The US and China are scheduled to begin trade talks in Geneva on May 10, 2025.

The talks aim to address tariff reduction and other trade-related issues, led by US Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng.

Sources indicate that the US may consider reducing tariffs on Chinese imports to below 60% as a first step, with China potentially reciprocating.

If negotiations make headway, these changes could be implemented as soon as next week. However, the discussions are expected to focus more on expressing concerns than on finalizing solutions. Immediate outcomes are not guaranteed.

Key items on the US agenda include urging China to lift export restrictions on rare earth materials, which are vital for various industries.

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🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ Historically extreme tariff rates are causing unprecedented economic pain

The current average effective US tariff rate has reached 27%, the highest level since 1903, creating economic pressures that explain both sides’ potential willingness to de-escalate 1.

These extreme tariffs, reaching 145% on many Chinese goods, have directly impacted American consumers, with studies projecting average household costs exceeding $1,200 in 2025 2, 3.

Small businesses are particularly vulnerable, with many explaining to customers that price increases are directly tied to tariff costs, affecting their competitiveness and customer relationships 4.

The economic burden falls disproportionately on lower-income households, making tariffs effectively a regressive tax policy that impacts those least able to absorb additional costs 2, 3, 1.

2️⃣ Tariffs have failed to achieve key economic objectives

Despite four years of escalating tariffs, the US trade deficit with China remained at $295 billion in 2024—still America’s largest bilateral trade deficit with any country 5.

The promised manufacturing renaissance hasn’t materialized, with studies instead showing job losses in manufacturing sectors and an estimated reduction of 740,000 jobs across the economy 1.