Trade War Monitor, Jun. 6: Can Trump-Xi Phone Call Save the Geneva Trade Deal?

After a brief truce in the U.S.-China trade war in May, shipping rates along China-U.S. trade routes have soared at an unprecedented pace, driven by exporters racing to secure shipping space and overwhelming freight markets coping with a surge in exports following a suspension of certain tariffs. These increases have intensified pressures on global freight markets, highlighting how tariff policies directly influence global supply chains and shipping economics [para. 1]. Despite the cessation of active trade hostilities, bilateral tensions remain pronounced as both sides blame each other for stalled negotiations. Recent escalations include Beijing tightening export controls on rare earth minerals, which has exacerbated strains on the global supply chain, and Washington suspending export licenses for American-made aircraft engines vital for China’s burgeoning commercial aviation sector [para. 2].

A diplomatic development occurred with the first phone call between China’s President Xi Jinping and U.S. President Donald Trump since Trump’s January 2025 inauguration. Both leaders accentuated the importance of reducing mutual interference and maintaining dialogue to stabilize relations. President Xi underscored China’s commitment to recent agreements from the Geneva trade talks, pushed for the lifting of U.S. punitive measures against China, and reiterated China’s unwavering position on the Taiwan issue, warning about confrontation risks stemming from pro-independence movements. President Trump echoed respect for Xi and acknowledged the mutual benefits of a robust Chinese economy, emphasizing the continued significance of U.S.-China relations [para. 5][para. 6][para. 7].

Tensions have further increased following reports that the U.S. Commerce Department suspended licenses permitting U.S. companies to supply engines, specifically the LEAP-1C co-produced by Safran and General Electric, for China’s C919 aircraft. This move has effectively halted the delivery of key technologies necessary for China’s main commercial jet initiative, directly challenging Beijing’s ambitions to compete with established Western aerospace giants like Boeing and Airbus [para. 8][para. 9][para. 10].

The United States’ major ports, particularly Los Angeles and Long Beach, are experiencing renewed strain as Chinese exporters attempt to front-load shipments in anticipation of future policy changes. Shipping lines have responded by reinstating and expanding trans-Pacific services. However, industry experts remain divided over whether the current tariff pause will trigger a shipping boom reminiscent of surges seen during the pandemic, citing uncertainty about the long-term trajectory of bilateral trade [para. 11][para. 12][para. 13].

Shipping giant A.P. Moller–Maersk is responding to these oscillating shipping rates and declining volumes by restructuring its China operations, integrating logistics, and expanding its air cargo footprint. Despite seeing up to a 40% drop in China-U.S. trade volumes by late April compared to pre-tariff levels, Maersk views this as an opportunity to provide more resilient supply chains for clients [para. 14][para. 15].

While Chinese exporters have enjoyed a short-term boost by expediting shipments due to the truce, analysts remain cautious about the medium-term outlook. Container bookings on China-U.S. routes have rebounded beyond pre-tariff-announcement levels, but sustained headwinds for export-driven industries are expected [para. 16][para. 17]. Concurrently, China’s policymakers are contending with the challenge of supporting domestic demand and fiscal balance amid ongoing global uncertainty and deteriorating business sentiment—a situation aggravated by ongoing trade turbulence and the broader economic impacts of tariffs imposed this spring [para. 18][para. 19][para. 20].

In summary, the U.S.-China trade relationship remains deeply unsettled despite leadership dialogue and tactical truces, with significant repercussions continuing to ripple through supply chains, global markets, and policy domains on both sides of the Pacific [para. 1][para. 2][para. 3][para. 5][para. 6][para. 7][para. 8][para. 9][para. 10][para. 11][para. 12][para. 13][para. 14][para. 15][para. 16][para. 17][para. 18][para. 19][para. 20].