The United States and China have concluded two days of high-stakes trade negotiations in Geneva, Switzerland, with both sides signaling "substantial progress" toward de-escalating a trade war that has disrupted global markets and supply chains.
The talks, held on May 10-11, 2025, mark the first face-to-face engagement between senior officials since U.S. President Donald Trump imposed 145% tariffs on Chinese imports, prompting China’s retaliatory 125% levies on U.S. goods.
A joint statement expected on Monday, May 12, will provide further details on a newly established trade consultation mechanism and potential tariff reductions, offering hope for global economic stabilization.
Breakthrough in Geneva Negotiations
U.S. Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer met with Chinese Vice Premier He Lifeng in Geneva over the weekend, concluding talks that both sides described as “candid, in-depth, and constructive.”
Bessent, speaking at a press conference on May 11, announced “substantial progress” in addressing the $1.2 trillion U.S. trade deficit, which the Trump administration has labeled a “national emergency.” Greer hinted at a “deal” that could mitigate these concerns, noting that the rapid agreement suggested smaller differences than anticipated.
Chinese Vice Premier He Lifeng echoed the optimism, stating that the talks achieved “important consensus” and laid the foundation for ongoing dialogue. According to China’s state-run Xinhua, the two nations agreed to establish a “trade consultation mechanism” led by He Lifeng for China and U.S. counterparts, with working teams to maintain regular communication. A joint statement, set for release on May 12, will outline the specifics of this mechanism and next steps.
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Economic Fallout and Market Response
The trade war, intensified by Trump’s tariffs starting in April 2025, has taken a toll on both economies. U.S. imports from China are projected to plummet by 75-80% in the second half of 2025, per JPMorgan, while Chinese exports to the U.S. dropped 21% in April compared to the previous year.
The U.S. economy contracted by 0.3% in Q1 2025, its first quarterly decline since 2022, as businesses rushed to import goods before tariffs took effect. In China, economic growth forecasts for 2025 have been downgraded, with Nomura warning of up to 16 million job losses due to tariff impacts.
Global markets reacted positively to the news of progress. On May 11, Dow futures rose 1%, S&P 500 futures climbed 1.3% to 564.34 (aligning with real-time data), and Nasdaq Composite futures surged 1.7%. Asian markets, including China and Hong Kong, saw gains on May 12, reflecting investor optimism about a potential tariff rollback. The SPY (S&P 500 ETF) closed at 564.34 USD, slightly down from its previous day’s close of 565.06, but within a stable range for the week.
Details of the Trade Consultation Mechanism
The newly announced trade consultation mechanism will facilitate ongoing negotiations to address trade imbalances and tariff disputes. China’s Trade Representative Li Chenggang emphasized that the mechanism will involve “regular and irregular communications” to tackle economic issues, with Vice Premier He Lifeng as Beijing’s lead.
The U.S. has not yet named its lead representative, but Bessent and Greer are expected to remain central figures. The mechanism aims to provide a structured platform for resolving disputes, potentially reducing tariffs to a more sustainable level, with economists suggesting 50% as a threshold for restoring normal trade.
President Trump, posting on Truth Social on May 10, described the talks as a “total reset” conducted in a “friendly, but constructive, manner.” He suggested an 80% tariff rate on Chinese goods “seems right,” a significant reduction from the current 145%, though still above the 10% baseline applied to other trading partners like the UK. Chinese officials have not publicly confirmed tariff concessions but stressed a “practical attitude” to expand cooperation.
Broader Context: Global Trade and AI Implications
The Geneva talks occur against a backdrop of broader geopolitical tensions, including U.S. restrictions on AI chip exports to China. On May 9, 2025, Reuters reported a U.S. senator’s bill to curb China’s access to advanced AI chips, citing national security concerns.
This could impact companies like NVIDIA, a key player in AI hardware, and complicate U.S.-China tech relations. Any U.S.-China trade deal could influence access to AI infrastructure, given China’s role in supplying critical minerals like gallium and germanium, which are now under export controls.
The World Trade Organization (WTO) Director-General Ngozi Okonjo-Iweala praised the talks as a “significant step forward” for global trade stability, particularly for vulnerable economies. Swiss Economy Minister Guy Parmelin, who facilitated the talks, noted that their occurrence alone reduced global tensions.
Did You Know?
The U.S.-China trade war has led to a 21% drop in Chinese exports to the U.S. in April 2025, the sharpest decline since the 2008 financial crisis.
Challenges and Expectations
Despite the optimism, analysts caution that a comprehensive trade deal remains elusive. Gary Hufbauer from the Peterson Institute for International Economics warned that even a 70-80% tariff rate could halve bilateral trade, far from normal relations.
A full resolution could take months or years, with the talks serving as confidence-building measures. China’s firm stance against unilateral tariffs and its economic leverage bolstered by an 8.1% export surge to Southeast Asia in April suggest tough negotiations ahead.
The U.S. faces domestic pressure to maintain tariffs to boost manufacturing, as Trump has predicted a resurgence in American factories. However, rising costs for consumers and businesses, coupled with disruptions like zero Chinese cargo ships arriving at West Coast ports in the past 12 hours (a phenomenon unseen since the COVID-19 pandemic), underscore the urgency of a deal.
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Looking Forward
The joint statement on May 12 will clarify whether tariff reductions are imminent or if the consultation mechanism is a precursor to prolonged talks. A reduction below 50% could signal a return to robust trade, benefiting consumers and stabilizing prices.
For now, the agreement to continue dialogue offers a lifeline to the global economy, which has faced fears of a sharp downturn. As Bessent and Greer prepare to elaborate in Geneva, and with He Lifeng’s commitment to “make the pie of cooperation bigger,” the world awaits concrete steps toward trade normalization.
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