The first meeting to break the American-Chinese commercial impasse took place almost three weeks ago in the basement of the IMF’s headquarters, organized under the cover of secrets.
US Treasury Secretary Scott Bessent, who attended the IMF spring meetings in Washington, met Chinese finance minister Lan Fo’an to discuss the almost complete break in the world between the two biggest economies in the world, according to people familiar with the issue.
The previously undeclared meeting was the first high -level meeting between American officials and Chinese officials since the inauguration of Donald Trump and the launch of his pricing war. The Treasury refused to comment on the secret meeting.
The talks culminated this weekend in Geneva this weekend with Bessent and Il Lifeng, Chinese vice-president, accepting a ceasefire that would reduce the respective prices of 115 percentage points for 90 days.
Despite the warning of the two parties that they were ready to dig in a long term, the truce turned out to be easier and faster than expected than expected. A primordial question has important implications for future negotiations: Beijing or Washington first tripped?
Trump claimed victory on Monday, saying that he had designed a “total reset” with China. Meanwhile, Hu Xijin, the former editor -in -chief of the National Communist Party Tabloid The Global Times, said on social networks that the agreement was “a great victory for China”.
“The United States has deflated,” said a popular Chinese social media post.
Economists agreed that the United States could have played too much by raising the prices too quickly and too high. “The United States first clicked eyes,” said Alicia García-Herrero, chief economist of Asia-Pacific at the French Investment Bank Natixis. “He thought it could increase the rates almost infinitely without being injured, but it was not proven.”
The United States and China had each argued that the other was more vulnerable to prices. But the speed at which they took place the samples in Geneva suggested that the trade war inflicted intense pain on both sides, she added.
A hard decoupling of the two largest economies in the world threatened job losses for Chinese workers and higher inflation and empty shelves for American consumers.
Craig Singleton of the Foundation for the Defense of Democracies, a group of reflection in Washington, said that it was “striking” how fast the agreement had emerged, suggesting that “the two parties were more economically supervised than they left it”.
While Beijing was standing on foot with Washington in the fight against Trump’s prices, Chinese negotiators have even more work to do to level the rules of the game; The United States still retains much higher prices on China than on any other country.
The capital economy has calculated that the total of American prices on Chinese products would remain about 40% after the ceasefire while Chinese prices in the United States would be around 25%. Experts also warned that this would be a difficult path to obtain any agreement that would be more sustainable.
“American-Chinese trade negotiations will be like roller coaster,” said Scott Kennedy, an expert in China at CSIS, a reflection group. “The markets can push a temporary relief, but we are far from the woods.”
Before the talks, Bessent had warned that the high level of prices was not durable and equivalent to an effective embargo on American-Chinese trade.
The ceasefire has at least reduced the gap enough for the extremely price manufacturers of China to remain in business in the United States.
Alfredo Montufar-Helu, China Center chief of the Conference Board Think Tank in New York, said that it would have been impossible for Chinese producers to compensate for the 145% tariffs imposed by the United States. “But at 30%, I think most Chinese imports in the United States would regain their competitiveness.”
Before the talks in Geneva, Bessent had declared that the two parties were unlikely to reach a large economic and commercial agreement, saying that they had to “defuse before we can move forward”.
But on Monday, he struck an optimistic note, suggesting that Washington could seek the type of “purchase agreement” which characterized the initial phase of the American-Chinese trade war during Trump’s first term.
These implied Beijing agreeing to buy quantities of basic products, such as soybeans and American manufactured products, but they were disturbed by the pandemic. “There will also be a possibility of purchasing agreements to draw what is our biggest bilateral trade deficit in balance,” said Bessent.
Bessent and Greer also seemed positive about the possibility of an agreement with China to slow down the trafficking of fentanyl precursors in the United States.
“The upward surprise for me this weekend was the level of Chinese engagement on the fentanyl crisis,” said Bessent.
He said the Chinese delegation included an official who had “a very robust and very detailed discussion with someone from the American national security team”.
For Beijing, a fentanyl agreement could erase 20 percentage points of rates that remain imposed by Trump, placing China roughly on a playground with other countries exporting to the United States.
China would still be confronted with prices specific to the sector, such as the Biden era samples from electric vehicles. But other countries would also be subject to American rates in similar sectors.
Even with this respite, economists have warned that the bilateral relationship has remained troubled, the creation of unpredictable policy of Trump which should encourage China to continue to diversify its export markets and try to stimulate greater domestic demand.
Chinese exporters would probably use the 90-day window for negotiation to download more exports to the United States, which could lead to another Chinese trade surplus with the country.
“A sustainable resolution remains difficult, given the complex bilateral relationship,” said Robin Xing, economist at Morgan Stanley in a note.
With additional reports from Wenjie Ding in Beijing
