China–United States: Trade Truce and Long-Term Strategy

Translated by Federico Emanuele

On May 12, following negotiations held in Geneva, the United States and China reached an agreement to temporarily suspend the reciprocal tariffs imposed in recent months.
This 90-day truce, which has brought tariffs back to an effective level of 40%, aims to foster bilateral dialogue and lay the groundwork for a broader and more lasting trade agreement. However, the impulsive trade policy of the Trump administration may have significant repercussions on the Asian economic order and, more broadly, on the world’s second-largest economy.

It also appears unlikely that the dialogue planned for the next ninety days will produce lasting effects or significantly contribute to the stabilization of relations between Washington and Beijing. The structural differences between the two countries are rooted in long-standing tensions that are unlikely to be resolved in the short term. These include the U.S. military presence in the region and its established system of alliances with major Asian countries. Added to this is the technological competition, with the United States intent on containing the development and spread of Chinese cutting-edge technologies, which are seen as a threat to its own strategic supremacy.

From the perspective of economic relations with Asia-Pacific countries, Trump’s unilateral initiatives risk undermining the stability of long-term relations, leaving room for growing Chinese influence. A striking example is the United States’ withdrawal from the TPP (Trans-Pacific Partnership) during Trump’s first term - a decision that accelerated the regionalization of the Asian economy and paved the way for the signing of the RCEP (Regional Comprehensive Economic Partnership), the world’s largest trade agreement, strongly backed by Beijing.

Another consequence of the growing regionalization of the Asian economy - marked by increasingly high entry barriers for new players - could be the deepening of the already significant divide between the economic and security spheres. These two dimensions are today led by different powers: China, as the region’s economic engine, and the United States, as the guarantor of regional security. For many Asian countries, particularly those in Southeast Asia belonging to ASEAN, the dilemma between economic interests and security imperatives is becoming increasingly pressing, making it difficult to find a sustainable long-term balance.

Moreover, China could seize the opportunity created by recent U.S. policy choices to rehabilitate its image on the international stage. Once accused of unfair trade practices, Beijing could now present itself as a responsible actor and a reliable partner committed to safeguarding the multilateral trading system. This paradox is made even more evident by the fact that it is the system’s original promoter - the United States -that is now calling it into question.

Furthermore, the strategy adopted by Beijing in the lead-up to last week’s agreement - if pursued consistently - could produce long-term effects on both the regional and Chinese economies, significantly reshaping the current balance of the global economy. Even before Donald Trump’s official inauguration, Chinese academic circles had been reflecting on possible countermeasures in case the U.S. administration adopted an aggressive trade policy - an outcome that indeed materialized. Among the strategies discussed were the promotion of the services sector, the signing of new trade agreements as alternatives to U.S.-dominated ones, and the outsourcing of some Chinese companies to bypass the impact of tariffs—a phenomenon already observable in recent months.

The topic of the measures needed to boost the Chinese economy was at the center of the recent joint session of the National People’s Congress and the Chinese People’s Political Consultative Conference. In that context, significant - though largely expected - stimulus measures were announced, mainly aimed at reviving investment and supporting domestic demand. However, the prospect of a structural shift toward a consumption-driven growth model still seems far off. The goal is to offset the losses caused by recent economic uncertainty and, at the same time, to move closer to the annual economic growth target, set at 5% and officially confirmed as the benchmark for 2025.

These measures are being introduced in a domestic context marked by increasingly entrenched nationalism, which on the one hand makes Chinese public opinion more willing to endure the burden of a trade confrontation with Washington - currently in a truce but likely to reemerge in the long run. On the other hand, this climate limits the flexibility of the Chinese leadership, which risks being constrained by the very nationalist expectations it helps to foster. In the long term, this could significantly restrict China’s room for negotiation should broader dialogue with the United States resume.

However, this domestic posture risks clashing with Beijing’s increasingly urgent need to adopt a pragmatic and responsible approach on the international stage. Only in this way could China hope to fill the void left by the United States and strengthen its image as a power committed to defending the multilateral economic and trade order. To consolidate this narrative—and, according to some analysts, to effectively recalibrate its economic model—China would need to ensure greater openness of its domestic market to foreign players. A prospect which, given the country’s political and social context and its history, appears anything but likely.

In conclusion, China finds itself caught between ambitions of global leadership and the constraints of its domestic environment. How it attempts to reconcile these two dimensions will determine not only the future of its relations with Washington but also the balance of the global economy in the years to come.

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