Editorial | US-China trade truce a test of both countries’ stamina

After two weeks of mixed signals from Washington, US President Donald Trump has finally confirmed an agreement with China to extend the tariff war truce for another 90 days. The new pause, approved hours before the ceasefire was due to end, headed off the risk of escalation. It sets the stage for a test of stamina and resilience between the world’s two biggest economies as they try to reach a reciprocal tariffs deal.

The extension, agreed between top officials in talks in Stockholm last month but subject to Trump’s approval, reflects the reality that neither possessed enough leverage to push the other to make a big compromise. Moreover, political and policy expectations are different, particularly in Washington. Among Trump supporters, there remain those who still insist on playing hardball with China.

The question is what will happen now. Both sides are trying to buy time, but from different perspectives. Voices in the US talk up the possibility of the Chinese economy coming under pressure, though it performed better than expected in the first six months of the year. Doubters hope this was partly driven by US importers placing early orders for Chinese goods ahead of higher tariffs. In the next six months, China’s economy faces a deteriorating external environment and some structural issues. While this would put the US in a stronger position, there are now many people talking up risks on the US side – national debt, lower-than-expected job creation, and inflation, for example. That said, there is an element of wishful thinking on both sides about the erosion of the other’s position.

Far from foreshadowing a mutually acceptable deal on tariffs, the truce is a test of each economy’s stamina during political and economic negotiations. Trump meets Russian President Vladimir Putin on Friday. There are hopes that Trump and President Xi Jinping will meet later this year. A positive outcome all round could build the impetus for meaningful reductions in proposed tariffs.

Trump’s attempts to talk up increased US soybean exports to China says as much about his need to shore up rural electoral support as it does about China’s need for them, given diversified sources.

The next three months will reveal how the push from both sides for an acceptable compromise plays out in terms of China’s stand on agricultural and natural gas imports, and US tech exports. The latter poses a difficult issue for Trump, with Nvidia’s H20 chip already widely seen in Washington as being as far as the US can go.