Markets, multinational companies, and scriptwriters alike must be thrilled that Trump administration officials and representatives of Chinese leader Xi Jinping will be meeting this weekend in Geneva to talk tariffs and trade. It’s an occasion for both drama and irony: They will be gathering in the shadow of the World Trade Organization, the world’s preeminent protector of free trade, which both countries have thoroughly undermined—China through its massive industrial policy machine, Washington through its dismissive abandonment.
The stakes could not be higher. Bilateral U.S.-China trade in goods and services was $660 billion in 2024. Thousands of U.S. multinationals in China and Chinese firms in the United States do another $600 billion in business from their overseas homes. There are 286 Chinese companies on the three major U.S. stock exchanges, with a combined market cap of $1.1 trillion. This commerce acts as the circulatory system, sustaining millions of jobs, complex innovation ecosystems, and affordable lifestyles.
Markets, multinational companies, and scriptwriters alike must be thrilled that Trump administration officials and representatives of Chinese leader Xi Jinping will be meeting this weekend in Geneva to talk tariffs and trade. It’s an occasion for both drama and irony: They will be gathering in the shadow of the World Trade Organization, the world’s preeminent protector of free trade, which both countries have thoroughly undermined—China through its massive industrial policy machine, Washington through its dismissive abandonment.
The stakes could not be higher. Bilateral U.S.-China trade in goods and services was $660 billion in 2024. Thousands of U.S. multinationals in China and Chinese firms in the United States do another $600 billion in business from their overseas homes. There are 286 Chinese companies on the three major U.S. stock exchanges, with a combined market cap of $1.1 trillion. This commerce acts as the circulatory system, sustaining millions of jobs, complex innovation ecosystems, and affordable lifestyles.
If the talks fail, astronomical tariffs, mounting technology restrictions, and expanding enmity will drive the U.S. and Chinese economies and societies to fully decouple. That will produce rising unemployment, higher prices, shelf shortages, and slower growth in both countries. And as the International Monetary Fund has forecasted, they’ll drag down the global economy with them.
Trump’s vision of the U.S. being a self-sustaining island, with tens of millions of new manufacturing jobs satisfying all of its wants and needs, will prove to be a delusional fantasy. And without the deep interdependence between Washington and Beijing, the chances of war in the Taiwan Strait will rise.
An economic divorce risks so alienating the rest of the globe so thoroughly that both sides become declining powers. China could lose its position as the manufacturing floor and, increasingly, the innovation lab, of the world. The United States would no longer be indispensable as a source of ideas, capital, and markets. A chaotic multilateral world where Washington and Beijing are weakened and sidelined is likely to be more susceptible to war and less capable of handling big questions, such as climate change, pandemics, or the ethics of artificial intelligence.
Although Washington and Beijing complain about—and to—each other nonstop, it has been 1,941 days since they signed the infamous “phase one” agreement on Jan. 15, 2020. China committed to strengthening protection of intellectual property and ramping up its imports of U.S. goods—which, according to the United States, it utterly failed to do. The Biden administration was so skeptical about reaching a meaningful deal that it didn’t even try.
Despite so much hanging in the balance, these low expectations are entirely appropriate. The chances are exceedingly low that the two sides will ever reach an agreement that genuinely resolves either party’s long-held grievances.
A basic requirement of any successful negotiation is a belief by both sides that they need a deal and are willing to make concessions that the other side values to gain one. Those conditions are absent.
Neither side’s economy is anywhere near the breaking point right now. Although U.S. financial markets have been extremely volatile, and there have been angry town hall meetings in many congressional districts, the stock market has regained most of its losses, and Washington is likely to extend tax cuts and find other ways to put more money in consumers’ pockets.
Similarly, Chinese exporters and their workers are suffering more than official data lets on, but China’s growing tech prowess and global market outreach have made it less dependent on the United States. Moreover, China has just begun to tap into fiscal and monetary stimulus resources, which will reduce the pain of less international business. And given China’s government-controlled securities markets and financial system, a full-blown economic crisis is unlikely. And if things do go south, Xi can credibly blame Trump and take credit for standing up to a bully.
