In a notable development, the United States and China have reported substantial advancements in their trade negotiations, which took place in Geneva. The discussions, led by US Treasury Secretary Scott Bessent and China’s Vice Premier He Lifeng, were described by Bessent as “productive and constructive,” while He characterized them as “in-depth” and “candid.” This marks the first formal engagement between the two nations since the imposition of steep tariffs by US President Donald Trump in January.
Positive Market Reactions
The series of closed-door meetings occurred over the weekend and came in response to the significant tariffs imposed by both countries—Trump’s 145% tariff on Chinese imports and China’s subsequent 125% tariff on certain US goods. The tariffs have sent shockwaves through global financial markets, raising concerns about a potential worldwide recession. However, on Monday morning, stocks in mainland China and Hong Kong showed signs of recovery, with the Shanghai Composite Index up by approximately 0.4% and the Hang Seng Index rising nearly 0.7%. Additionally, US stock futures indicated a positive opening, reflecting optimism in the markets.
Future Steps and Expert Opinions
The Chinese yuan also experienced a strengthening against the US dollar, further signaling market confidence. A detailed joint announcement regarding the outcomes of the trade discussions is expected to be made public on Monday. Trade expert Frank Lavin, a former undersecretary for international trade at the US Department of Commerce, expressed his belief that the negotiations might lead to tariff reductions, although he cautioned that the rates would likely remain “way above historical norms.” Conversely, Deborah Elms, Head of Trade Policy at the Hinrich Foundation, shared a more cautious perspective, suggesting that while reciprocal tariffs could be addressed, she anticipates mainly an agreement to continue dialogue.
“The deal we struck with our Chinese partners will help reduce the US’s $1.2tn (£901bn) trade deficit,”
stated US trade representative ambassador Jamieson Greer following the conclusion of the two-day talks. Both Bessent and He emphasized the significance of these discussions not only for their respective countries but also for the overall stability and development of the global economy.
International trade organizations have recognized the talks as a crucial step forward. Ngozi Okonjo-Iweala, the World Trade Organization’s inspector general, urged both nations to maintain this momentum by continuing to seek practical solutions that alleviate tensions and restore confidence in the multilateral trading system.
Amidst these developments, President Trump took to social media to commend the negotiations, describing them as “very good” and highlighting the constructive nature of the discussions. He emphasized the importance of opening China to American businesses, stating, “GREAT PROGRESS MADE!!!” The backdrop of the trade talks remains a complex landscape of reciprocal tariffs, with the US imposing significant tariffs on Chinese imports and China retaliating with its own levies on American goods.
As the negotiations progress, the White House has maintained its position that any reduction in tariffs will require concessions from China. Prior to the talks, White House Press Secretary Karoline Leavitt reiterated that the US would not unilaterally lower tariffs.
Recent reports indicate that Chinese exporters have been grappling with the impacts of US tariffs, with some companies struggling to sell their products in the US market. Meanwhile, the US economy itself faced a decline, contracting at an annual rate of 0.3% in the first quarter, as businesses rushed to bring goods into the country amid the ongoing trade conflict.
The trade dynamics between the US and China intensified significantly last month, following Trump’s announcement of a universal baseline tariff on all imports, which he dubbed “Liberation Day.” Approximately 60 trading partners, identified by the White House as “the worst offenders,” are facing increased tariffs, including both China and the European Union. This escalation reflects Trump’s broader strategy to address what he perceives as long-standing unfair trade practices.
In further developments, the US has recently reached an agreement with the UK, reducing a 25% import tax on UK cars to 10% for a maximum of 100,000 vehicles per year, aligning with the number of cars the UK exported to the US last year. The automotive sector remains a crucial component of trade relations, with UK car exports valued at approximately £9bn last year.