OpinionUS-China tariff truce offers hope for resolution on fentanyl and other issues

The global economy breathed a collective sigh of relief as China and the US stepped back from the brink of a damaging trade decoupling. The better-than-expected results from their Geneva negotiations sent ripples of confidence through financial markets. Yet beneath the surface optimism lingers the sobering reality that this is merely a 90-day reprieve rather than a lasting resolution. Given the intricate and often contentious nature of their economic interdependence, the prospect of a sweeping agreement before the August deadline remains slim. Though the US has scaled back its tariffs on Chinese goods from the prohibitive 145 per cent – effectively a trade embargo – the remaining cumulative tariffs hovering around 50 per cent still cast a long shadow over bilateral trade. Nevertheless, there are reasons for cautious optimism. The truce signals that neither side is willing – nor prepared – to sever economic ties completely. During my visit to Washington last week, I learned from the organiser of a closed-door discussion with business leaders that most expect tariffs on Chinese goods to either hold steady or decrease further once the 90-day period lapses. US Treasury Secretary Scott Bessent warned that tariffs could revert to “reciprocal” levels if negotiations with other countries failed by the deadline. But many remain sceptical of the view that the US is ready to bring back prohibitive tariffs on China. Having already played its strongest hand, few believe the Trump administration possesses the political will to reignite a full-blown trade war with Beijing. Shock tactics, after all, yield diminishing returns – if an opponent withstands the initial blow, subsequent threats lose their potency. Compounding the pressure on Washington is the looming debt ceiling crisis, which could trigger a default by August if Congress fails to act. With the 10-year Treasury yield climbing to 4.5 per cent and the US losing its pristine credit rating for the first time in a century, Wall Street has little appetite for another high-stakes stand-off with China. While a comprehensive deal remains unlikely, there are smaller, achievable steps that could ease tensions. One immediate area of potential cooperation is the fentanyl crisis. China, though not the source of illicit fentanyl flooding the US, is a key supplier of the precursor chemicals used in its production. These same chemicals are essential for legitimate pharmaceuticals, making the accusations against China akin to blaming steelmakers for gun violence. Yet, if Washington insists, Beijing could tighten export controls on selected precursors – a move that would disrupt global pharmaceutical supply chains but provide the Trump administration with a symbolic victory in its anti-fentanyl campaign. The fentanyl abuses are already in decline – a trend that actually started under Joe Biden’s government. But in politics, perception is reality. An announcement from Beijing may be just enough for Trump to claim a political win. Such a concession could pave the way for the US to lift an additional 10 to 20 per cent in tariffs, ostensibly imposed over China’s handling of the fentanyl trade. In return, Beijing might remove its 15 per cent tariff on American agricultural products – a sensible move, given China’s demand for affordable, high-quality soybeans. Chinese airlines could also resume orders for Boeing aircraft, addressing both commercial needs and reducing the trade deficit. These incremental gains would allow Trump to claim a political win while postponing further tariff escalations, creating a foundation for gradual progress. Yet even the most optimistic observers I have talked to doubt there will be a return to the “good old days” of unimpeded trade. The economic tensions between the two nations are deeply structural and long-term. Distrust runs too deep, and the political environment remains too volatile for sustained improvement. From technology restrictions like the Huawei Ascend chip ban to geopolitical manoeuvring in Latin America and the trial of Jimmy Lai Chee-ying, bilateral relations face constant friction. While none of these issues alone could rupture ties, their cumulative effect ensures a relationship perpetually teetering on the edge of crisis. The road ahead remains fraught, but for now, the world can take solace in the fact that the worst-case scenario has been temporarily averted.

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}The Geneva talks made room for some potential wins on several points of contention but structural problems remain

The Geneva talks made room for some potential wins on several points of contention but structural problems remain