China said it is currently evaluating the possibility of implementing a negotiation process with the United States on trade cooperation between the world’s two largest economies that was actually the first signal from Beijing about the at least theoretical ability of dialogue with Washington after last month, US President Donald Trump announced sweeping tariffs on goods imported from almost all countries.
The tough measures of the current configuration of the trade policy of the administration of Mr. Trump provide for 145% levies on products from the Asian country. As part of the response, China has announced 125% tariffs on goods shipped from the United States. Against the background of these measures, tensions in the context of relationships between Beijing and Washington in the framework of confrontation in the economic plane reached a peak level. So far, the parties to the mentioned confrontation have not come close to any concrete de-escalation actions in terms of practical moves. However, the rhetoric of Beijing and Washington regarding the possibility of resolving the conditions and circumstances of economic cooperation is gradually beginning to soften, but still, in this case, only statements are meant that do not actually have any impact on the content of the state of affairs existing in the space of objective reality. The current status quo in the context of relationships between an Asian country and the US continues to be confrontational.
The Chinese Commerce Ministry on Friday, May 2, released a statement noting that senior United States officials have repeatedly expressed their willingness to discuss tariffs with Beijing. Also, this ministry urged officials in Washington to show sincerity toward the Asian country.
Moreover, in the mentioned statement, it was noted that the United States has sent messages to China through relevant parties, hoping to start negotiations. In this context, it was highlighted that Beijing is currently evaluating this.
Against the background of the specified statement, which was actually the first signal from China that it does not reject negotiations as a kind of potentially possible idea in terms of prospects for implementation and is not radically immersed in a strategy of an unambiguous and uncompromising trade war of attrition, US stocks showed growth on Friday. In the context of the upward dynamic, the S&P 500 Index is on track to erase all of the losses triggered by the tariffs announced by Donald Trump last month. This result reflects the fact that investor sentiment has become more optimistic amid the prospect of trade negotiations, the favorable outcome of which will mean an improvement in the conditions and circumstances of economic cooperation between Beijing and Washington. It is worth noting that both sides of the current confrontation are interested in normalizing the mentioned cooperation.
The media interpret the statement from the Chinese Commerce Ministry as a signal that the stalemate between the world’s two largest economies may shift. The current state of affairs is virtually guaranteed to cause significant damage to both China and the US. The Asian country’s economic system relies heavily on exports. It is obvious that Beijing’s ability to earn on external shipments of products will be significantly reduced in the harsh conditions of global trade. According to Statista, the share of exports in the total gross domestic product (GDP) of the Asian country reached about 18.9% last year. For the United States, the tariffs currently observed mean an almost inevitable price increase. The materialization of this prospect will lead to what can be described as an upward acceleration of inflation, which has been one of the main challenges for Washington over the past few years. Consumer sentiment in the United States is already brimming with pessimistic expectations due to the trade war, which is becoming an increasingly visible and enduring reality. At the same time, the most negative scenario can still be prevented if Beijing and Washington begin the negotiation process and reach an agreement on normalizing the conditions and circumstances of economic cooperation.
It is worth noting that the Asian country has recognized the negative sensitivity of tariffs not at the level of statements but in the plane of concrete actions. In this case, it is implied that China has started to exempt US products worth approximately $40 billion from levies. The relevant information was released by the media. It is worth noting that the mentioned actions of Beijing are unequivocal, unambiguous, and more than obvious evidence that the economic system of the Asian country, which is the second-largest in the world, needs decisions to mitigate the consequences of the trade war since the direct and full-scale materialization of all the costs of the current situation will be a very painful blow. According to media reports, a list of 131 excepted products is circulating among merchants and businesses in China. The mentioned list highlights the areas where Beijing relies most heavily on imports of goods from the United States. In this case, among other things, pharmaceuticals and industrial chemicals are meant.
At the same time, the media, even against the background of a gradual softening of rhetoric on both sides of the confrontation, claim that Beijing and Washington have a long and difficult way to go to achieve any concrete progress in the context of normalizing cooperation between the world’s largest economies. Donald Trump has repeatedly stated that the head of the People’s Republic of China, Xi Jinping, should contact him to start negotiations on tariffs. At the same time, the Asian country has not been in a hurry and continues to be in no hurry to make the first move in the appropriate direction. In this case, the reputational consequences of the current tension are a sensitive circumstance for both sides of the confrontation. Beijing, like Washington, seeks to demonstrate to the world that its position is the most unshakeable and least susceptible to any external impact. In the future, the side that, based on the results of the potential settlement of the current economic confrontation, defends its conditions for normalizing the situation to a greater extent, will receive maximum political points as a player in the geopolitical environment.
