Renewed Tensions Between Washington and Beijing
Trump and Xi are at it again. While the two men (or rather their trade representatives) seemed to arrive at a truce last June in London, renewed tensions demand yet another round of negotiations. These are scheduled for the end of October. The failure of the June agreement stems from Beijing’s renewed plans to place severe export controls on rare earth elements, which are crucial to modern technologies and of which China presently controls some 90% of the world’s supply. Trump has responded by promising to place tariffs of 100% on U.S. imports from China. Â
Whatever comes of these imminent talks, history suggests that tensions will escalate again. The pattern of intense trade animosities followed by an easing followed by new tensions has become well established. For business and trade, this back and forth has offered only one constant: huge uncertainties that more than any official action have cut deeply into Sino-American trade and promise to continue to do so.
The Rise of “Fentanyl Tariffs” and Escalating Trade Barriers
This year’s intense round of punch and counter-punch began soon after Trump took office. His February 1st executive order placed new 10% tariffs on all goods coming from China. Because Trump justified his order on national security grounds (to slow the flow of fentanyl and precursor chemicals into the country) these initial levies have acquired the name “fentanyl tariffs.” Trump doubled them soon after they were implemented. Then in April, under the banner of Trump’s so-called “Liberation Day,” the White House raised the tariffs on Chinese imports to 54%. That elicited a round of Chinese countermeasures that prompted Trump to raise the tariff barrier against Chinese products to 125%. At this point, both sides agreed to de-escalate the contest. Â
Failed Trade Truces: From Geneva to London
In May, officials from the United States and China met in Geneva and agreed to return to the original 10% “fentanyl tariffs” and remain with them for at least the next 90 days. The Geneva agreement did nothing to reduce the tariffs already in place before Trump took office. At that point, U.S. levies on Chinese imports stood at an average of 30%, though they were higher on some especially sensitive goods. The May deal failed to extend for the full 90 days. Washington objected to China’s efforts to restrict the export of rare earth elements. To head off another round of punch-counter-punch, the sides met in June. That meeting in London seemed to re-establish the Geneva deal of the prior month.
By late summer, however, Xi’s efforts to impose more controls on exports of rare earth elements got a renewed response from Trump. The new rules did not explicitly block rare earth exports. Instead, they demand that any producer get permission from Beijing on overseas sales that carry as little as 0.1% of their value in rare earth. Even though the United States is rapidly developing alternative sources of rare earth elements, the threat to the United States and the world is clear. Trump countered with promises of “massive” new tariffs and “many other countermeasures.” That is when he announced his plans to raise the tariffs to 100%. Immediately, the sides set a new date for renewed negotiations including a possible face-to-face exchange between Trump and Xi. These negotiations may ease tensions, but given the history of this contest, especially the past nine months, it is unreasonable to expect a lasting settlement.
The Lasting Impact of Trade Uncertainty on U.S. and Chinese Businesses
Even in the unlikely event that Trump and Xi come to some more durable arrangement this time, the uncertainties bred by past on-again-off-again policies from both sides have already sealed the fate of Sino-American trade. More than the tariffs and restrictions themselves, questions about where matters are going and how they might settle have impelled Chinese business to look elsewhere for export markets. They have equally impelled American business to source away from China and seek other markets for their exports, including agriculture. Indeed, the latest scare among American farmers about losing the Chinese market for their soybeans will only escalate the process. It seems unlikely that any relative stability now will convince businesspeople on either side of the Pacific to rely too heavily on trade between the two countries.
From Trump to Biden: A Bipartisan Approach to Confronting China
What is more, these trade-killing uncertainties would seem to have staying power. Their roots go back a long way before this year’s roller coaster ride. American complaints about Beijing’s unfair trade practices grew loud in the early twenty teens at least. Trump’s initial tariffs in 2018-19 were billed as an effort to correct such practices. Even as Joe Biden took his oath of office in January 2021, those complaints raised hostility toward China trade on both sides of the aisle in Congress. Though Biden had criticized the Trump tariffs during the election campaign in 2020, he accordingly kept them in place once he took office. Echoing the common complaints in Congress about Chinese trade policy, Biden and his trade representative Katherine Tai, insisted that the Trump tariffs were essential to pressure Beijing to abandon its unfair practices.Â
Right after taking office in 2021, Biden issued an executive order that forbade American investors from any involvement in Chinese ventures that benefitted either Beijing’s military or its surveillance practices. Biden then added restrictions on exports of any products contrary to U.S. military economic interests. That vague language gave the administration considerable latitude to control just about any aspect of China trade. Biden expanded the number of sanctions on Chinese companies and imposed export controls on the sale of advanced semiconductors to China as well as advanced semiconductor manufacturing machinery. He stepped up such pressures by restricting any sales of artificial intelligence (AI) products to China. Toward the end of his administration, Biden placed steep 100% tariffs on Chinese-made electric vehicles, parts, and batteries. By then, Beijing was making threats to curtail exports of rare earth elements.
Trade Data Reveals the Cost of Economic Decoupling
Trump’s recent actions, though certainly more dramatic and a greater focus of media attention, seem to be in line with what Washington has been doing consistently since the middle of his first term. Trade patterns have long reflected this trend. The impact stems not only from the direct costs tariffs impose on commerce between the two economies, but also from the risks and uncertainties they introduce into any Sino-American business arrangement.
Statistics from the U.S. Commerce Department tell the story well. American imports of Chinese-made products dropped immediately after Trump imposed his first round of tariffs in 2018-19, but even though Biden kept them in place, those imports began to grow again after the Covid pandemic. They peaked in 2022 at some $536 billion.
Biden’s additional trade restraints brought the level of imports down some 18.2% to $439 billion by 2024, an 8.7% annual rate of decline. Since, Trump’s tariffs, but more the uncertainties imposed by behaviors in both Washington and Beijing, have brought a further steep decline. Because the Commerce Department does not seasonally adjust data on trade, it is hard to compare what has happened so far in 2025 with the past annual figures. But as of July 2025, the most recent period for which complete data are available, goods imports from China were some 35.3% below levels of July 2024. The earlier trend has accelerated, to be sure, but the difference clearly is one of degree not kind.
A Cycle of Negotiation and Retaliation With No End in Sight
This next round of meetings will almost certainly claim some degree of peace in this contest, either immediately or after a period of weeks. Given the patterns of past years and especially the past nine months, it seems likely that any “agreement” will quickly break down under a new round of threats and accusations. Neither Trump nor Xi has shown himself willing to accept the level of compromise needed to settle matters. Uncertainties destructive of trade will then remain a fact of economic and business life, as will the accompanying decline in Sino-American trade. China will look elsewhere for the exports it needs to keep its economy from sinking, and the United States will source elsewhere, maybe even, as Trump wants, domestically.
