I provided these lengthy comments on the weekends development in the US/China trade escalation, some were picked up by some media outlets. Here are the full length comments.
The recent U.S.-China thaw, a 90-day tariff reduction from 145% to 30% for U.S. imports and 125% to 10% for Chinese imports, marks a tactical pause. While the accord signals a mutual recognition of the economic costs of prolonged trade warfare, it leaves critical structural issues unresolved, underscoring the enduring tension. It is not a breakthrough but a recognition that economic instability harms both sides–and a test of whether cooler heads can prevail over geopolitical mistrust.
The agreement’s limited scope reveals the asymmetries in the trade relationship. U.S. imports to China face far lower tariffs (10%) compared to the 30% levied on Chinese exports to the U.S. Lowering tariffs, despite the continued asymmetry, is still a temporary win/win. In both cases, lower tariff rates are going to reduce inflationary pressures, for final goods purchases of Chinese goods in the US, and agricultural commodities from the U.S. to China.
But, China remains subject to U.S. export controls on high-tech goods, particularly semiconductors and AI chips, which hurts some American interest. Recently, China has selectively allowed U.S. – designed chips from third-party manufacturers to ease tech-sector pressures, highlighting its tactical adjustments to mitigate economic fallout, while maintaining its stance on intellectual property rights.
In light of this, the U.S. is now recalibrating its export controls, signaling a potential shift in the tech war. However, the asymmetry in trade treatment persists, with China’s reliance on low-tariff agricultural imports and the U.S.’s focus on technological dominance shaping the trade imbalance. This dynamic reflects a deeper strategic divide: while both nations seek to control inflation through reduced tariffs, the underlying issues of market access and industrial policy remain unaddressed.
The agreement has brought immediate relief to global markets. Equity surges, shifting bond yields, and optimism about improved trade flows reflect a cautious hope that the 90-day window could pave the way for a more sustainable framework. However, the lack of transparency in the negotiations keep uncertainty elevated. But its good to hear that the tone is shifting.
Beyond trade, the U.S.-China rivalry is reshaping the international financial and trade system. The Russian war on Ukraine, the deployment of sanctions, the trade disruptions in recent years, along with the current trade war, and the implicit increase in supply chain transparency that each of these bring, highlight a potential substantial shift in the plumbing of the global trade system that may be underway. These shifts may, in the medium term, be also quite beneficial for climate action.
The topic that has not been touched on is the financial system plumbing. Beijing’s accelerated cross-border digital yuan trials and broader de-dollarization efforts reflect a push to build parallel financial infrastructure, reducing reliance on Western-dominated systems.
At the same time, U.S. restrictions on Chinese access to critical tech components — particularly semiconductors and AI chips — may have reinforced the view in Beijing that financial and technological sovereignty are inseparable. Other geopolitical blocs are similarly rethinking the role of the dollar, signaling a shift toward multipolar financial governance. This evolution could redefine global economic power dynamics, with the U.S. and China vying for influence in a system increasingly fragmented by ideological and strategic divides.
The broader geopolitical context adds complexity to the trade agreement. The Ukraine conflict has exposed flaws in Western sanction enforcement and highlighted vulnerabilities in the digital and information infrastructure of Western societies. These challenges have brought the evolving tensions around digital governance to the forefront, as nations grapple with the balance between security and open systems.
Meanwhile, European defense upgrades are gaining momentum, potentially offering an offramp for parts of the defense-related automobile industry. Technology transfer from China and continued investment could accelerate the transition to electric vehicles. Meanwhile, OPEC’s internal ruptures are creating financial pressure on Russia, helping create some momentum to bring its agression towards Ukraine to a halt. Some Middle Eastern players may be willing to accept lower oil prices amid the global shift toward electric vehicles as they may speculate on dynamically lower shale oil supply and increases in market share in a decarbonising world. Trump’s uncertainty has also contributed to market volatility, though his potential policies could provide a catalyst for further shifts in energy and trade dynamics.
The next 90 days will be critical in determining whether this temporary thaw evolves into a sustainable framework or if geopolitical mistrust reasserts itself. The U.S.-China trade relationship remains a precarious balancing act between cooperation and competition, with realignments in supply chains and regulatory shifts continuing to reshape the global economic landscape.
As the world navigates these tensions, the interplay between economic and geopolitical forces will define the next chapter of international relations. Whether the trade agreement marks a turning point or merely a pause in a long-term rivalry remains to be seen. For now, the stage is set for a complex dance of diplomacy, technology, and finance–one where the stakes are as high as ever.