The First Step: US-China Trade Talks in Geneva

Key Issues and Sticking Points

• The main obstacle remains the high tariffs: US tariffs on Chinese goods are at 145%, with China retaliating at 125%.
• Trump floated lowering tariffs to 80%, but this is seen as insufficient by Beijing, which seeks more substantial tariff relief before engaging in broader trade reforms.
• Chinese negotiators insist that without significant movement on tariffs, they will not discuss further trade liberalization.
• Both sides are wary of appearing weak, and the talks are seen as a way to establish baselines and test the mood rather than to reach an immediate agreement.

Fentanyl and Side Issues

• The fentanyl crisis is a key US concern; China has shown willingness to step up enforcement against the export of precursor chemicals used to make fentanyl.
• President Xi sent top public security aide Wang Xiaohong to Geneva to address US fentanyl concerns, indicating the issue’s importance to both sides.
• US negotiators are demanding hard guarantees and verifiable benchmarks on fentanyl enforcement, not just symbolic gestures.
• The fentanyl issue is seen as a potential confidence-building measure but not a substitute for progress on tariffs.

Economic and Strategic Dynamics

• China appears prepared for a prolonged standoff, implementing domestic economic support measures and betting that the US will feel the economic pain more acutely.
• The talks are not expected to yield a quick fix; instead, they are laying groundwork for possible future progress and exploring side issues to build limited trust.
• The economic impact of tariffs continues to be severe, with both countries’ exports and manufacturing sectors suffering, and global supply chains being restructured.

Comparative and Regional Context

• China’s approach mirrors that of Japan in its own trade talks with the US-refusing to make quick deals without addressing core concerns (e.g., auto tariffs for Japan).
• The talks are taking place in a context of broader global economic uncertainty, with investors, companies, and governments watching closely for signs of de-escalation.

Additional Details

• The Geneva meetings are being held in a private villa on Lake Geneva and are facilitated by Swiss officials, who see the mere fact of dialogue as a success.
• China’s Vice Premier He Lifeng and public security aide Wang Xiaohong are leading the Chinese delegation; US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer are representing the US.
• The talks may extend into Monday if progress is made