Decryption. Trade War: Why the United States and China Announced a Truce

Two days of negotiations in Geneva were enough: the United States and China announced on Monday that they were suspending the exorbitant customs duties they had imposed on each other . The suspension takes effect Wednesday for 90 days. It reduces American customs duties on Chinese products from 145% to 30%, and Chinese duties on American products from 125% to 10%.

The delegations' comments raise hopes for a more lasting suspension. "Neither side wants a breakdown" in economic relations, Treasury Secretary Scott Bessent declared. Moreover, the two countries agreed to establish "a mechanism to continue discussions on trade and economic relations." Even better, Donald Trump indicated that he expected to speak "with President Xi, perhaps at the end of the week." He praised "productive discussions in Geneva" and spoke of a "very, very good relationship" with China.

How can we explain this sudden drop in tension in the trade war ? The market reaction provides an initial answer: all the world's stock markets, including New York's, welcomed the agreement with a sharp rise in values. Market opposition was also the cause of Donald Trump's first retreat on April 9, when he reversed the general increase in customs duties – making an exception for China. The crisis on the bond market (as global investors, lacking confidence, stopped buying American debt) had particularly alerted him.

China's firmness has undoubtedly also played a role. Xi Jinping, for example, has virtually blocked exports of rare earths, which his country has an abundance of and which are essential to American industry.

However, a truce is not peace. The desire to reduce the trade deficit and prioritize " Made in America " ​​products remains at the heart of Donald Trump's election promise. And the rivalry with China, which is vying to become the world's leading power, can only intensify on all fronts, including trade.

Finally, it should be noted that the negotiations took place in Geneva, where the World Trade Organization (WTO) is headquartered, and which is normally empowered to handle these disputes. Its complete absence from the discussions shows that a return to multilateral rules respected by all is not on the horizon.