Is the US-China Trade War Over?
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Whatever challenge comes next, let Microsoft help you keep pushing forward. For more details, visit Microsoft.com slash challengers. Bloomberg Audio Studios. Podcasts. Radio. News. Another stunning turn of events in the trade war between the U.S. and China. Early Monday morning, the country said in a joint statement that they'd slash tariffs on one another for 90 days as they continue talks.

The combined 145% tariffs the U.S. had levied on Chinese imports are going down to 30%. And China is rolling back its 125% tariffs to 10%. Yesterday, we achieved a total reset with China after productive talks in Geneva. It's a far cry from President Trump's past statements. He once called the U.S.'s trade relationship with China, quote, "...the greatest theft in the history of the world."

The talks in Geneva were very friendly. The relationship is very good. We're not looking to hurt China. China was being hurt very badly. On Bloomberg TV this morning, U.S. Treasury Secretary Scott Bessett called the current tariffs, quote, a floor for further negotiations and says there's now a process in place to avoid further escalation. I think they understand that we are focused on fair trade, that this gigantic gap

deficit that we have with them that it didn't happen last year. It didn't happen the year before. It's happened over decades. Stocks rebounded sharply following the news and comments by President Trump that he might speak to President Xi Jinping later this week.

I'm David Gurra, and this is The Big Take from Bloomberg News. Today on the show, surprisingly fruitful negotiations over the weekend lowered tariffs with China and buoyed markets, but a lot of uncertainty remains. I sat down with Bloomberg Treasury reporter Dan Flatley to discuss the negotiations and what could lie ahead.

Well, Dan, Wall Street is very clearly cheering this news. How significant is it, this agreement? I think it's significant in a couple of ways. One is that it far exceeded people's expectations going into this weekend. Treasury Secretary Scott Besant kind of downplayed the expectations a little bit last week. Trump floated this idea of maybe taking the tariffs down to 80%.

Folks that I talked to ahead of this weekend were sort of saying the Chinese may walk out of this negotiation. They may just say this is not worth it to us. I think that what we got and the reason why stocks are on a tear right now is because this is way below any expectations that we had. So we're talking about US tariffs on Chinese goods of about 30%.

when you add everything together. That's way down from 145%. It's not nothing. I mean, it's more tariffs than existed on January 1st this year, but certainly it seems to indicate, and the folks that I've heard and talked to in the days and hours since this deal was worked on and announced sort of seem to think that this is a sign that there will be some deal further on down the line. And I think Besant talked about this a little bit in one of his TV appearances this morning that

It's really the expectation that there will be some bigger deal down the road that has kind of stocks where they are today. We'll dig into all of that. Before we get there, could you just set the scene for us what these meetings looked like? They took place in Geneva in Switzerland.

Yeah, it's interesting the location that was chosen, sort of neutral territory for both parties. And the way that this was initially kind of talked about by the Treasury was this idea of, oh, we just we're going to be in Switzerland anyway. So might as well meet with the Chinese. It was very nonchalant.

And I think that was intentional because they didn't want to set expectations too high. At the same time, the meetings were largely sort of on the Chinese's terms, you know, the negotiators from China on their terms in the sense that they didn't want a lot of media attention around this. They wanted the negotiations to play out behind closed doors. They really were big on this idea of the U.S. approaching China with respect and

And so you saw a little bit of that, too, in how all this was stage managed. And obviously there was this idea of, OK, we'll start the talks on Saturday. We'll see how things go. If things go well, if there's more to discuss, we'll meet on Sunday. They met on Sunday. Then they had the announcement early this morning, U.S. time in Geneva. It was very carefully calibrated and orchestrated.

And so what I think you see is this idea of a mechanism, a quote unquote mechanism. That's what Besson has talked about. And he's even talked about sort of this idea of a Geneva mechanism or some way in which these talks can continue. And I think that it would reflect broadly this kind of idea of very discreet, carefully calibrated language around all of this stuff, which is in part what the Chinese have asked for.

It's about tariffs, but it's about more than that, isn't it? I know that there were mentions here of kind of non-tariff countermeasures that have been put in place. Right. Besson has been big on this idea of non-tariff barriers. And one of the things that he has said and talked about and that Trump has talked about a little bit as well is that China is going to remove some of those non-tariff barriers to U.S. businesses doing business in China. They want to see a rebalancing.

