The China Not-Reset

Sunday’s cease-fire in the US/China trade war was hardly the “total reset” Trump advertised, but neither was it a capitulation to China. It was merely a mutual-climb down from the tit-for-tat escalation of tariff retaliation that followed “Liberation Day.” That’s enough to drive US stocks to a marginal year-to-date gain, but an appreciable one excluding the Magnificent Seven. Chinese tariffs are nevertheless 10% higher than before that day, and US tariffs are 30% higher, without even considering sectoral tariffs. If the “winner” is the one who raised tariffs the most, then the US won. But tariffs are taxes, and if the winner is the one who raised taxes the least, then China won. Building on the mere “framework” for a possible future trade deal with the UK, this sets the template for Trump claiming great victories and standing down from the worst tariff excesses, even when only very modest trade liberalization from other nations is actually achieved. But any little bit helps, and it allows the US to pull back from the most self-destructive tariff levels.