Tariff retreat: A breakthrough born of necessity

Editor's Note: Sun Taiyi is an associate professor of political science at Christopher Newport University, United States. He is also the executive editor of the Global Forum of Chinese Political Scientists' main publication, Global China. The article reflects the author's opinions and not necessarily those of CGTN.

The joint statement released by China and the U.S. in Switzerland to significantly scale back tariffs – by approximately 115 percentage points from each other's rates – is a major breakthrough, far exceeding the expectations of elites in both Beijing and Washington. Yet in hindsight, it may have been the only feasible outcome all along. A smaller reduction – say, to the 80 percent level previously floated by President Donald Trump via social media – would have been entirely unrealistic from Beijing's perspective. Tariffs at 80 percent or higher are effectively tantamount to a trade embargo and would not have represented a meaningful shift in practice. On the other hand, cutting tariffs below the agreed-upon level would likely have triggered a backlash from many of America's allies and failed to satisfy the China hawks in Washington. After all, if the U.S. positions itself as being in strategic competition with China, it would be diplomatically awkward – if not politically damaging – for Beijing to face lower tariffs than some of America's closest partners.

Markets responded with overwhelming positivity. Major stock indexes rose roughly three percent on the day of the announcement. Particularly notable was U.S. Treasury Secretary Scott Bessent's comment that neither side wanted decoupling a very real possibility had the China-U.S. joint statement not materialized. The establishment of a bilateral mechanism, with clearly identified representatives on both sides to discuss trade and economic issues, also lays a foundation for sustained engagement and progress.

Still, despite these encouraging developments, the joint statement released by China and the U.S. remains insufficient. Trade barriers between the two countries were already high before Trump's second term, and the Biden administration left most of the initial tariffs intact – fearing that any reduction might carry political costs. In effect, the current situation mirrors the Trump administration imposing a 30 percent additional tariff on China, with the possibility of another 24 percent increase in 90 days if further progress is not made. If 20 percent of that figure is attributed solely to fentanyl-related concerns, then China's current position resembles that of other nations that have yet to reach any trade deal with the U.S. Had this approach been announced on April 2, markets would likely have reacted negatively; it is only by comparison to the much worse alternative that the current China-U.S. joint statement appears reasonable.

Moreover, resolving the fentanyl issue will be difficult. The U.S. has thus far refused to acknowledge the measures China has already taken, while continuing to place the blame squarely on Beijing. At the same time, many in China see the opioid crisis as fundamentally an American problem, and do not feel obligated to contribute further resources. This divergence in views further complicates the path forward. The latest U.S. demands regarding fentanyl cooperation are widely regarded in Beijing as neither feasible nor realistic. Thus, even though counter-narcotics remains an area of potential collaboration, real progress is likely to remain elusive for the foreseeable future.

The Trump administration's original goals for launching the global tariff war were threefold: to enhance U.S. bargaining power by creating new leverage, to incentivize the return of manufacturing to the United States, and to help balance the federal budget. When tariffs are set at prohibitively high levels, they become ineffective as a source of revenue. But when tariffs are reduced – while still remaining substantial – they can generate a more consistent revenue stream. In this sense, the recent policy adjustment may reflect a shift in prioritization toward revenue collection rather than a fundamental change in strategy, even if the actual revenue generated remains negligible in the context of the overall U.S. budget.

Furthermore, the Trump administration may only be inclined to demonstrate goodwill during moments of economic vulnerability – when inflation is rising, store shelves are thinning out, and instability in the stock, bond and currency markets is undermining investor confidence. In such conditions, the U.S. becomes a less attractive destination for capital, the dollar's global status is weakened, and borrowing costs rise, particularly with a substantial volume of government bonds set to mature.

This is precisely why the progress achieved thus far must be built upon – so that it does not become merely a flash in the pan. Nominal trade barriers remain high, and core demands from both sides are still unresolved. A 90-day window is hardly sufficient to address the complexity of the China-U.S. economic relationship.

Nevertheless, this moment should be recognized for what it is: a significant step forward. The world may have narrowly avoided a recession. China-U.S. relations appear to be returning to a more constructive trajectory, and economic tensions have – so far – not spilled into more dangerous geopolitical domains.

Fingers crossed.