TLDR
- US and Chinese officials will meet in Switzerland for trade talks this weekend amid high tariffs on both sides
- China cut interest rates and unveiled stimulus measures in response to trade tensions
- Treasury Secretary Scott Bessent called current tariff rates unsustainable, equivalent to a trade embargo
- President Trump has proposed new tariffs on movies and pharmaceuticals
- Markets reacted positively to news of the upcoming trade talks
US Treasury Secretary Scott Bessent and US Trade Representative Jamieson Greer will head to Switzerland this weekend for critical trade talks with Chinese officials led by Vice Premier He Lifeng. The meeting aims to de-escalate growing trade tensions that have seen both countries impose high tariffs on each other’s goods.
The talks were announced Tuesday in statements from both governments. This will be the first confirmed trade discussion between the nations since President Donald Trump announced punishing levies of up to 145% on Chinese imports, which Beijing countered with retaliatory rates of 125%.
Bessent told Fox News that the current tariff rates aren’t sustainable and amount to a trade embargo. He emphasized the talks will focus on de-escalation rather than reaching a major trade deal.
“We’ve got to de-escalate before we move forward,” Bessent said. “We don’t want to decouple, what we want is fair trade.”
The S&P 500 experienced two days of declines earlier this week following Trump’s announcement of new tariffs on movies and pharmaceuticals. However, US equity-index futures rose when the trade talks were confirmed.
China’s Economic Response
China appears to be feeling economic pressure from the trade standoff. On Wednesday, the country’s central bank cut interest rates and Beijing introduced a range of stimulus measures to counter the effects of trade tensions.
China’s Ministry of Commerce issued a statement saying the US should “show sincerity” in the talks and correct wrong practices. The ministry warned that China would not “sacrifice its principled position and international fairness and justice to seek any agreement.”
Wu Qing, Chairman of the China Securities Regulatory Commission, stated during a briefing that “The US abuses of tariffs have severely disrupted global economic and trade orders.”
Market Impacts and Presidential Stance
The ongoing tariff dispute has rattled markets and threatens to increase prices for manufacturing equipment and consumer goods, including clothing and toys that many Americans rely on.
Trump has given mixed signals about his trade strategy. While stating he’s willing to lower tariffs on China eventually, he also claimed the US is “losing nothing” by not trading with Beijing and that Chinese ships are “turning around in the Pacific Ocean.”
In a Sunday interview on NBC’s Meet the Press, Trump suggested American consumers could accept higher prices and less selection to rebalance the trade relationship with China. “Young girls don’t need to have 30 dolls,” Trump said. “I think they can have three dolls or four dolls, because what we were doing with China was just unbelievable.”
Bessent acknowledged that Trump’s “strategic uncertainty” approach might unsettle markets but claimed it gives the US an advantage in negotiations. He stated that while he and the president know what Trump would accept in talks, they weren’t going to broadcast those details openly.
Expert Predictions
Billionaire investor Paul Tudor Jones predicted Tuesday that Trump could slash tariffs on China in half but warned that may not be enough to prevent markets from falling.
“You have Trump, who’s locked in on tariffs; you have the Fed, who’s locked in on not cutting rates,” said Jones, founder of macro hedge fund Tudor Investment Corp. “That’s not good for the stock market.”
The Federal Reserve’s interest rate decisions, normally a central focus for investors, are currently taking a back seat to trade concerns. Analysts suggest that markets need a truce in the trade war to continue buying, a factor beyond Fed Chair Jerome Powell’s control.
The 90-day tariff reprieve is set to expire on July 8, raising hopes that most if not all of the tariffs might be dropped by then. Bessent and Greer are also scheduled to meet with Swiss President Karin Keller-Sutter during their visit.
