The US and China are finally talking. Why now?

The United States and China are finally set to engage in discussions, marking a significant moment as they are the two largest economies in the world. These talks will take place in Switzerland and represent the first high-level meeting since President Donald Trump imposed tariffs on China back in January. In response, China retaliated immediately, leading to a tense standoff where both nations imposed tariffs on each other's goods. Currently, the new tariffs from the US on Chinese imports are at a staggering 145%, while some American exports to China are facing duties of 125%. For weeks, both sides have exchanged stern and sometimes heated words, each trying to portray the other as the more desperate party. However, this weekend, they will finally meet at the negotiating table. So, what has prompted this meeting now? One reason is the desire to save face. Despite the ongoing tit-for-tat tariffs, both countries have been signaling a willingness to break the deadlock. Yet, it was unclear who would be the first to back down. Stephen Olson, a senior visiting fellow at Singapore's ISEAS-Yusof Ishak Institute and a former US trade negotiator, noted that neither side wants to appear weak. He stated, 'The talks are taking place now because both countries have judged that they can move forward without appearing to have caved in to the other side. ' However, China's foreign ministry spokesperson Lin Jian emphasized that the talks are being held at the request of the US. The Chinese commerce ministry framed it as a favor to Washington, stating they were responding to the 'calls of US businesses and consumers. ' On the other hand, the Trump administration claims that it is the Chinese officials who are eager to engage in discussions because their economy is struggling. Trump remarked, 'They said we initiated? Well, I think they ought to go back and study their files. ' As Chinese trade officials head to Geneva, President Xi Jinping is in Moscow meeting with Vladimir Putin. The timing of these talks is also significant for Beijing, as it coincides with Xi's visit to Moscow, where he was a guest of honor at the Victory Day parade commemorating the 80th anniversary of the World War Two victory over Nazi Germany. This positioning allows China to project strength while heading into negotiations. The pressure is mounting on both sides. Trump insists that the tariffs will ultimately strengthen America, while Beijing has vowed to 'fight till the end. ' However, the reality is that these tariffs are negatively impacting both economies. Recent government data indicates that factory output in China has declined, with manufacturing activity in April reaching its lowest level since December 2023. Additionally, a survey by news outlet Caixin revealed that services activity has hit a seven-month low. The BBC has reported that Chinese exporters are struggling due to the steep tariffs. Bert Hofman, a professor at the East Asian Institute in Singapore, stated, 'I think [China] realizes that a deal is better than no deal. ' He believes that China has taken a pragmatic approach and decided that it is time to initiate talks. With the major May Day holiday in China now over, officials in Beijing have determined that the time is right to engage in discussions. On the US side, the uncertainty caused by tariffs has led to the economy contracting for the first time in three years. Industries that have long relied on Chinese-made goods are particularly concerned. A toy company owner in Los Angeles expressed that they are facing a 'total implosion of the supply chain. ' Trump himself has acknowledged that US consumers are feeling the impact of the tariffs, stating that American children may have 'two dolls instead of 30 dolls' and that the two dolls might cost a bit more than usual. Trump's approval ratings have also declined due to concerns about inflation and a potential recession, with over 60% of Americans believing he is focusing too much on tariffs. Both countries are under pressure to provide reassurance to increasingly anxious markets, businesses, and domestic constituencies. Olson remarked, 'Both countries are feeling pressure to provide a bit of reassurance to increasingly nervous markets, businesses, and domestic constituencies. ' He believes that a few days of meetings in Geneva will serve that purpose. What can we expect next? While the talks have been met with optimism, it may take time for a deal to materialize. The discussions will primarily focus on 'touching base,' according to Hofman, who added that this could involve an 'exchange of positions' and, if all goes well, 'an agenda will be set for future talks. ' The negotiations are expected to take months, similar to the lengthy process during Trump's first term. After nearly two years of back-and-forth tariffs, the US and China signed a 'phase one' deal in early 2020 to suspend or reduce some levies. However, this deal did not address critical issues such as Chinese government subsidies for key industries or a timeline for eliminating the remaining tariffs. In fact, many of these tariffs remained in place during President Biden's administration, and Trump's latest tariffs have added to the existing ones. Experts suggest that what could emerge this time is a 'phase one deal on steroids,' meaning it would go beyond the previous agreement and attempt to tackle more contentious issues. However, they caution that the systemic frictions affecting the US-China trade relationship will not be resolved quickly. Olson adds, 'Geneva will only produce anodyne statements about 'frank dialogues' and the desire to keep talking.