.0 with the Middle Kingdom. He thought China in 2025 is still the same China some eight years ago, where Beijing signed Phase-1 agreement in January 2020 to buy US$200 billion worth of additional imports from Washington (a deal that was thrown away after Trump lost his re-election to Joe Biden).
As Beijing pretended to be incompetent and weak in 2018, at the same time, it diversified its trade with other countries, making it less dependent on the U.S. For example, between 2018 and 2020, Brazil’s soya bean exports to China increased by more than 45%, but U.S. exports declined 38% over the same period. So, it actually hurts American farmers more and much quicker than it would damage the Chinese.
China’s defiance is largely due to the fact that the U.S. is far more dependent on Chinese imports than China is on America. That’s because the main items that the U.S. imports from China are consumer goods, such as smartphones, computers and toys – which are hard to replace, especially since China also controls the supply chain. That’s why Trump made a humiliating U-turn to exempt iPhones and computers from tariffs.
In contrast, the goods that China imports from the U.S. are industrial and manufacturing supplies, such as soya beans, fossil fuels and jet engines. Arguably, it is much easier for price increases in these commodities to be absorbed before a consumer pays from their wallet. This explains why Beijing has sent back Boeing planes it ordered from the US in its retaliation over Trump tariffs.
Understandably, Trump and his minions will claim credit and victory based on the U.S.’ 30% tariff on China compared to the Chinese’ 10% tax on Americans. But let’s take a step back and ask the burning question – who will actually pay the 30% tariff if not American consumers. Yes, if the U.S. still thinks MAGA is winning because Americans will pay 30% while the Chinese will pay only 10%, then go celebrates.
Despite Trump’s favourite lies that China would eat tariffs, it’s the businessesin the U.S. who directly pay import taxes to the U.S. government on their purchases from abroad. Whether they decide to absorb or pass tariff-related costs to consumers is another issue. A 2023 United States International Trade Commission (USITC) report also confirmed near complete pass-through to import prices.
Here’s another proof – Apple is considering raising iPhone prices this September, even though it is careful not to link it to Trump’s tariff for fear of repercussions. If indeed China is the one paying Trump’s tariffs, would it not be better to raise the tariffs on Chinese goods to 800% or even 2,000%, rather than chicken out and slashed self-imposed tariffs from 145% all the way down to 30%?
After all, MAGA or “Make America Great Again” is all about repowering the American Eagle, weakening the Chinese Dragon and isolating China for the continuation of the U.S. hegemony. So, exactly how does cutting tariffs from 145% to 30% encourage American companies to relocate manufacturing back to American soil? And how to reduce U.S.’ US$918 billion foreign trade deficit if tariffs on China is cut to only 30%?
Rather than weakening the Chinese dragon by reducing its foreign trade surplus, which is used to strengthen its economic and military power, Beijing is laughing all its ways to the bank – at least for the next 90 days – as Bessent, despite talking big in front of American cameras, panicked and scrambled to strike a deal in Geneva. It’s both hilarious and entertaining to hear Trump said China was “being hurt very badly”.
The reset will force U.S. companies, who just went through five weeks of hell, to slam on the brakes and reconsider speeding up efforts to offshore production from China. Trump’s endless and annoying U-turn means they will maintain their current situation – keep China as their main operations hub and make appropriate partial arrangements in neighbouring countries like Vietnam, Cambodia and Malaysia.
Donald Trump and his minions can huff and puff that they have won the trade war. While the stock market celebrated the so-called deal, the bond market refused to be scammed. The U.S. 10-Year Treasury yield rockets to 4.45% – suggesting that either investors were still dumping or were avoiding the U.S. securities note with a 10-foot pole. The world has very low confidence to buy U.S. debt papers.
Beijing agreed to meet with U.S’ team because they came with betters cards in hand. China successfully called Trump’s bluff because he was a lousy poker player from the beginning. He lied through his teeth in claiming that the U.S. was doing great despite crashing stock and bond markets, collapsing shipments into U.S. ports, plunging U.S. dollar, contracting economy in the first quarter of 2025.
Confronted with warnings of a shortage of toys, Trump told reporters that children should be happy with “two dolls instead of 30 dolls”, and they might “cost a couple bucks more” than usual. Despite putting up a brave face, he was terrified about the attacks that would come his way if he began to be seen as responsible for Covid-style shortages of key goods in the world’s largest economy.
The White House has no choice but to opt for an early tactical retreat, before stores are overwhelmed with empty shelves and angry people. Amusingly, it was only on April 2 when Trump whined on Liberation Day about the U.S. being “looted, pillaged, raped and plundered by other nations left, right and centre”. He set the house on fire and then fetched a pail of water, and demanded to be given a medal after caving in to China.
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May 13th, 2025 by financetwitter
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