Tariff Pause Marks Diplomatic Shift in US-China Talks

• The U.S. and China agreed to ease some tariffs to improve trade ties after months of quiet negotiations

• Analysts view the move as a short-term strategy ahead of the U.S. election, with key issues still unresolved

By Kenzie Aryasatya, Fayza Nawra Avanitanya, Muthia Noor Safitri, Imam Fakhri Prayogo Harianto 

May 16, 2025 at 16:30 GMT+7

The United States and China agreed to pause select tariffs, marking a conscious change in their trade relationship. The arrangement includes a partial rollback of tariffs originally implemented during the previous US administration, specifically targeting industrial and consumer goods. 

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This decision follows several months of confidential diplomatic engagement and reflects a shared intent to prevent further deterioration in bilateral economic relations. Both governments have presented the action as a confidence-building measure aimed at stabilizing trade and investment flows that have remained under strain since 2018. 

By taking this step, the two countries aim to foster a more predictable and cooperative economic environment, signaling a deliberate shift toward rebuilding trust and reducing uncertainty for businesses and investors on both sides.

Flags of China and the United States | Source: AP News

Economic and political pressures played a central role in driving the United States and China toward this agreement. In the US, the high inflation and supply chain challenges have intensified demands for a recalibration of tariff policy, such as regarding sectors of the economy that are mainly dependent on imports. 

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For China, declining export performance and weakening domestic demand have heightened the urgency to secure more favorable trade conditions. 

Analysts view the timing of the deal as a tactical move ahead of the US presidential election, allowing the administration to demonstrate pragmatic engagement with China while maintaining a strong negotiating posture. This balance of economic necessity and political strategy facilitated the limited but significant agreement.

US Trade Representative and Treasury Secretary at a press conference in Geneva (5/12) | Source: AP News

Financial markets responded positively to the announcement, with US stock futures rising on Monday (5/12), led by sectors dependent on exports to China. This initial optimism reflected investor hopes for reduced trade tensions and improved global economic stability. 

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However, investor optimism faded as market attention quickly returned to persistent domestic inflation and broader global economic risks. Market analysts caution that while the tariff pause offers short-term stability but does not resolve fundamental structural challenges such as disputes over technology transfer and industrial policy. 

Therefore, this development is better described as a temporary diplomatic reprieve rather than a comprehensive solution to the complex and ongoing economic tensions between the two nations.

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Source:

BBC

Reuters