

China and US trade breakthrough
May 12, 2025
Zongyuan Zoe Liu, an economist and senior fellow specializing in the Chinese economy at the Council on Foreign Relations, discusses a surprising trade agreement between the U.S. and China. She highlights the strategic negotiations that led to a temporary rollback on tariffs. Liu explores China's shift towards domestic consumption to mitigate international pressures and its diversification of trade relations. She also critiques the 'wolf warrior' diplomacy style and examines the impact of these dynamics on future agreements and U.S.-China relations.
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U.S. Tariff Rollback Rationale
- U.S. supply chain issues and empty shelves due to tariff hikes pressured America to reduce tariffs.
- Without de-escalation, the U.S. faced risks similar to COVID-style shortages in industrial inputs.
China's Proactive Trade War Strategy
- China anticipated escalating trade tensions and diversified trade and production abroad.
- Xi Jinping emphasized self-sufficiency to reduce China’s reliance on foreign technology and markets.
Misjudging China's Resilience
- Some in the Trump administration overestimated U.S. leverage and underestimated China's resilience.
- Contrary to narratives, China is not desperate for a tariff deal and has strong economic endurance.