The Next Step in the US-China Tariff Game: Trump's Leverage and Constraints (AI Translation)
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专栏作家 罗志恒
Columnist Luo Zhiheng
6月5日，中美元首开启特朗普本届任期执政以来的首轮通话，两国元首同意双方团队继续落实好日内瓦共识，尽快举行新一轮会谈。6月9日，中美经贸团队将在伦敦开启第二轮贸易谈判，也是中美经贸磋商机制建立后的首次会议。在中美关税博弈的关键阶段，伦敦会谈的启动，既承载着日内瓦首轮会谈的初步成果，也背负着一个月来双方新增摩擦的复杂压力。日内瓦会谈中美双方达成了互降关税等一系列关键共识，但之后中国仍受到美国的刻意针对和打压。例如，日内瓦声明签署次日美国便发布AI芯片出口管制指南，之后又陆续出台了停止对华芯片设计软件（EDA）销售、取消中国留学生的签证等多项歧视性限制措施。此次元首通话为持续升温的中美博弈提供了阶段性缓冲，但鉴于特朗普重点打压中国的立场没有实质性改变，双方对现存问题的分歧较大，中美博弈具有长期性和严峻性，大概率会是打打停停、边打边谈。有必要透过纷繁的表象，理清特朗普在中美博弈中的筹码和约束，以此推演未来中美关税博弈的可能情景。
On June 5, the heads of state of China and the United States held their first official phone conversation since Donald Trump began his current term, marking the first such communication between the two leaders during this administration. Both parties agreed that their respective teams would continue to implement the Geneva consensus and to hold a new round of talks at the earliest opportunity. On June 9, the China-U.S. economic and trade teams are set to begin their second round of trade negotiations in London, which also marks the inaugural meeting of the newly established China-U.S. economic and trade consultation mechanism. As the two countries sit at a critical juncture in their tariff standoff, the launch of the London talks both builds upon the preliminary outcomes of the Geneva round and bears the weight of new frictions that have emerged over the past month. At the Geneva talks, Chinese and U.S. negotiators reached a series of key understandings, including mutual tariff reductions. However, since then, China has continued to face targeted pressure and crackdowns from the United States. For instance, the day after the signing of the Geneva statement, the U.S. released guidelines restricting exports of AI chips. This was soon followed by further discriminatory measures, such as a halt in sales of chip design software (EDA) to China and the revocation of visas for Chinese students. The recent leadership-level phone call provided a temporary reprieve in the escalating U.S.-China contest, but given that Trump’s administration has not fundamentally changed its tough stance against China, and given the wide gulf that remains between the two sides on outstanding issues, the contest is expected to remain protracted and severe, likely following a “fight-and-talk” pattern characterized by recurring pauses and resumptions in tensions and dialogue. Against this complex backdrop, it is necessary to look beyond the superficial turbulence and clarify the levers and constraints facing Trump in the current phase of the U.S.-China contest. Doing so will help project possible scenarios in the evolving tariff standoff between the world’s two largest economies.
四大因素将影响中美关税博弈的走向
Four Key Factors to Shape the Course of U.S.-China Tariff Dispute
（一）美国经济：重点关注美国物价和就业市场压力
(1) U.S. Economy: Focus on Inflation and Labor Market Pressures
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- On June 5, US Presidents held their first call during Trump's current term, agreeing to continue implementing the Geneva consensus and hold new talks soon.
- On June 9, US-China economic and trade teams will start the second round of trade negotiations in London.
- Key factors influencing US-China tariff disputes include the U.S. economy, capital markets, domestic political pressures, and international relations.
Summary
On June 5, 2025, U.S. President Donald Trump and the Chinese President held their first direct conversation since Trump’s current term began, agreeing that their respective teams would continue to implement the Geneva consensus and to hold new negotiations soon. The second round of Sino-U.S. trade talks was scheduled for June 9 in London, marking the first meeting under the newly established bilateral trade consultation mechanism. This round of negotiation comes at a critical moment in the tariff standoff and carries both the preliminary outcomes achieved in Geneva and the mounting tensions from recent weeks. While mutual tariff reductions were agreed upon in Geneva, the U.S. has continued to enact restrictive measures against China, such as new export controls on AI chips, bans on relevant software, and cancellations of student visas. The leaders’ dialogue provides a momentary easing of hostilities, but due to Trump’s continued hardline approach, significant divergences remain, making the trade tussle likely to continue with intermittent alternations between confrontation and negotiation. It is therefore important to analyze Trump’s leverage and constraints in the trade war to forecast future developments in tariff battles between the two nations [para. 1].
