The United States and China meet for the first time since Trump imposes tariffs

Top economic officials from the United States and China held high-stakes negotiations in Geneva on Saturday, which could determine the fate of President Trump’s trade war to the global economy.

The meeting, scheduled to continue on Sunday, was the first time since Mr. Trump’s tariffs on Chinese imports, which China retaliated against a 125% tax on U.S. goods. Tit-For-Tat effectively cuts off trade between the world’s largest economies while increasing the likelihood of a global recession.

Despite the high bets for the meeting, expectations for breakthroughs resulted in meaningful reductions in tariffs. China and the United States even agreed to talk for weeks, and many analysts hope this weekend’s discussion will revolve around determining what the sides want and how the negotiations can move forward.

Still, the fact that Beijing and Washington are finally talking about is hoped that the tension between them can be eliminated and eventually lowered tariffs. The impact of taxes has rippled in the global economy, repositioning supply chains and causing businesses to transfer additional costs to consumers.

Economists and investors will keep a close eye on the negotiations, fearing that the U.S.-China economic war will lead to slower growth and higher global prices. Businesses, especially those relying on Chinese imports, are also highly wary of negotiations as they struggle to deal with new taxes and whether existing uncertainties will be maintained.

“The United States and China have strong economic and financial interests in downgrading trade hostilities, but there are few lasting stripteases,” said Eswar Prasad, a former director of the IMF’s Chinese division.

He added: “Nevertheless, it depends on the parties launching at least high-level negotiations, which makes them hope that they can ease their speech and retreat from further obvious hostilities to other trade and other aspects of economic relations.”

Negotiators in the Trump administration are led by Treasury Secretary Scott Bessent, a hedge fund manager, said current tariff levels are unsustainable. U.S. Trade Representative Jamieson Greer will join him, helping to design Mr. Trump’s first trade agenda, which includes a “phase one” deal with China. Mr. Trump’s hawkish trade adviser Peter Navarro did not arrange for the talks.

He is the vice premier of China’s economic policy and held talks on behalf of Beijing’s leadership. The Chinese government has not confirmed who else he is with him at the meeting, or that the Chinese Minister of Public Safety Wang Xiaohong, who directs its Narcotics Control Committee, will attend. Mr. Wang’s involvement suggests that both sides may discuss Trump’s concerns about China’s role in helping fentanyl flow into the United States.

The trade struggle has begun to cause losses to the world’s largest economy. On Friday, China reported that its exports to the U.S. in April fell 21% from a year ago. Some of the largest U.S. companies say they will have to raise prices to deal with tariffs, which goes against Mr. Trump’s promise to “end” inflation.

On Friday, Mr. Trump said he was ready to start lowering tariffs, suggesting that the 80% ratio of Chinese imports seemed appropriate. Later that day, Mr. Trump was referring to the China trade talks, “We have to do a lot for the United States.” He added that he would not be disappointed if the deal was not concluded immediately and that not doing business would also be a good deal for the United States.

The president also reiterated that he recommended reducing China’s tariffs to 80%, adding: “We will see how it works.”

The Trump administration accuses China of unfairly subsidizing key sectors of its economy and flooding the world with cheap goods. The United States has also been forcing China to take more aggressive steps to curb exports of fentanyl precursors, a drug that kills millions of Americans.

China has been firmly saying it does not intend to make trade concessions to Trump’s tariffs. Officials insist that the state agreed to hold talks at the request of the United States.

“This tariff war was initiated by the United States,” Liu Pengyu, spokesman for the Chinese Embassy in Washington, said this week. “If the United States really wants to negotiate a solution, it should stop threats and put pressure on it and negotiate with China on the basis of equality, mutual respect and mutual benefit.”

80% tariffs, while the current 145% tariffs are still likely to shut down most trade between the two countries.

Other experts say China and the United States can take other specific gestures to help pave the way for future negotiations.

One option is to scale tariffs to about 20% in early April, after Mr. Trump announced a 34% tax on goods and the ensuing mutual retaliation, said Wu Xinbo, dean of the International Institute of Fudan University in Shanghai.

“If we can go back to that stage, then I think it will be a big step towards more constructive negotiations,” Mr Wu said.

He said China was ready to talk about fentanyl as a separate issue, adding that after Mr. Trump first announced plans to impose tariffs on Chinese goods, China proposed to sit down with the Trump administration on the grounds that illegal fentanyl flowed into the United States.

The United States and China are meeting near the World Trade Organization’s headquarters, which has fiercely criticized Mr. Trump’s tariff war. The organization predicts that the continued division of the global economy into “competitive groups” could lead to nearly 7% of global GDP in the long run, especially to harm the poorest countries in the world. A WTO spokesman said this is a step towards an escalation and welcomes negotiations.

Alternatives – a world where the United States and China no longer engage in trade – could be economically painful and stable. American consumers who rely on cheap Chinese goods will soon face thin store shelves while the remaining products are priced at high prices.

The National Retail Federation said Friday that traffic for imported goods is expected to decline for the first time this year since 2023, when supply chain problems persisted and attributed it to Mr. Trump’s tariffs.

“We are starting to see the real impact of President Trump’s tariffs on supply chains,” said Jonathan Gold, vice president of supply chain and customs policy at the Retail Federation. “Ultimately, these tariffs will affect consumers in a higher price form, with less availability on store shelves.”

The Trump administration has been struggling deals with 17 other major trading partners after the president decided to suspend his reciprocity tariffs announced in April. On Friday, he praised the preliminary agreement with the UK to prove that his tariff strategy was working.

Economists are excited about signs that the White House appears to be ready to scale tax tariffs.

“This rush to show ‘trading’ progress reveals despair within the government, before they reach GDP growth and inflation,” Paul Ashworth, chief economist of North American capital economics, wrote in a note to clients. “With the downturn in incoming container ships from China, this has raised concerns about the imminent shortage of the U.S. in the U.S., and the Trump administration has put pressure on building lowering such tariffs.”

Capital economics estimates that if the U.S. reduces its tariffs on China to 54%, the overall effective tariff rate for U.S. imports will be reduced from 23% to 15%. This will align its forecasts for growth and inflation with estimates promised earlier this year based on Mr. Trump’s campaign pledge.

It is unclear whether Mr. Trump will accept a 54% tariff rate.

On Friday, he suggested he was ready to lower the tariffs to 80 per cent as he granted Mr Best the power to reach an agreement.

“The 80% tariff in China seems to be right,” Mr. Trump wrote in his social media platform Truth Social.

Later that day, his press secretary Karoline Leavitt said 80% of the figures were not formal offers, but “the figures the president threw there.” She added that Mr. Trump will not lower tariffs on China unless Beijing also reduces taxes.