US-China tariff pause is just the start of a trade-talk marathon

Chinese and U.S. officials’ decision to temporarily ratchet back sky-high tariffs offered both countries a brief respite—and left tremendous uncertainty about what is next.

Now, the initial relief from the agreement for a 90-day reduction of tariffs—Washington is cutting the rate on Chinese imports from 145% to 30% and Beijing is cutting levies on U.S. goods from 125% to 10%— is giving way to concern that a resolution may not be quick, or clean. Tariffs remain far higher than most had anticipated.

The 30% tariffs on Chinese goods are on top of an effective tariff rate of about 11% from levies imposed during Trump’s first term and other sector-oriented tariffs. If the 30% additional tariffs on China aren’t reduced to 10% to 15%, the market will be disappointed, says Vivian Lin Thurston, a manager on William Blair’s emerging markets growth strategy. Current tariffs, she says, will shave 1% off growth in China’s gross domestic product this year.

But it could take time to see further relief. In a briefing on Thursday, China’s Ministry of Finance had no updates on plans for talks between officials. The week came to a close without signs that President Donald Trump had spoken with Chinese leader Xi Jinping, a possibility he had floated earlier in the week.

A long list of sticking points persist, complicating further discussions. Beijing has kept several restrictions related to exports of critical minerals to the U.S., including for magnets used by the military and for autos. The U.S. shows little sign of loosening restrictions aimed at curtailing China’s access to critical technology.

Indeed, the U.S. Bureau of Industry and Security this past week warned the technology industry against using certain Chinese chips, like Huawei’s Ascend chips. Beijing said the U.S. was “abusing export control measures."

As a result, geopolitical strategists are prepping clients for a messy couple of months. While they see steps both sides could take to move negotiations forward, they warn of spurts of de-escalation and escalation. That, they say, would be a recipe for the kind of stock market volatility that abounded in the lead-up to the Phase One trade deal during the first Trump administration.

Henrietta Treyz, director of economic policy at the political consultancy Veda Partners, expects negotiations could continue for much of the year. One concern is that new sector-specific tariffs, including one on pharmaceuticals, are likely to be rolled out in June, endangering the recently reached truce. The administration is either going to have to adjust its plans or accept that risk, Treyz says.

One route to dialing down the temperature further would be an agreement that lifts or reduces the 20% tariffs the U.S. has imposed on China, citing its role in the flow of fentanyl into the U.S. Analysts noted the presence of Wang Xiaohong, China’s vice minister of public security, at last weekend’s talks as a sign fentanyl-related negotiations could play a part in coming discussions.

Even that isn’t straightforward. Chinese officials have made overtures several times this year with proposals on fentanyl, but have been rebuffed, adding to their wariness about the aim of these trade negotiations, according to geopolitical analysts.

The U.S. wants stronger measures to restrict flows, with stricter enforcement and a more public approach that might involve the Chinese government going after domestic pharmaceutical companies. Analysts say China will likely want to act quietly rather than make the type of public splash the Trump administration favors, partly because Beijing has denied it has any role in the fentanyl crisis in the U.S., blaming it on a U.S. failure to tackle addiction.

A second vehicle for reducing tension could be a lighter version of the Phase 1 trade deal that U.S. Trade Representative Jamieson Greer helped craft. Beijing didn’t live up to the purchase commitments or promises of structural changes in the deal, but Treasury Secretary Scott Bessent has noted that such promises to buy U.S. goods could be a template for talks.

“The Chinese love the memo of understanding—a broad statement of what the intent is and where they want to go," says Dennis Wilder, senior fellow at Georgetown University’s Initiative for U.S.-China Dialogue on Global Issues and previously the National Security Council’s director of China under President George W. Bush. “If Trump is eager for a quick win, the Chinese could give him a broad MOU with some specifics about creating 500,000 jobs in the U.S. or promising to buy more U.S. goods, such as Boeing planes."

That could set the stage for discussions on thornier subjects, including export restrictions and opening up markets. But skepticism prevails about the chances of a bigger deal that could take years to hash out.

For Louis-Vincent Gave, head of Gavekal Research, a sign the two sides could be headed toward a deal that resets the relationship would be if the U.S. agrees to accept much more direct investment from Chinese firms.While Chinese investment into the U.S. has collapsed, in part because it has faced increasing bipartisan scrutiny as the countries’ strategic rivalry has intensified, Trump has often nudged countries to invest in the U.S. to help rebuild manufacturing stateside.

Still unclear is whether the U.S. will seek to adjust its economic relationship with China, or sever it. That could depend on which officials are most successful in making their case to Trump. More business-minded officials, such as Bessent, have said the U.S. isn’t looking for a decoupling from China. More hawkish officials have advocated cutting ties more broadly.