Trump Extends Trade Truce with China, Averting Immediate Showdown

WASHINGTON (AP) — President Donald Trump announced on Monday the extension of a trade truce with China for an additional 90 days, averting a potentially serious confrontation between the world’s two largest economies. The executive order was shared via Trump’s Truth Social platform, where he stated that “all other elements of the Agreement will remain the same.” The announcement coincided with a statement from Beijing’s Ministry of Commerce, confirming the extension of the tariff pause.

Delay in Tariff Increase

The original deadline for negotiations was set to expire at 12:01 a.m. Tuesday. Had this deadline passed without agreement, the U.S. could have escalated tariffs on Chinese imports from an already substantial 30%, prompting Beijing to retaliate with increased levies on U.S. exports. The extension, therefore, buys precious time for both countries to negotiate their differences, potentially setting the stage for a summit between Trump and Chinese President Xi Jinping later this year. This move has been welcomed by U.S. businesses operating in China.

Business Perspectives

Sean Stein, president of the U.S.-China Business Council, emphasized the importance of the extension, stating it is “critical” for allowing both governments the time needed to negotiate a trade agreement that would improve market access for U.S. businesses in China and provide the certainty essential for long-term planning.

Stein also highlighted the urgency of securing an agreement on fentanyl, one that would lead to a reduction in U.S. tariffs and a rollback of China’s retaliatory measures, which he noted is crucial for rejuvenating U.S. agriculture and energy exports.

China’s Reciprocity

In a related development, China announced a pause in its restrictions on American companies previously placed on an export control list. Following Trump’s initial tariff announcements, China limited exports of dual-use goods to specific American firms and imposed bans on others. However, the Ministry of Commerce has indicated that these restrictions will be lifted for some companies, while others will receive an additional 90-day extension.

Ongoing Trade Challenges

Despite this temporary reprieve, bridging the trade gap with China remains an unfinished endeavor for Trump. His administration has already altered the global trading landscape by implementing tariffs on numerous countries. Notably, the European Union and Japan have resorted to agreeing to disproportionately heavy trade deals in a bid to avoid even higher tariffs.

Statistics reveal that the average U.S. tariff has surged from approximately 2.5% earlier this year to 18.6%, marking the highest levels since 1933, according to the Budget Lab at Yale University. Meanwhile, China has pushed back against this trade strategy by considering its own limitations on rare earth exports, crucial components in electric vehicles and various advanced technologies.

Tensions and Agreements

Earlier this summer, the two nations reached a crucial agreement to ease tensions, with the U.S. agreeing to retract some of its export restrictions on certain technologies in exchange for China facilitating easier access for U.S. firms to rare earths. However, experts, including Claire Reade from Arnold & Porter, argue that the U.S. has realized it does not possess the upper hand in these negotiations.

The Road Ahead

While some progress has been made, reaching a comprehensive agreement on significant issues—such as China’s inadequate protection of intellectual property rights, and its industrial policies that allegedly create an uneven global competitive landscape—remains a challenge. The U.S. trade deficit with China stood at $262 billion last year, emphasizing the economic imbalance.

Consultant Jeff Moon acknowledges that while minor agreements may be achievable, larger, more stubborn issues will likely persist, suggesting that “the trade war will continue grinding ahead for years into the future.”