Trump floats 80% China tariff: is de-escalation on the horizon?

2025-05-09 general

Washington, Friday, 9 May 2025.
Ahead of crucial trade talks in Switzerland, President Trump has suggested lowering tariffs on Chinese goods. The proposal targets a rate of 80%, a steep drop from the current 145%. Treasury Secretary Scott Bessent will lead discussions with Chinese counterparts. China’s Vice Foreign Minister expressed confidence in managing trade issues. Experts suggest this could signal a move towards de-escalation in the trade war. However, significant barriers and restrictions may still remain. The impact on major players like Nvidia and TSMC, heavily reliant on Chinese markets, remains uncertain.

Tariff reduction impact

President Trump’s suggestion to reduce tariffs on China to 80% from the existing 145% marks a potential shift in trade policy [1]. The scale of the proposed reduction, 44.828, approximately 44.8%, could ease some of the financial strain on businesses importing goods from China [2]. However, an 80% tariff remains substantial, potentially limiting the positive impact on consumer prices and corporate earnings [1]. The ultimate decision rests with Treasury Secretary Scott Bessent, adding uncertainty to the situation [2].

Market reactions and expert opinions

News of potential tariff reductions has elicited mixed reactions from market analysts. Dan Wang from Eurasia Group suggests a ‘transactional de-escalation’ may be on the table [2]. Conversely, Stephen Olson, a former US trade negotiator, cautions that systemic frictions between the US and China are unlikely to disappear quickly [2]. Eswar Prasad, formerly with the IMF, believes a pullback from sky-high tariffs is the most realistic outcome, but high barriers are still expected [2]. These expert opinions highlight the complex and uncertain path forward for trade relations.

Sector-specific implications

The semiconductor industry, with key players like Nvidia and TSMC, closely watches these developments [GPT]. Nvidia stock recently cleared its 50-day moving average following news that President Trump plans to rescind an AI chip-export rule [8]. Reduced tariffs could further benefit these companies by lowering the cost of manufacturing and improving access to the Chinese market [1]. However, an 80% tariff could still pose a significant barrier, potentially limiting the full realization of these benefits [2].

Trade dynamics and economic indicators

Despite the existing tariffs, China’s exports rose by 8.1% year-on-year in April, exceeding economists’ predictions of 2% growth [6]. This increase occurred even with a 21% drop in sales to the US due to the 145% tariffs [6]. Lynn Song, chief economist for Greater China at ING, suggests that reports of China’s export decline are exaggerated [6]. However, Zichun Huang from Capital Economics warns that China’s export growth could turn negative later in the year, with further declines in US-bound exports [6].

Geopolitical considerations

The US-China trade relationship is further complicated by geopolitical factors [GPT]. China rejected direct talks between President Trump and President Xi Jinping after Trump publicly criticized Ukrainian President Volodymyr Zelenskyy [6]. One source indicated that any unscripted, hostile interaction between the leaders would cause Xi to lose face [6]. Scott Kennedy from the Center for Strategic and International Studies notes that both sides are trying to appear tough while avoiding actions that could harm the global economy [6].

Bronnen

tariffs trade