US-China open trade talks in bid to wind down their tariff war

The US president has sent mixed signals about his desired outcome for the meetings. Trump has repeatedly said he is unwilling to lower tariffs without Chinese concessions, though he nonetheless on Friday volunteered that an 80% levy “seems right.”

“We have to make a great deal for America,” Trump told reporters in the Oval Office late Friday. “I think we’re going to come back with a fair deal for both China and us.”

Bessent on Wednesday downplayed any potential outcome, telling lawmakers talks were at an early stage and the focus was on lowering tensions rather than reaching a comprehensive deal. But Trump himself said Thursday he anticipated “substantive” progress. Other US officials have emphasized the opportunity to defuse the conflict.

Commerce Secretary Howard Lutnick said on Fox News Friday evening that there was “no chance” that tariffs would be completely paused, no matter the outcome of the weekend talks. If those negotiations go well, he added, the levies “come down to a human level. To a level where we do business. There are significant tariffs, the president is going to keep significant tariffs on trade with China. That is his objective. That’s his expectation. That should be everybody’s expectation.”

China is taking a guarded approach, setting expectations low ahead of the negotiations and viewing them more as exploratory than likely to yield an immediate grand bargain. Xi’s representatives will be measuring how serious their US counterparts are in seeking a breakthrough, said Wu Xinbo, director at Fudan University’s Center for American Studies in Shanghai and an adviser to the foreign minister.

Both economies, with a combined gross domestic product of $46 trillion, have a lot to lose if talks falter. Tariffs at the current level will obliterate 90% of bilateral trade, according to a Bloomberg Economics estimate.

Fallout from the trade fight has already appeared, portending more economic pain to come absent an agreement.

Shipping volume from China to the US has slumped. And in China, factories that make everyday consumer items have slowed or idled assembly lines. Two-way annual trade between both countries is around $700 billion, and China has an estimated $1.4 trillion of portfolio investments in the US.

The conflict has prompted Beijing to expand trade with other markets, with exports to the US plummeting by 21%. Trade data published Friday show shipments from China to the European Union soaring by 8% last month.

Meanwhile, China’s domestic economy is plagued by lackluster manufacturing figures and a deflationary spiral unlikely to improve as competition in the domestic market intensifies amid a weak labor market.

While the US economy continues to hold up, analysts are warning that goods shortages will begin to surface in the form of empty shelves in the weeks and months ahead, threatening jobs, especially those in trucking, logistics and retail. The Federal Reserve has warned of rising uncertainty. The US economy contracted at the start of the year for the first time since 2022, though a gauge of underlying demand stayed firm.

The consequences of the US-led trade fight are ricocheting across the globe. The World Trade Organization slashed its forecast for merchandise trade this year and now expects volume to decline by 0.2% — almost 3 percentage points lower than it would have been without the trade war. The International Monetary Fund in April sharply lowered its growth expectations this year and next, warning the outlook may deteriorate further.

For Trump, a top goal is rebalancing trade, with the president reiterating Friday he wants to see Beijing open its markets to the US. Trump also has repeatedly signaled he views access to the American market as key leverage to force concessions.

“They have a lot to gain” from the talks, Trump told reporters Thursday. “They have far more to gain than we do, in a sense.”

But China sees tariffs as just one aspect of a broader move by the US to limit its rise. To Beijing, the conflict is not just a trade war, said Regina Ip, Hong Kong lawmaker and convener of Chief Executive John Lee’s cabinet. It threatens its very survival, she said.

“China’s determined to take it on the chin — ‘don’t kneel’ — they’re taking a very hard line,” she said. But, she warned: “Both sides must play their cards very carefully. They must make every move very carefully not to escalate.”

Even a week before the talks, Washington and Beijing were trading barbs over who had initiated them.

One US priority heading into the negotiations was securing an easing of Chinese export restrictions on rare earths used to make magnets used in everything from robots to jet engines.

The Trump administration also wants China to curb fentanyl trafficking by stifling the flow of precursors used to make the opioid. However, continued progress on that issue could be made on a separate track, outside of the Geneva talks.

China said it has forcefully cracked down on the fentanyl trade, and has even said Washington owes it a “big thank you” for its efforts.