Trade between the world's two largest economies has nearly skidded to a halt since US President Donald Trump slapped China with various rounds of levies that began as retaliation for Beijing's alleged role in a devastating fentanyl crisis.
With additional measures justified by Trump as efforts to rebalance the trade relationship and prevent the United States from being "ripped off", tariffs on many Chinese products now reach as high as 145 percent -- with cumulative duties on some goods soaring to a staggering 245 percent.
Beijing has responded with 125 percent tariffs on US imports, along with other measures targeting American firms.
But after weeks of tit-for-tat escalation that sent global markets into a tailspin, the two powers will meet this weekend for a chance to break the ice.
Washington has said it's not expecting a "big trade deal" that could address Trump's longstanding complaint about the major goods imbalance with the export powerhouse -- but it is hoping the two sides can at least begin to de-escalate tensions.
Beijing has vowed to stick to its guns and insisted its demand that all US tariffs be lifted remains "unchanged".
Analysts say, however, China is in no major rush to make a deal.
"Beijing can impose some pain on the United States," Chong Ja Ian, associate professor of political science at National University of Singapore, told AFP.
China's core strengths going into the talks are its huge domestic market, as well as "key technologies and control of a significant proportion of processed rare earth minerals", Chong said.
- 'No wild bluster' -
Compared to its approach during Trump's first term, Beijing's response to his tariffs this time has been "more mature", said Dylan Loh, an assistant professor at Singapore's Nanyang Technological University.
"There's no wild bluster," he explained.
"I think they have learnt from their earlier responses and they know that they cannot be led by the nose," he said.
Analysts say China has been able to take more of a hardline posture to Trump's tariffs this time, despite its struggling economy.
"It still has meaningful retaliatory tools and -- just as important -- staying power," said Lizzi Lee from the Asia Society Policy Institute's Center for China Analysis.
China's autocratic system, she said, allowed it "to absorb economic pain in ways democracies often cannot".
Beijing has also concurrently launched a charm offensive aimed at tightening trade ties in Southeast Asia and Europe -- positioning itself as a more stable and reliable partner in contrast to the mercurial Trump administration.
That move allowed Beijing to "build buffers" against trade war vicissitudes, Lee said.
"It won't replace the US market overnight, but every incremental diversification reduces exposure and increases negotiating room," she added.
That's not to say China isn't hurting.
Sales of Chinese goods to the US last year totalled more than $500 billion -- 16.4 percent of the country's exports, according to Beijing's customs data.
But as the effects of the trade war sunk in, China's factory activity shrank in April, with Beijing blaming a "sharp shift" in the global economy.
While not as colossal as China's export levels, US shipments to the country last year were a considerable $143.5 billion, according to the US Trade Representative website.
"Even in the case that one of the two countries would clearly have 'the upper hand', it is still worse off economically than before the trade war started," said Teeuwe Mevissen, senior China economist at Rabobank.
Beijing and Washington have "found out that it is not so easy to fully decouple".
- Talks about talks -
Policymakers this week unveiled measures to boost domestic consumption -- a sign that leaders are "not panicking but feeling some pressure", said Shehzad Qazi, managing director of China Beige Book.
Beijing will need to strap in for potentially long and drawn-out negotiations with Washington that could bring "much more volatility along the way", said Qazi.
Analysts broadly agree that upcoming talks are a first step towards a de-escalation of tensions that could, a long way down the line, lead to a lifting of tariffs.
"A best-case scenario would be agreement around a process to enter future negotiations," Ryan Hass, senior fellow at Brookings Institution, told AFP.
Beijing could insist on receiving the same 90-day waiver on tariffs that other countries had received, he suggested.
And China's insistence that the Switzerland talks came at the request of Washington suggests it is the United States that is desperate for a deal, said Dan Wang, China Director at the Eurasia Group.
"The fact that it is happening is showing some concessions already on the US side."
Where things stand in the US-China trade war
Beijing (AFP) May 9, 2025 -
US and Chinese officials meet this weekend in Geneva for their first formal talks aimed at resolving a gruelling tit-for-tat tariff war that threatens hundreds of billions in trade and roiled global markets and supply chains.
AFP looks at how the trade row between the world's two economic superpowers is playing out:
- What steps have the two sides taken so far? -
The United States has raised tariffs on Chinese imports to 145 percent, with cumulative duties on some goods reaching a staggering 245 percent.
As well as the blanket levies, China has also been hit with sector-specific tariffs on steel, aluminium and car imports.
Sales of Chinese goods to the United States last year totalled more than $500 billion -- 16.4 percent of the country's exports, according to Beijing's customs data.
Beijing has vowed to fight the measures "to the end" and has unveiled reciprocal tariffs of up to 125 percent on imports of American goods, which totalled $143.5 billion last year, according to Washington.
China has filed complaints with the World Trade Organization (WTO), citing "bullying" tactics by the Trump administration.
And it has gone after US companies, scrapping orders for Boeing planes, probing Google for "anti-monopoly" violations and adding fashion group PVH Corp. -- which owns Tommy Hilfiger and Calvin Klein -- and biotech giant Illumina to a list of "unreliable entities".
Beijing has also restricted exports of rare earth elements -- critical for making a wide range of products including semiconductors, medical technology and consumer electronics.
- What's been the impact? -
Beijing has long drawn Trump's ire with a trade surplus with the United States that reached $295.4 billion last year, according to the US Commerce Department's Bureau of Economic Analysis.
Chinese leaders have been reluctant to disrupt that status quo.
But an intensified trade war could mean China cannot peg its hopes for strong economic growth this year on exports, which hit a record high in 2024.
US duties further threaten to harm China's fragile post-Covid economic recovery as it struggles with a debt crisis in the property sector and persistently low consumption.
The tariff war is already having an impact in the United States, with uncertainty triggering a manufacturing slump last month and officials blaming it for an unexpected economic contraction during the first three months of the year.
"Both countries have surely found out that it is not so easy to fully decouple," Teeuwe Mevissen, senior China economist at Rabobank, told AFP.
"Both the US and China lose economically with the current trade war," he said, adding that even in the case that one side gains the upper hand "it is still worse off economically than before the trade war started".
The head of the WTO warned in April that the US-China standoff could cut trade in goods between the two countries by 80 percent.
Beijing announced a raft of interest rate cuts on Wednesday aimed at boosting consumption -- a possible sign that it is starting to feel the pinch.
Analysts expect the levies to take a significant chunk out of China's gross domestic product, which Beijing's leadership have targeted to grow five percent this year.
Likely to be hit hardest are China's top exports to the United States -- this includes everything from electronics and machinery to textiles and clothing.
And because of the crucial role Chinese goods play in supplying US firms, the tariffs may also hurt American manufacturers and consumers, analysts have warned.
- Is a breakthrough possible? -
Both sides insist that economic pressures have driven the other to seek negotiations.
But while markets have welcomed the talks, a major breakthrough in Geneva seems unlikely.
China has insisted its position that the United States must lift tariffs first remains "unchanged" and vowed to defend its interests.
US Treasury Secretary Scott Bessent has said the meetings will focus on "de-escalation" -- and not a "big trade deal".
But analysts do expect some form of tariff reduction to be announced following Saturday's ice-breaking exercise.
"One possible outcome of the Switzerland talks is an agreement to pause most, if not all, of the tariffs that have been imposed this year while negotiations take place," Bonnie Glaser, managing director of the German Marshall Fund's Indo-Pacific program, told AFP.
Lizzi Lee from the Asia Society said she expected "a tentative, symbolic gesture -- designed to lower temperatures, not resolve core disputes".
"Stabilisation and guardrails are the most likely outcomes."
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