In a significant shift in tone, US President Donald Trump has signaled a possible de-escalation in the intensifying trade war with China, indicating that the punitive tariffs—currently as high as 145%—may be reduced.
Speaking at a White House news event on Tuesday, Trump stated:
“145% is very high and it won’t be that high… It’ll come down substantially. But it won’t be zero.”
This remark suggests a softening stance after weeks of aggressive tariff hikes and retaliatory measures that have rattled global markets and strained US-China relations. Trump’s comments followed those of Treasury Secretary Scott Bessent, who earlier told investors at a private JP Morgan Chase event that the current tariff regime is “unsustainable” and predicted a near-term de-escalation.
Wall Street and Asian Markets Rally
Bessent’s comments, seen as an early indication of a potential thaw, triggered a surge on Wall Street, with all three major US indexes rallying to session highs. The momentum carried over to Asian markets, where Hong Kong’s Hang Seng jumped 2.5%, Japan’s Nikkei rose 2%, and South Korea’s Kospi gained 1.5%.
Tariff War Takes Its Toll
The US-China trade war has ballooned into a full-blown economic standoff, with both countries imposing historically high tariffs—the US now levies up to 145% on Chinese imports, while China has countered with 125% tariffs on US goods. The fallout has disrupted supply chains, spurred recession warnings, and strained diplomatic relations.
Beijing has taken several retaliatory steps beyond tariffs:
- Restricted key mineral exports vital to global tech and defense sectors.
- Blocked additional Hollywood films from releasing in China.
- Returned Boeing jets meant for Chinese carriers back to the US.
- Expanded its export control and unreliable entity lists, targeting US firms.
Despite the escalation, Trump has maintained he shares a “very good relationship” with Chinese President Xi Jinping, and on Tuesday, he reiterated his hope for a resolution:
“We’re going to be very nice. They’re going to be very nice, and we’ll see what happens… Ultimately, they have to make a deal.”
Beijing’s Strategic Patience
China, for its part, continues to signal openness to talks, but on its terms. A Chinese official told CNN that “respect, consistency, and reciprocity” must be the foundation of any meaningful dialogue. While Beijing had designated a lead negotiator, the official noted confusion over the appropriate US counterpart, hinting that Trump’s preference for direct involvement complicates traditional diplomatic protocol.
Adding to tensions, China recently criticized US Vice President JD Vance for inflammatory remarks about “Chinese peasants,” which triggered online backlash and were condemned by Beijing as offensive and out of line with diplomatic norms.
Behind the Scenes: Cabinet Discontent and Diverging Signals
Analysts point to internal divisions within the Trump administration as another roadblock. While Trump has projected warmth toward Xi, Cabinet members and advisors have publicly taken a much harder line, fueling mixed messages and making it difficult for Beijing to trust the US negotiating position.
Secretary Bessent’s remarks suggest a shift toward a more pragmatic tone, indicating that a total decoupling is not the goal, but rather a “rebalancing of trade” between the two economic superpowers.
What’s Next?
While Trump’s remarks suggest a willingness to dial down the tariff war, the lack of formal dialogue and lingering mistrust between the two sides remains a barrier. However, the economic toll and market volatility appear to be pressuring Washington to reconsider its approach.
If both nations do return to the table, expectations are that tariffs will be rolled back in phases, tied to specific trade commitments and enforcement mechanisms.
Bottom Line
Trump’s latest comments may be the clearest signal yet that a truce is possible, but the road to any deal will be fraught with political optics, economic realities, and diplomatic nuance. For now, global investors will be watching closely—hoping the world’s top two economies can pivot from confrontation to cooperation.