This week, United States Treasury Secretary Scott Bessent said China must take the first step to de-escalate the dispute.
John Gong, a former consultant to China’s Commerce Ministry, likened the latest gesture to the first rain after a long drought. According to this expert, who is currently a professor at the University of International Business and Economics in Beijing, the mentioned gesture indicates a go-ahead from the very top of the leadership of the Asian country. During a conversation with media representatives, John Gong stated that China is preparing for the negotiation, who’s going to lead this process, what would be the strategy, and what is the model like to deal with the United States. According to the expert, all these things are probably being intensively debated and discussed right now.
The media note that it should not be ruled out that the negative consequences of the trade war will be the most convincing arguments for both Beijing and Washington in favor of starting the negotiation process. The deterioration of the economic situation as realized in the space of objective reality will be perceived by the authorities of both countries more sensitively than the rhetoric about what could theoretically happen. For example, the United States economy at the beginning of the current year contracted mainly due to a significant increase in imports ahead of the entry into force of tariffs. Levies have become a shock circumstance for global financial markets. Tariffs, as a factor shaping the subsequent economic prospects, also provoked a drop in consumer confidence.
In China, factory activity has demonstrated the most intense contraction since December 2023. This is evidenced by the official manufacturing purchasing managers’ index. At the same time, new export orders in the Asian country declined to the lowest level since December 2022. Also, in this case, there is a gradual repetition of the negative situation observed in April 2022, when lockdown began in Shanghai due to the coronavirus pandemic.
At the same time, both economies will face more significant difficulties if they fail to reach an agreement on the normalization of trade cooperation shortly. The future is the territory of the unknown. That’s how it was, is, and always will be. However, sometimes the content of a current historical moment is relatively unambiguous in terms of the most likely prospects for the subsequent dynamic of the state of affairs. The tariff confrontation between Beijing and Washington, as a kind of object of analysis in the context of forecasting, is a similar example.
The media claim that China has now been looking for the United States to appoint a point person for talks, who has the support of Donald Trump and can help prepare the deal in a version that the US president and the head of the Asian country will perceive as acceptable for signing.
It is worth noting that other countries are currently seeking to reach an agreement on the normalization of trade cooperation with the United States. For example, Japan’s chief negotiator Ryosei Akazawa expressed the hope that Washington and Tokyo will be able to conclude a corresponding deal in June. At the same time, the media notes that these prospects are complicated by the fact that the parties remain at odds on the most important issue concerning the export of cars. Ryosei Akazawa said he’d had a frank meeting with US officials, including Scott Bessent, Trade Representative Jamieson Greer, and Commerce Secretary Howard Lutnick. In this case, the second round of the negotiation process took place. The talks lasted more than two hours. This duration of communication is not minimal, but at the same time, it does not contain signals about a detailed discussion of the parameters of a future deal, which requires many clarifications and careful coordination of the actions of the parties.
Ryosei Akazawa stated that the parties were able to have concrete discussions on topics such as expanding bilateral trade, non-tariff measures, and cooperation on economic security. He told this last Thursday, May 1, to reporters in Washington after the gathering. According to him, the next round of the negotiation process may take place from the middle of the current month.
At the same time, the Japanese media, citing numerous insiders who were aware of the so-called behind-the-scenes details of the mentioned negotiations, published information that Washington proposed the parameters of the deal, providing for the United States to maintain its 25% tariffs on the Asian country’s auto industry and the continuation of levies on steel and aluminum. It is claimed that Tokyo rejected the mentioned proposal. The media also noted that the Japanese side stated that the negotiations should be comprehensive. Insiders cited by journalists claim that Tokyo has suggested reviewing its non-tariff barriers and expanding imports of US farm products.
Tariff concessions regarding the automotive industry are a particularly important and sensitive issue for Japan. Currently, about 8% of the Asian country’s workforce is involved in areas related to the auto sector. At the same time, according to media reports, the United States is seeking to focus the negotiation process on broader reciprocal tariffs, which are due to take effect in July. Ryosei Akazawa stated that he reiterated Japan’s stance that Donald Trump’s large-scale tariff campaign was extremely regrettable. He also repeated Tokyo’s plea that the levies measures be revisited.
On Friday, Japan’s Finance Minister Katsunobu Kato hinted at the possibility of citing the Asian country’s vast holdings of US Treasuries for leverage in discussions. At the same time, the media noted that so far there is no definitive understanding of the degree of Tokyo’s readiness for such actions. Katsunobu Kato said on Friday during a conversation with media representatives that it does exist as a card. He also noted that whether or not Tokyo uses that card is a different decision. The media drew attention to the fact that this comment differs from the statement made in April by the ruling party’s policy chief Itsunori Onodera, who claimed that Japan, being an ally of the United States, would not intentionally take action against US government bonds.
