In One Sentence

• On April 23, President Trump claimed the U.S. and China were “actively” discussing trade, but both China’s Foreign Ministry and Ministry of Commerce denied any tariff talks had occurred, dismissing the claim as “fake news.”
• Trump later reiterated his claim, saying officials had met on April 24 and that he spoke with President Xi on the 25th, though China’s Foreign Ministry again denied the statements.
• Although it remains unclear whether any discussions are underway to avert the steep tariffs, signs of de-escalation may have begun to emerge.
• The White House has floated that it may consider reducing tariffs on Chinese imports to approximately 50–65%, while maintaining 100% levies on items deemed strategic to U.S. interests.
• China, for its part, has exempted certain U.S. imports from its 125% tariffs and is requesting firms to identify additional essential goods for potential exclusion.

Mark the Essentials

• U.S. Treasury Secretary Scott Bessent told a closed-door investor summit on April 22 that the U.S. does not seek to decouple from China and emphasized that the current tariff status quo—145% on Chinese goods and 125% on U.S. products—is unsustainable for both countries.
• Retailers warn that U.S. consumers may again face Covid-era-type supply chain disruptions, with a projected 20% decline in imports in the second half of the year likely causing shortages of low-cost goods.
• Bessent further emphasized that President Trump would not unilaterally reduce tariffs on Chinese imports, arguing that China—at risk of losing up to 10 million jobs—should take the first step in easing tariffs, a stance Beijing has previously rejected.
• Despite Trump’s stated openness to a deal, disputes over who should move first and fears of losing face make a near-term resumption of talks unlikely, with analysts noting that “one or both will have to swallow their pride,” highlighting the depth of the current deadlock.
• The Information Technology and Innovation Foundation (ITIF) simulation results indicate that retaliatory tariffs triggered by Trump’s “Liberation Day” tariff regime could cost U.S. tech exporters up to $82 billion, with even the most modest scenario resulting in $56 billion in losses; given these findings, ITIF warns that the tariffs risk accelerating offshoring and bolstering China’s tech sector at the expense of U.S. firms.
• Despite ongoing talks with other countries, analysts note that the Trump administration lacks a coherent internal position on tariff policy, characterizing it as “a war with itself” between those who see tariffs as a temporary negotiating tool to be lowered through bilateral deals and others who favor maintaining high tariffs to advance a protectionist, economic nationalist agenda.
• The U.S. has agreed to WTO consultations with China over the tariffs but maintains the measures are justified by national security and fall outside the WTO dispute settlement body’s jurisdiction.

Keeping an Eye On…

• At a time when the U.S. and China have moved from being at mere loggerheads with one another to becoming embroiled in a full-fledged trade war with no near-term end in sight, it merits examining the Trump administration’s emerging economic and trade framework for China. That framework is built with four objectives in mind. First, is the imperative to significantly reduce the U.S.’ bilateral goods trade deficits, with the focus being on the main surplus countries – China, Canada, and Mexico, as well as the main surplus region – the Asia-Pacific region. The combined deficit with China, Japan, Korea, Taiwan and Vietnam, the U.S.’ five largest Asia-Pacific trading partners, was more than 50% of the U.S.’ total goods deficit in 2024. Hence, the reciprocal tariffs. Next, is the need to reshore manufacturing in certain vital and heavily traded industrial sectors. ‘Friendshoring’ is out, so also is ‘nearshoring’ (with the limited exception of certain USMCA-eligible goods from Canada and Mexico). Reshoring is the only game in town. It is worth noting that machinery, electrical equipment, motor vehicle and auto parts, and pharmaceutical products made up 75% of the U.S. goods trade deficit in 2024. The administration’s goal is to reshore as much of high-end productive capacity in these sectors as is practicable. Third, is the need to strip China out of U.S. critical infrastructure sectors (food supplies, farmland, minerals, natural resources, and ports and shipping terminals) and related supply chains. This objective builds on earlier Biden administration measures to strip China’s supply chain presence out of the AI and advanced computing, ICTS and data, and clean energy (including EVs) sectors. And finally, to continue decoupling from China in advanced technology sectors – the key ones listed now being expanded beyond semiconductors, AI, quantum, and biotechnology to include hypersonics, aerospace, advanced manufacturing, and directed energy too. The yard is to become wider and the fence taller.
  
  The administration has been clear regarding its overarching trade and economic policy goals vis-à-vis China. It is much less clear on how to realize these goals, and for good reasons. Trade deficits are a product of investment, consumption, and savings imbalances and are disconnected from tariff levels, except at very high tariff levels. Structuring ‘reciprocal tariffs’ to eliminate or significantly reduce bilateral trade deficits is an unrealizable goal, which has left counterpart countries perplexed and markets rattled. Reshoring manufacturing is easier said than done, too, in an era when the bulk of cross-border trade is conducted in intermediate goods. And the administration has been entirely unclear about the end state of its trading relationship with Beijing, beyond the four broad objectives. Should the U.S. build on the disentangling of its trading relations with China to fully decouple economic ties? Should the U.S. lead an alliance of market democracies that disentangle and substantially exclude China from their markets? Should the U.S. seek fair and enduring access to China’s market and balanced two-way economic exchanges, while eliminating interdependencies in advanced technologies and critical infrastructure supply chains? The end state matters. From a strategic standpoint, China seeks an interdependent relationship, if only to facilitate its own modernization goals. If a degree of interdependence is rejected and the U.S. market substantially closed to Chinese goods, what is China’s reciprocal interest and incentive in opening its market to U.S. exports? If the U.S. chooses to pursue its own sweetheart market purchases deal with Beijing, why should allies and partners have to burn their trade bridges with China? The U.S. overestimates, furthermore, the extent to which its allies and partners are willing to follow it down the path of casual disregard of multilateral trade and treaty law in their dealings with Beijing.
  
  In the absence of a consensus on what the end state should look like, senior administration appointees have taken to improvising their own preferred solutions. Allies and partners could obtain relief from the reciprocal tariffs in exchange for isolating China from its markets. Allies and partners could obtain relief in exchange for matching secondary tariffs on Chinese imports. Allies and partners could obtain relief in exchange for denying China their market for its excess produced industrial goods, etc. None of the proposed solutions is authoritative. At the end of the day, where the administration’s tariffs vis-à-vis China finally land will depend on what Mr. Trump wants – much like the larger trade war, which has been a function of senior administration officials scurrying around to cater to the president’s peculiar and disruptive ideas on trade deficits and reciprocal trade while simultaneously attempting to stay within the good graces of financial markets.

Expanded Reading

• US and China clash over status of trade talks. Here’s what to know, ABC News, April 24, 2025.
• Trump says Xi called him, lays out trade and other deal plans in Time interview, Reuters, April 25, 2025.
• China exempts some goods from US tariffs, Reuters, April 25, 2025.
• Conflicting US-China talks statements add to global trade confusion, Reuters, April 25, 2025.
• White House Considers Slashing China Tariffs to De-Escalate Trade War, Wall Street Journal, April 23, 2025.
• Bessent Expects Tariff Standoff With China to De-Escalate, Bloomberg, April 22, 2025.
• Product shortages and empty store shelves loom with falling shipments from China, NBC News, April 25, 2025.