(Preview) A 90-Day Pause, Big Tariff Reductions and What De-Escalation Might Mean for the U.S. and China
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Hello and welcome to Sharp China. I'm Andrew Sharp and you are listening to a free preview of today's episode.

It's a 90-day pause, and they agreed to set up a dialogue mechanism, right, where they're going to have regular meetings. The U.S. side will be led by Secretary of Treasury Besant and USTR head Greer. The Chinese side will be Vice Premier He Lifeng. And then the two Chinese officials who are at a lower level but who will do most of the heavy lifting are Liao Min from his Vice Minister of Finance.

And then I think it's Li Chenggang, who's the head international trade negotiator over at Ministry of Commerce. So a couple of things on that 90-day period, you know, look, if you're on the Chinese side,

How can you not look at this 90-day period like you look at the 75-day TikTok extension? Yeah. I mean, the odds will be that if they don't have a better deal, President Trump, as long as he doesn't feel like he's been mistreated or offended, will just extend it for another 90 days. So that is a win on the Chinese side. And I think they are very happy with the ability to... They're confident in the ability to continue to extend things if they show progress. Second is...

this dialogue mechanism and the appointment of, or the designation of lead negotiators. So Besson and Greer, not Navarro, who I think, I'm not sure if anyone's done a wellness check on Navarro. He doesn't seem to have been appeared recently. People might want to check and just see how he's doing.

It would be very entertaining to go back and look at everything Navarro was saying about six weeks ago and cross-reference it with everything that's actually happened. Right as the markets were all crashing. I mean, again, this is Mr. Market, Mrs. Market. Whatever you want to call the market clearly trumps all, I think is one of the lessons here. But what I was also saying, though, about the fact that there are now point people on the U.S. side, a point person on the Chinese side, and a mechanism. This is what the Chinese want.

They love dialogue mechanisms. This is like, okay, so this is a big win from the Chinese side. They know how to- Let's talk and talk and talk. They know how to use this. They know how to do this. It was interesting too that there was a senior official, a vice minister of the Ministry of Public Security who attended the meeting to talk about fentanyl. It was not, the Washington Journal had reported and the New York Times had reported too that it was likely possible. Actually, I think the journal reported that

that Wang Xiaohong, the Minister of Public Security, was going to Geneva. That turned out to be incorrect. It was a vice minister. Still important because, again, it shows to the US side, it showed to the US side, I think, that they were maybe going to get more serious about dealing with fentanyl. And that is clearly, it wasn't enough to drop the 20% fentanyl-related tariffs. But that is a very important issue for the US and for President Trump personally. And so I think that was a smart move by the Chinese to send him

You know, one of the questions, right, and you're seeing a lot of commentary, and we're recording this podcast at 3.30 on Monday afternoon, so we've had 12 hours to digest it and look at all the ways people are digesting it. And, you know...

I think, you know, certainly the Chinese side is effectively not the official channels, but semi-official and some of the official media and then other proxy people are all, you know, portraying this as a climb down by the U.S., a big win for China. Shows if you just stay strong, if you don't blink, you know, that ultimately the U.S., the paper tiger will blink. You know, I think that we still are at 34% tariffs on China.

more in certain sectors. The tariffs are still pretty high. The Chinese went to the meeting. Originally, they said they wouldn't go. They wouldn't even talk until the US unilaterally withdrew the tariffs they implemented. Obviously, the Chinese changed their position, I think, smartly. I think they handled this in quite a mature way. And so they went to the meeting. And from the Chinese perspective, this is as good as a first deal as I think they could have expected. And so

I'm still in the sort of a little bit like it's too early to tell how much, you know, either side caved. I think certainly this is a come down from the maximalist positions the U.S. side was taking, but it's also a bit of a come down from the Chinese side and the positions they were taking. And so, but I do think that, you know, I will wager that from the Chinese perspective, they are confident that they will be able to get the Trump administration to move down even more because they do believe that,

Trump is more susceptible to market pressures, political pressures than the Chinese side is. Yes. Well, and evidence would suggest that they are right on that front. But as we talked about last podcast, there was no question that these tariffs were starting to

enact a real toll on parts of the Chinese economy. The Chinese government, you know, not happy about that. And so I think they are happy to pocket this win, happy to have a bit of a ceasefire, a pause. If you go back, you remember a couple weeks ago, there was a commentary by the Beijing Daily talking about Mao Zedong's famous essay on protracted war and how that would apply to this fight with the U.S. I mean, in that commentary,

Part of that discussion, you know, in Mao's essay, there's discussion of the idea around sort of temporary halts or pauses to regroup. Right. And so I don't think anyone should look at this as a... This is a breakthrough and this is over. This is a pause...

Both sides can regroup. I think the Chinese side has demonstrated to the U.S. that they are much better prepared than they were in 2018, 2019. It is worth remembering, though, that we had similar types of pauses in the first Trump trade war in 2018. So this is likely far from over. There's likely a lot more drama. But this weekend was, I think...

I don't think there was anybody who thought that both sides would go down so quickly. Yeah, no, I mean, certainly when we were talking about it last week, we were saying, you know, the best case scenario here and a sign of progress would be an agreement to keep talking. I was not expecting the tariffs to be reduced as much as they were. Um, uh,

A tariff reduction wasn't all that shocking, but this is a real de-escalation. The magnitude is significant. Exactly, yeah. But again, I think if you're trying to figure out, well, who blinked, who wins...

like i said i still am not could this be a mutual blink here because i think right now i think they winked i think they winked at each other and then they blinked right it's sort of like a hey hey uh hey hey hey we know everybody involved here needs to save face um yeah no i mean the financial times they had a uh they had an article about besant meeting in the basement of the imf uh

three weeks ago as things began to thaw a little bit. Was that with the Minister of Finance? Correct. Who's here for the World Bank meeting. And in that story, they characterized it this way. The US and China had each argued that the other was more vulnerable to the tariffs, but the speed with which they unwound the levies in Geneva suggested that the trade war was inflicting severe pain on both sides.

A hard decoupling of the world's two largest economies was threatening job losses for Chinese workers and higher inflation and empty shells for American consumers. So to your point on the value of a pause, I think both the U.S. and China, the direction remains unchanged in terms of the tensions in the relationship. But again,

it really makes sense for both the PRC and the Americans to take a beat here and see if anything can be worked out, whether it can, structurally speaking remains entirely unclear to me. And Besson has been talking about driving toward a durable deal. And, uh,

I just don't really know what the goal is of those sorts of negotiations, but good luck to them. I'll just say it's deja vu all over again because so much of this is the same thing people were saying in 2018 and 19, right? And so that goes back to the question of what are, and we're still not really clear, what are the actual asks from the U.S. side if it involves...

anything like the structural changes that were asked for in the initial Trump attempt at a deal in Trump won, that actually they thought they had gotten and then the Chinese side backed out of it in May of 2019. The Chinese side is much better prepared and much, you know, the odds, the likelihood that they're going to agree to any of the kind of structural changes that Trump wanted initially in Trump won, I think are pretty close to nil.

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