Currently, there is no indication that the issue of Japan’s foreign reserves was discussed during Ryosei Akazawa’s visit to Washington. He hopes that speeding up the negotiation process will allow Donald Trump and Japanese Prime Minister Shigeru Ishiba to reach an agreement as early as next month. At the same time, Ryosei Akazawa noted that this is not simply a matter of speed, as there are national interests that must be protected on both sides, and it will take some time. Also, according to him, there are still many issues that need to be addressed and resolved before a final agreement is reached.
It is likely that the leaders of the United States and Japan will meet for talks on the sidelines of the summit of the Group of Seven Nations in Canada, which will be held in mid-June.
Tokyo may face significant damage from the current configuration of Washington’s trade policy. In March, US 25% tariffs on steel and aluminum imports came into effect, with a similar tax on autos and a baseline 10% levis on all goods kicking in this month. Tariffs on the automotive industry are the most painful for Japan. Ryosei Akazawa said that one local automaker is already losing $1 million per hour. At the same time, he did not specify which company was meant in this case.
Also, Donald Trump imposed 24% tariffs on the rest of Japanese exports aimed at the United States market. However, the entry into force of these measures has been delayed for 90 days.
For Shigeru Ishiba, the issue of protecting the interests of Japan and jobs will be crucial ahead of the national elections scheduled for July. Last year, cars and car parts accounted for just over a third of Japanese exports to the United States.
India is also currently seeking to conclude a trade deal with the US. Last week, the media, citing insiders, published information according to which the trade agreement under discussion between the two countries will cover 19 categories, including broader market access for farm foods, e-commerce, data storage, and critical minerals. The potential deal will allow New Delhi to avoid raising tariffs on its products.
The terms of reference for a bilateral deal, which was finalized by both sides last week, include trade in goods and services. The relevant information was published by the media, referring to insiders who used the right of anonymity. Also, according to them, other aspects of the discussed deal relate to corruption and rules of origin. The initial agreement announced after US Vice President JD Vance met with Indian Prime Minister Narendra Modi in New Delhi last week lays out a framework for further negotiations. Donald Trump imposed 26% tariffs on India. The entry into force of these measures was delayed until July. According to media reports, New Delhi hopes that the trade deal will allow it to avoid the mentioned tariffs.
If the efforts of India and Japan to conclude a trade deal with the United States are successful, China’s economic system may plunge into a kind of isolation. It is worth noting that Beijing is calling on the countries of Southeast Asia to cooperate, positioning itself as a defender of the ideology of globalization and free trade as opposed to protectionist measures from Washington. Moreover, Xi Jinping will visit Europe next week. It is highly likely that during this visit he will discuss economic cooperation issues with his European counterparts.
Woei Chen Ho, an economist at United Overseas Bank Ltd, said that the high level of reciprocal tariffs on China is not sustainable, so the market expects Washington and Beijing to start negotiating at some point. According to the expert, the beginning of the negotiation process is likely to drive volatility in the market, as the relevant process is not expected to be plain sailing.
A reshuffle by Donald Trump this week may complicate bilateral relationships by expanding the portfolio of Secretary of State Marco Rubio, the first person in his post to be sanctioned by Beijing. Mr. Rubio will serve as interim national security adviser while keeping his job as secretary of state. His voice will be amplified on issues where Beijing has a special interest. In this case, among other things, the issue of Taiwan is implied, a self-ruled island democracy that China identifies as its territory in the context of its current concept of political geography. It is also worth mentioning that Marco Rubio pledged to address the destabilizing actions of an Asian country in the South China Sea.
US Council of Economic Advisers Chairman Stephen Miran said on Friday during a conversation with media representatives that it’s in the interest of both economies to lower the temperature, to create breathing space to continue talking, to figure out how they can get to a new stable equilibrium on trade.
Representatives for the Office of the US Trade Representative and the Departments of Treasury and Commerce did not respond to media requests for comment.
The negotiations between Beijing and Washington on a potential trade deal are not what can be described as a matter of bilateral relationships and nothing more. The economies of China and the United States are the largest in the world, which is why the condition of their interaction to a certain extent will have consequences on a global scale, affecting many countries. The era of globalization as a kind of form of economic and political reality continues to exist, despite the intensification of protectionism as an ideology in the theoretical plane and as a strategy in the plane of practical actions. For this reason, the negotiations between Beijing and Washington are of global importance as an impact factor and do not belong to the category of what is limited to the situation only in the United States and China.
