By Chun Han Wong and Jason Douglas
SINGAPORE -- A U.S.-China agreement to pause bruising tariffs was cheered in Beijing as vindication for leader Xi Jinping and his defiant response to President Trump's trade war, while providing a much-needed boost to China's ailing economy.
During talks in Geneva this past weekend, U.S. and Chinese officials put the brakes on a spiraling trade war between the world's two largest economies. They agreed to a 90-day pause on most of the tariffs they had imposed on each other since April and pledged further negotiations.
Xi had directed an uncompromising response to Trump's tariffs, retaliating with a range of economic countermeasures and whipping up nationalist fervor against what Beijing denounced as American bullying.
His perceived success could dampen Beijing's will to pursue policy overhauls that many see as necessary to lift the Chinese economy, even without the added pressure to act from Trump's tariffs, some economists say.
Xi reinforced his message on Tuesday at a Beijing gathering of leaders and foreign ministers from Latin American and Caribbean countries, amid China's efforts to rally international opinion against Trump's global tariffs.
"Bullying and hegemonism will only result in self-isolation," Xi said, addressing an audience that included the presidents of Brazil, Chile and Colombia.
On Chinese social media, opinion leaders portrayed the tariff truce as a resounding victory for Xi.
"China fought a very beautiful 'counterattack in self-defense,'" said Ren Yi, a commentator who goes by the pen name "Chairman Rabbit," in an online post. Beijing showed the world that Trump is irrational and America is a paper tiger, while China offers stability and certainty, he wrote.
Trump has pledged to use tariffs to restore U.S. industrial might and slash America's $295 billion trade deficit with China, a goal that would require Beijing to drastically overhaul its economic model.
Xi has made a show of defying U.S. pressure and leaned into his self-styled image as a staunch steward of Chinese sovereignty. He has repeatedly expressed his belief that China will usher out the era of American dominance, a process aided by Western capitalist excess.
Under the agreement reached in Geneva, the U.S. agreed to lower the base level of tariffs on most Chinese goods to 30% from 145%, while China would cut its levies on U.S. products to 10% from 125%.
The tariff reprieve means China's economic prospects for this year just got somewhat brighter, as the risk of a drawn-out trade recedes for now and gives exporters more time to adjust to shifting global trade patterns.
Chinese exports to the U.S. sank 21% on the year after sky-high tariffs came into effect in April, Chinese customs data showed. Analysts and executives feared trade between the two superpowers would shrivel further and put millions of Chinese factory jobs at risk.
Now, economists expect a rush of shipments as firms race to restock, especially as tariffs could rise again if the two sides make little progress during the 90-day window for talks.
While that should buoy Chinese growth over the coming months, it will likely also lessen the government's appetite for stimulus, economists said. Beijing had been expected to increase borrowing and spending to support infrastructure projects and consumption as a way to offset shrinking trade, but those plans look set to be scaled back or delayed.
Louise Loo, lead China economist at Oxford Economics in Singapore, said before truce she had expected the Chinese government to borrow an extra 1 trillion yuan, equivalent to about $139 billion, to shore up growth this year, on top of big borrowing and spending plans announced in March.
The extra stimulus is now likely to be around half that figure, she said. That mix of better exports but weaker stimulus means she now expects growth this year of about 4.3%, only a slight improvement from the 4.1% she expected when the higher tariffs were still in place.
"The urgency to stimulate the economy is much lower now," Loo said.
Trump also claimed victory following the tariff rollback. He said he expected to strike a deal with Beijing within the 90-day period, but made clear that the U.S. could raise its China tariffs "substantially higher" -- albeit not to 145% -- if an agreement isn't reached.
"China was being hurt very badly," Trump said on Monday. "I think they want the deal very badly."
Some analysts argued that China may have lifted more punitive measures than the U.S. had. Both sides said Beijing has agreed to end or suspend non-tariff measures against Washington, which likely includes export controls on critical minerals that the U.S. needs for producing high-end technology, even as the Trump administration maintains measures for curbing Chinese access to advanced chip-making gear.
Chinese imports remain subject to a variety of other tariffs, including some imposed during Trump's first term and Joe Biden's presidency, as well as a new 20% tariff linked to China's alleged role in the U.S. fentanyl crisis and duties on steel, aluminum and cars.
The truce provides China with some breathing space to deal with domestic economic challenges, experts said.
"China wants more certainty in the external environment," said Weihuan Zhou, a professor and co-director of the China International Business and Economic Law Center at the University of New South Wales. "For now, China has put its relationship with the U.S. on a more stable and rational path -- at least there's a consultative process, and we won't see for the time being any crazy things happening."
China's economic challenges include an unresolved property crunch, tepid consumer spending and the menace of deflation. Prices charged for goods leaving Chinese factories have been falling for more than two years and consumer-price inflation has also turned negative, the result of weak domestic spending colliding with swelling industrial production.
Xi has been funneling investment toward China's vast manufacturing sector to drive economic growth and hone China's technological edge in advanced industries such as batteries and electric vehicles.
These and other pressures mean many economists considered the government's 5% growth goal for 2025 a stretch, even before the trade war with the U.S. Beijing has pledged economic changes aimed at boosting consumption and rebalancing China's lopsided economy to make it less reliant on investment and exports, but progress has been slow.
Overhauls will likely drag on for years now that the extra pressure to act from tariffs has diminished, said Loo, the Singapore-based economist.
Some Chinese experts stressed that Beijing, while securing an initial victory in the trade fight, has to stay vigilant against further U.S. pressure.
"The U.S. has also come to recognize the limitations of playing the tariff card," said Wu Xinbo, director of the Center for American Studies at Shanghai's Fudan University.
Trump may thus rely more on other tools to pressure China, such as punitive measures against Chinese companies and strengthening ties with Taiwan, the self-governed island that Beijing claims as its territory, Wu said. "China must prepare for this."
Write to Chun Han Wong at chunhan.wong@wsj.com and Jason Douglas at jason.douglas@wsj.com
(END) Dow Jones Newswires
May 13, 2025 08:28 ET (12:28 GMT)
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