Tu Xinquan: Why Is Trump Rushing to Negotiate With China? (AI Translation)

屠新泉：特朗普为何急与中国谈判

Summary:

Following April 2, U.S. President Donald Trump’s tariff policies underwent multiple adjustments, with the most significant change towards China resulting from unexpectedly positive outcomes during recent U.S.-China talks in Geneva. This reflects two underlying facts: neither the U.S. nor China truly sought complete decoupling from the other—particularly evident on the American side—and, in the short term, a hard decoupling would hurt the U.S. more than China, with U.S. financial resilience falling short of expectations. Trump’s reversal on tariffs is primarily due to greater-than-expected turmoil in U.S. capital markets, including stocks and, crucially, the treasury market, which directly affects the administration’s policy execution and fiscal dynamics. Unlike stock market swings, which Trump could personally benefit from, unrest in the bond market is out of his control and jeopardizes fiscal policy [para. 1][para. 2][para. 3].

Trump’s tariff adjustments are influenced less by macroeconomic indicators and more by short-term metrics with direct impact on his political base and interests, such as treasury yields and inflation rates. The swift policy reversal revealed misjudgments about both domestic impacts and Chinese responses. Initially, Trump’s approach appeared set to introduce a baseline tariff of 10-15% to boost federal revenue, additional “232 tariffs” of 25-30% on industries linked to national security, and reciprocity-based tariffs on surplus-trading countries. On April 2, announced tariffs widely exceeded expectations—levied on most countries, with some developing nations facing even higher rates than China [para. 4][para. 5][para. 6][para. 7].

Subsequent developments saw Trump’s tariffs return to these established patterns, maintaining a basic 10% tariff and “232 tariffs” even with initial British agreements. However, recent U.S. International Trade Court rulings have added uncertainty by rejecting Trump’s reciprocal tariffs and some basic tariffs, arguing that the International Emergency Economic Powers Act (IEEPA) does not grant the president broad tariff authority. Experts anticipate these judicial challenges will likely result in Trump losing further appeals, possibly undermining future tariff plans [para. 8][para. 9][para. 10].

Trump may respond by further raising or expanding “232 tariffs,” already doubling steel and aluminum tariffs. He could also utilize “301” trade cases, mimicking his first-term approach toward China, which permits punitive tariffs following fast-track investigations. However, recent court rulings may force removal of the 10% baseline tariff and cancel some China-specific tariffs, like those on fentanyl, if cooperation is reached. The average effective tariff on Chinese goods currently stands at 30%, the highest among U.S. trading partners, and may remain so even after reshuffling other tariffs [para. 11][para. 12][para. 13][para. 14].

Going forward, long-term trends point toward deepening U.S.-China economic decoupling, with the trade relationship’s importance diminishing bilaterally. Strategic decoupling will persist, shifting the priority from broad cooperation to risk and conflict management. Middle countries increasingly act as intermediaries in global value chains, maintaining indirect China-U.S. economic links. For this “double-driven” world economy to function, the U.S. cannot force third countries to choose sides. While the U.S. is a major market, China’s weight as a key global supplier ensures it retains significant influence [para. 15][para. 16][para. 17][para. 18].

Looking ahead, China should focus more on investment liberalization rather than further trade opening, as gains from reducing tariffs are now limited. China has ample potential to expand outbound investment, aligning with global economic trends. Upgrading investment agreements, both regionally and bilaterally, will be crucial for China’s continued integration and leadership in the global economic cycle [para. 19][para. 20][para. 21].

Paragraph indicators: [para. 1][para. 2][para. 3][para. 4][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][para. 21].