They want to see China open its markets to U.S. goods. They want to see China balance its economic profile toward not just production, but also consumption. They want to see the U.S. up its production, manufacturing production here at home and not just focus on consumption. So they're trying to strike this balance. So I think if you were to ask

Scott Besson, what he wants to see out of all of this in the end, it would be some type of grand rebalancing where you have a little bit of a national security overlay to all of this, which is about supply chains and so forth, but also about economic security. Now, whether we actually get to that is kind of a separate conversation.

question. And the events of this past weekend seem to suggest that there is a pain point at which the Trump administration may be looking at giving up some of those broader goals in order to not do lasting harm to the economy. So that's one of the things that we're kind of keeping an eye on as all this plays out. I want to get back to Treasury Secretary Besson's objectives here in a minute before we get there. What wasn't discussed over the course of the weekend? Well, one of the things that came up is this idea of fentanyl.

And China shipping precursor chemicals for the production of fentanyl to Mexico and other countries in order to basically get that drug into the United States. And so China sent one of its national security officials to Geneva to discuss this issue. The U.S. sent a national security official as well to discuss this issue.

But it's not clear whether the broader national security issues around China came up at all vis-a-vis Taiwan, semiconductor issues, the steel industry, pharmaceuticals is another one. Lots of different items that have been talked about in terms of tariffs coming on those products or those services or those goods further down the road. So that was not really addressed in this discussion. This was narrowly focused on trade. Dan, I want to have you describe the backdrop to these talks and maybe the

maybe the forcing mechanism brought these two sides to the table. I don't know if we know yet who initiated this in earnest, but how did we get here and sort of what was playing out more broadly in trade that made this something that I think both sides recognized needed to happen? So,

So I think there are a couple of things. One of the main things that we've been watching is this question of empty shelves in the US. So there's been reporting and we've done some great reporting on container ships, cargo ships coming from China that have not either made it to US shores or have been held up or turned around.

other issues like that. So I do think that that was a real fear, as well as what we call rare earths, basically critical minerals around magnets and other sorts of things that go into a lot of consumer products and a lot of defense consumer products. So I think the US was getting nervous about that. I think the Chinese were sort of getting nervous on their end

about companies like Apple and others potentially pulling out, upsetting sort of their long-term plans for how they want to reorient their economy. So I think that both sides had an incentive to come to the table. I think long-term, as Secretary Besson has talked about, the U.S. may have had more of an advantage as the deficit country, as the country that was buying a lot of these goods, whereas China had more of a short-term advantage in the country that supplies a lot of these goods.

President Trump has teased being open to having a call with President Xi. He did that again today on Monday morning. The relationship is very, very good. I'll speak to President Xi maybe at the end of the week. You mentioned that Geneva mechanism, this agreement to continue talking.

And I wonder if that's kind of as important or almost as important as reducing these tariffs, just this agreement that dialogue is going to continue here. Whatever we got today, the more important thing going forward is this idea that these two sides will continue to talk. Trump has actually talked about the European Union as being potentially a harder party to negotiate with than China.

But as all of this plays out, the big question was what happens with China. And just the fact that these two sides are talking now suggests that there will be some resolution to this agreement that's not going to do lasting harm to the global economy at some point. So I think that that is one of the things that more than anything else has given markets some encouragement. After the break, what a trade truce means for the future of the U.S.-China relationship, plus what the upcoming G7 meeting could reveal about the administration's approach to trade.

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Explore solutions at 4imprint.com and get your brand where it needs to be quickly, confidently and without compromise. What does Secretary Besson, what does President Trump want this relationship to look like going forward, the relationship between the U.S. and China? Have they been explicit about that?

I think they have been explicit about it in a couple of ways. One thing is that they've talked about this idea of certain goods being critical. You know, Besson has talked a lot about critical minerals. He's talked about these ingredients that go into very high-end weapon systems and things like that as being something that the U.S. needs to have access to no matter what happens in terms of global trade. And right now, China does most of the world's production around those types of

elements and those types of minerals. And so the U.S. definitely wants to see a lot of that production and processing and those sorts of things moved out of China, potentially to the U.S., but maybe to some friendlier countries. And that's been a longstanding issue for not just the Trump administration, but also the Biden folks as well. There's also questions around semiconductors.

steel industry. I think Besant said earlier today that they're going to protect the U.S. steel industry. There's a lot of these sort of national security-focused supply chain things that they really want to focus on and that are sort of existing somewhere outside of this idea of consumer goods. Now, it's interesting to hear them talk about those things in those terms because, again, this has been a longstanding issue for successive U.S. administrations going back to the first

Trump administration. So it's not something that's totally new. What we see more of is this idea of rebalancing consumption and production. And that's really something that's unique to Besant and Trump. And you kind of have to look at what the administration said that they were going to do when they started this whole thing, which was to move more manufacturing to the U.S. and using tariffs as sort of a wall to encourage companies to come here to do that.