Four major factors will shape the trajectory of the U.S.-China tariff standoff.
(1) The resilience of the U.S. economy is key, with modestly easing inflation and stable employment supporting Trump’s tough stance. In April, consumer prices rose 2.3% year-on-year; unemployment was steady at 4.2% in May. However, the transient effect of import stockpiling on inflation will dissipate, likely exposing consumers more directly to tariff costs and elevating inflation risks, as indicated by rising inflation expectations (6.6%, highest since 1981) and a surge in new jobless claims. The IMF forecasts U.S. GDP growth at only 1.8% for 2025 if current tariff policies remain. Should economic distress worsen, Trump may be forced to compromise on tariffs [para. 2].
(2) Disruptions in U.S. capital markets, as seen in stock, bond, and currency declines linked to “reciprocal tariffs,” can exert significant pressure on the Trump administration. For example, a sharp fall in equities would hurt consumer sentiment and confidence due to Americans’ heavy exposure to stocks, while increased bond yields would raise federal debt costs. Moreover, tariff policy weakens the dollar’s credibility and could accelerate global “de-dollarization”; since the beginning of the year through May, the dollar index has fallen by 8.3% [para. 3].
(3) Domestic political pressures also play a role. Despite legal setbacks in court, Trump is unlikely to abandon tariffs but may use alternative legislative routes to target China. While tariffs appeal to his political base, if they fail to deliver quick wins, dissatisfaction could hurt Republicans in the narrowly divided Congress (House: 219-215 GOP; Senate: 53-47 GOP). Trump may relax tariffs on consumer goods to win votes or intensify tariffs if legislative reforms stall [para. 4].
(4) Internationally, the U.S. faces slow or stalled negotiations with major economies like the EU and Japan, which have grown more cautious following China’s tough response. If these partners yield to U.S. pressure, it may embolden Trump to further harden his stance against China [para. 5].
Looking ahead, the standoff will move into a “stalemate” with limited scope for further tariff cuts and persistent risks of escalation. Trump’s unpredictable tariff policy, substantial structural differences (such as subsidies and non-tariff barriers), and unresolved issues (like fentanyl tariffs and strategic product restrictions) make the outlook volatile. Potential future scenarios include longer, repeated talks with possible structural tariff adjustments and the risk that conflicts spread to financial and technological sectors, including severe measures like banning Chinese banks from SWIFT or restricting U.S.-China investment and stock listings [para. 6][para. 7].
- As of end of 2024：
- Financial assets make up 68% of U.S. household wealth; nearly 30% of those assets are in stocks.
- April 2, 2025：
- U.S. announces tariff policies; IMF projects U.S. GDP growth of 1.8% for 2025 if these policies are maintained, a reduction of 0.9 percentage points from previous projections.
- April 9, 2025：
- U.S. postpones imposition of 'reciprocal tariffs' on the European Union and other economies for 90 days, maintaining only a 10% baseline tariff.
- April 2025：
- U.S. Consumer Price Index (CPI) rises 2.3% year-over-year; core CPI growth remains unchanged from previous month.
- May 2025：
- The U.S. unemployment rate stands at 4.2%, unchanged for three consecutive months.
- May 2025：
- University of Michigan survey shows U.S. consumers' 1-year inflation expectations rise to 6.6%, the highest since 1981.
- May 23, 2025：
- Trump threatens to increase tariffs on the European Union by 50% starting June 1, 2025.
- May 31, 2025：
- Weekly initial jobless claims in the U.S. reach 247,000, the highest figure of the year; U.S. Dollar Index is down 8.3% from the start of the year; Republicans and Democrats hold 219 and 215 seats in the House of Representatives, and 53 and 47 seats in the Senate.
- By the end of May 2025：
- Aside from the United Kingdom and China, the U.S. has yet to reach a tariff agreement with other major economies.
- June 1, 2025：
- Scheduled date for Trump’s threatened 50% tariff increase on the EU.
- June 5, 2025：
- Heads of state of China and the United States hold their first official phone conversation since Donald Trump began his current term, agreeing to continue implementing the Geneva consensus and arrange a new round of talks.
- After Geneva talks (exact date unspecified but after June 5, 2025 and before June 9, 2025)：
- U.S. releases guidelines restricting exports of AI chips to China, followed soon after by further discriminatory measures.
- June 9, 2025：
- China-U.S. economic and trade teams are set to begin their second round of trade negotiations in London, which is also the inaugural meeting of the newly established China-U.S. economic and trade consultation mechanism.
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