Neither Washington nor Beijing is internationally isolated. The Trump administration just concluded a framework agreement with Britain, and it has more than a dozen ongoing negotiations with other countries, with the hope that it can ink deals that open markets to the United States and close them to China. For its part, Beijing is warning others not to acquiesce to U.S. demands at its expense. Meanwhile, Xi and his lieutenants are crisscrossing the world, from Southeast Asia to Western Europe to Russia, looking to deepen ties and outflank Washington.
At this early stage, for both sides, it is more important to appear to be open to negotiate—in order to maintain market confidence and political support back home—than it is to actually reach a deal.
In addition to not yet sufficiently suffering from the trade war, a huge obstacle to ever getting to “yes” is the ambiguity of the Washington’s aims. Trump is clearly enamored with tariffs, but he and his staff have offered competing goals for their use. The president has emphasized reducing the United States’ trade deficits with China and others; Treasury Secretary Scott Bessent has highlighted a desire for China to trim its industrial policy sails and rebalance its economy; trade and manufacturing advisor Peter Navarro, by contrast, has stressed the need for the United States to decouple from China.
If the goal is to lower the trade deficit, then a Chinese commitment to buy more and sell less would suffice. Dismantling China’s industrial policy system would require a whole other set of actions. And if it’s decoupling that the United States wants, then there’s really nothing to negotiate about in the first place. Given the mixed signals and the difficulty of anyone else to authoritatively speak for Trump, it would be nonsensical to believe that one could coax anything beyond the smallest of offers from China.
Even if the administration could settle on a goal, equally confounding is what Washington or Beijing would be willing to offer each other. Negotiators from other countries meeting with the Trump administration say that they have been told to come with a list of offers and that the only thing the Trump administration might conceivably do in return would be to lift the reciprocal tariffs.
On top of that, the United States is also reportedly considering raising tariffs on several strategic goods, including critical minerals, steel, pharmaceuticals, and autos. If so, then what Trump gives with one hand (lowering reciprocal tariffs), he could take away with the other (imposing industry-specific tariffs). The administration may force some countries that are utterly dependent on U.S. markets and its nuclear umbrella to cry uncle, but most will brush aside such a one-sided offer.
Count Beijing among them. It is not going to put anything of substance on the table in exchange for modest relief from some tariffs only to be subsequently subjected to others. There is no sense that the Trump administration recognizes this problem, let alone is thinking about itself making more enticing commitments.
Even more, Chinese officials have told me that they do not believe the Trump administration could give them what they most desire: predictability. Chinese leaders would like lower tariffs and fewer restrictions on accessing U.S. technology, but above all they crave greater certainty, so they can adapt China’s economy, governance strategy, and foreign policy accordingly.
But predictability may be the one thing that Trump will not provide, both because uncertainty is his favorite weapon and because he is so susceptible to changing his mind.
Similarly, there is almost no chance that China would be willing to commit to major structural reforms of its economy—such as shrinking industrial policy and expanding household consumption—as part of these negotiations. It almost made such commitments during the first Trump administration, then pulled its offer back, after which Trump settled for a smaller deal that was centered on exports. Given China’s stronger technological capabilities, diversified commercial and diplomatic relationships, and the low likelihood that it could count on a permanent reprieve from Trump’s tariffs, such concessions from Beijing are essentially off the table.
There is the smallest of chances that despite neither side yet feeling sufficient pressure, the United States not having clear goals, and both being unwilling to give the other what they most want, modest progress will be made in Geneva, with both sides agreeing to temporarily halt further escalation and possibly even to temporarily lower barriers. But any progress should be seen as fleeting. The chances of renewed escalation and a drawn-out stalemate are quite high. The “phase one” deal agreed to during Trump’s first term took 22 months to negotiate, and the issues facing the United States and China today are even more weighty and complicated.
These negotiations are most likely to resemble a speeding roller-coaster, which goes up and down, leaving with a few moments of euphoria, following by a deeper sense of nausea, only to be locked in for another ride around, again and again. Buckle up!