What we're seeing now is sort of a hybrid where we're not seeing as much of an emphasis on that, but more this idea of free trade and opening up foreign markets to U.S. goods. So it's kind of an open question about exactly what the Trump administration wants when it comes to this sort of economic policy. Do they want to have a very protectionist agenda that's going to see more manufacturing move to the U.S.? Or do they want more free trade where you see foreign markets like China open up more to U.S. goods and products?

So where this all kind of ends up at the end of the day is a little tricky. And one thing we always need to keep in mind is the midterm elections coming up next year. And so if we have some type of an economic downturn that affects the way people are feeling in terms of what they're paying for, how they're feeling in terms of their economic security, that could affect the political outlook for the final two years of Trump's last term in office, as far as we know. So that's all the sort of things that are kind of hanging in the balance as this deal is announced today.

I want to ask you what's likely to play out over the next 90 days. What is the U.S. looking for in specific? Is it just more good faith negotiation? I think that they want to keep the talks going, number one. There's going to be a few sort of international fora coming up where Besant will have a chance to interact with

some representatives from China's government, and also from some other foreign governments. We have the G7 finance ministers meeting coming up in Canada in about a week or so, where he'll meet with the other G7 nations. He'll have a chance to talk to some of his EU counterparts about trade deals with the EU. With China, I think that it's going to be almost on this separate track.

And it is really the critical track. So Besant has talked about 15 to 18 nations that the US runs large trade deficits with.

And the 18th nation is China. And for a long time, they were talking about China being sort of on the side, something that was happening separately from the other negotiations. And I think you'll continue to see that. And you see how the UK announcement was made with Keir Starmer calling into the Oval Office, Trump sort of stage managing all of that. The China negotiations were very different. A couple of representatives from the US government, high level representatives, but not President Trump.

went to Geneva, went to a third country location, met with their interlocutors from China,

did all this behind closed doors, came out with a major concession on both sides to the current state of play, and then with a promise to continue to talk. Now, what is going to be somewhat elusive is what the grand bargain would look like. And again, that's where you kind of get all of this coming into play. What does Trump actually want out of this deal? And how do politics play into that as well? Because you may have to not let the perfect be the enemy of the good. And

and get something that is serviceable to get through the midterms and to get to the next presidential election.

Dan, I want to get a sense from you of what this means for companies who have been dealing with this dramatic increase in uncertainty. So Bloomberg Economics estimating that the new tariffs could still lead to a nearly 70 percent drop in bilateral trade between the U.S. and China in the medium term. We see the market reaction. But what does this do to allay that sense that companies really don't know how this is going to play out?

Well, I don't think it helps in that regard, David. You know, a couple of things to keep in mind with all of this. What we've heard from companies is essentially they're frozen in place. They don't know, for instance, whether they should continue investing, whether they should lay people off, what moves that they should make, because they don't know whether the tariffs are going to be permanently in place or whether they're going to be part of a trade negotiation. So all of that is kind of locked in place. And I was reading an economic analysis earlier today that suggested that

before any rigorous analysis can be made of this weekend's agreement, this all needs to be listed in the Federal Register. That's not how Trump works. His approach to these matters is to get things done quickly,

to get them done expeditiously, to get them done on terms that he sees as most favorable for the United States. And these sort of niceties of government process, listing things in their federal register, rolling out policy in a very measured and methodical way, that's not how he operates.

And so I think businesses are looking to see how this will all play out. And as they're trying to read the tea leaves, they have to go by what they're hearing and seeing from Trump administration officials. And so the idea that we have a deal or some kind of agreement to take down the temperature for a period of time seems to suggest that there will be some

deal in the end, that things are moving in that direction. Because otherwise, why would you even do a 90-day pause? There would be no point in doing that. So I think that that is one of the things that businesses, corporate entities are digesting and trying to suss out. But again...

Let's keep in mind that no matter what happens, there's still going to be elevated tariff rates. And so that is going to have an impact on the economy. Exactly how all that plays out with these deals that are being negotiated, including with China, is yet to be seen. But that's sort of the state of play at the moment. Dan, thank you very much. Thanks, David.

This is The Big Take from Bloomberg News. I'm David Gurra. This episode was produced by Julia Press with support from Eleanor Harrison Dengate. It was edited by Tracy Samuelson and Sarah Halczak. It was fact-checked by Rachel Lewis-Kriske and mixed and sound designed by Alex Segura with Julia Weaver, our Deputy Executive Producer. Our Senior Producer is Naomi Chavon. Our Senior Editor is Elizabeth Ponso. Our Executive Producer is Nicole Beamsterbore. Sage Bauman is Bloomberg's Head of Podcasts.

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