US Eases Trade War, Pursues 'Strategic Decoupling' From China

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“The US has canceled 91% of the additional tariffs, and China has canceled 91% of the counter-tariffs. The US has suspended the implementation of a 24% 'reciprocal tariff' and China has also correspondingly suspended the implementation of a 24% counter-tariff,” a spokesperson of the Chinese Ministry of Commerce (MoC) said on Monday.

“It is hoped that the US will continue to work with China based on this meeting, thoroughly correct the wrong practice of unilateral tariff hikes, continuously strengthen mutually beneficial cooperation, maintain the healthy, stable and sustainable development of China-US economic and trade relations and jointly inject more certainty and stability into the world economy,” the spokesperson said.

Yuyuan Tantian, a social media account operated by the state-owned China Central TV, which has access to top decision makers in the Chinese Communist Party (CCP), said the He-Bessent meeting has brought out three signals:

• The atmosphere of the talks was candid, in-depth, and constructive. The two sides could reach a consensus due to two factors. First, China had resolutely countered to safeguard its own interests, which had led to both sides raising tariffs to a level equivalent to prohibitive tariffs; second, the US side, having misjudged the current situation and overestimated its capabilities, has made itself very proactive, urgent and problem-solving-oriented in the discussions.
• China and the US have agreed to establish a trade consultation mechanism to maintain communication. Both sides will decide the time and place of future communication.
• Any possible discussion results between both sides must align with China's development interests.

Yuyuan Tantian said China's decision to retaliate against Trump's“reciprocal” tariffs contributed to the substantial progress of an agreement between China and the US.

'Resilient supply chains'

Bessent told CNBC on Monday that the trade agreement reached over the weekend represents progress in“strategic decoupling” from China.

“We do not want a generalized decoupling from China, but what we do want is a decoupling for strategic necessities, which we were unable to obtain during Covid,” Bessent said.“We realized that efficient supply chains were not resilient supply chains.”

“We are going to create our own steel to protect our steel industry, and work on critical medicines and semiconductors. So we are doing that, and the reciprocal tariffs have nothing to do with the specific industry tariffs,” he added.

He said the latest trade agreement represents another stage in the US shaking its reliance on Chinese products.

Commenting on the fentanyl issue, Bessent said,“We saw here in Geneva that the Chinese are now serious about assisting the US in stopping the flow of precursor drugs, because the Chinese brought their trade delegation led by the vice premier but they also brought a deputy minister for security, who was their fentanyl expert.”

He said US national security officials had a very long and in-depth talk with their Chinese counterparts about how the two countries could work together on the fentanyl issue.

The Chinese national security official who joined the He-Bessent meeting is China's Public Security Minister Wang Xiaohong, who is also deputy secretary of the Central Political and Legal Affairs Commission of the Chinese Communist Party.

Unwanted Chinese goods

After Trump imposed tariffs on almost all countries on“Liberation Day” (April 2), media reports said many Chinese factories lost all their US orders, while some faced financial difficulties as Chinese exporters cancelled their orders without compensation.

Chart: Asia Times

According to China Customs, the country's total imports decreased 0.3% to US$220.1 billion in April from a year ago. China's imports from the US fell 13.8% to $12.6 billion for the same period.

China's total exports grew 7.9% to $315.7 billion in April from $292.5 billion a year earlier, faster than the 5.7% year-on-year growth recorded in the first quarter of this year.

A calculation can show where Chinese manufacturers shipped their unwanted goods during the trade war.

For example, China's exports to Vietnam increased 22.5% year-on-year to $17.1 billion in April. However, if there had been no“Liberation Day,” the April figures could have maintained the first quarter's 15.6% growth rate to grow to $16.2 billion. This means that Trump's tariff war might have helped boost China's exports to Vietnam by $975 million last month.