The United States and the People’s Republic of China are key competitors vying for global influence in the 21st century. Consequently, it was not unexpected when President Donald Trump imposed 20% tariffs on China early in his second term, and then enacted measures on “”. A few days later, when Trump reduced tariff rates for other nations to stabilize markets, he escalated duties on China to a . Yet, all of that now seems like distant history.
Over the last four months, Trump has gone to great lengths to be accommodating towards Beijing. In early May, the two nations announced a in Geneva, agreeing to lower tariffs and address their disagreements on export controls and other matters. (U.S. tariffs on China remain at approximately 55%, and China’s tariffs on the U.S. are nearly 33%. While these levels are historically high, they are not enough to completely halt trade.) Further discussions in London and Stockholm yielded sufficient progress for both sides to declare an of the ceasefire this week, with the White House commending Beijing for its cooperation and flexibility in the ongoing negotiations.
Similarly, the Trump Administration has not in the U.S. despite its continued Chinese ownership, in ; it for ; and it is permitting Nvidia and AMD to sell advanced chips in China, reversing earlier blocks on many of these sales, following a .
So, what accounts for this sudden change in approach to China? It appears particularly unusual given the U.S.’s simultaneous firm stance towards other BRICS members—a rival to the U.S.-led G7 that includes , Russia, , and —not to mention .
Three main reasons emerge.
First, both Washington and Beijing now possess effective tools that temper the aggressive tendencies of the other side. Unlike other nations that yielded to Trump’s pressure, Beijing retaliated, initially with its own high tariffs, and then, more critically, with , over which they exert global dominance. Once Trump began reducing most of the initial reciprocal tariffs and sought discussions with Xi, China gained confidence that restricting rare earth minerals and magnets would be met with concessions rather than counterstrikes. This includes the Trump Administration stepping back from imposing new export controls on various technologies and rescinding its to “aggressively revoke” Chinese student visas. Beijing now believes it has mastered the method for making a “” (“Trump always chickens out”).
Second, both Trump and Xi share an interest in bolstering economic confidence domestically. With persistent overcapacity and intense price competition across industrial and consumer sectors, “” has become a common phrase in China, signaling the excessive rivalry that is harming local enterprises. Xi needs to strengthen government finances, consolidate industries, and prevent further international barriers to Chinese exports and investment. The U.S.’s current economic situation is more robust, but constituents in across the country have expressed significant concerns about diminished export markets, inflation, budget deficits, and a potential recession.
Third, Trump and Xi anticipate a potential meeting, most likely in Asia this Fall. Trump has been seeking direct communication with Xi since at least April. He aims to finalize a deal that he can present domestically as expanding U.S. business opportunities and curbing the fentanyl epidemic, given China’s role in producing most of the precursors for the synthetic opioid trafficked to America. The Chinese have played hard to get, insisting any summit must be preceded by comprehensive negotiations and planning. Based on my recent conversations with experts in China, Xi wishes to avoid being disrespected, as and were during their White House visits. And with Trump making concession after concession, Beijing may seek to solidify its recent gains and aim even higher, possibly compelling Trump to make additional compromises on tariffs, export controls, and Taiwan.
While the importance of stable relations between the world’s two largest economies, both equipped with vast nuclear arsenals, should not be underestimated, this current period of warming is unlikely to endure for long. Both sides currently prefer calmness because it aligns with their short-term interests. Despite official Chinese rhetoric, neither side views the relationship in genuinely cooperative terms, and neither is prepared to take significant steps to offer strategic reassurance to the other. The underlying fundamental challenges stemming from the countries’ deep divisions over economic ties, the potential for conflict over Taiwan and other flashpoints, and their competing visions of the international order can only be temporarily overlooked.
At some point, Beijing may exhaust its good fortune, either by not conceding enough in negotiations or by pushing too hard to achieve a TACO, thereby triggering a Trumpian outburst or policy overreaction. Trump’s unpredictable nature makes linear projections of any U.S. policy or strategy a risky proposition. Eventually, for reasons of either policy or changing sentiment, the U.S.’s current lenient approach toward Beijing is likely to harden, leading to a new chapter in this unfolding drama.
Beijing understands that no agreement with Trump is permanent. They will enjoy the current peace and quiet for as long as possible, but they know they must be ready for the next phase of escalation—whenever it materializes.
Other countries, companies, and markets should also be prepared.