As world economies grapple with the repercussions of rising trade tensions, the United States and China are preparing for their first major meeting since the onset of what analysts have termed “Trade War Two.” Convening on Saturday in Switzerland, this senior-level meeting addresses the retaliatory tariffs, supply chain disruptions, and economic uncertainty that have destabilized both nations and the broader global economy. While the negotiations show a disposition to converse, expectations of significant breakthroughs remain low, and the most probable outcome is the establishment of a process of continued negotiation rather than negotiating deeply rooted differences. For readers of Diplotic, this time serves to underscore the diplomatic dance of economic pragmatism and geostrategic positioning that defines U.S.-China relations in 2025.
The Context: A Trade War with Global Ripples
The Switzerland negotiations are at a crossroads. U.S. President Donald Trump’s aggressive trade policies, including the imposition of more than 100% tariffs on Chinese goods, have positioned China as the focal point of a global trade war that is threatening to drag the world into a deep economic recession. These measures, referred to by analysts as a virtual trade embargo, have undermined supply chains, fueled market instability, and subjected enormous pressure on companies and consumers in both nations. The U.S. hopes to reduce its trade deficit with Beijing and press structural changes in China’s economic system, which Washington views as mercantilist. Specifically, the U.S. would prefer China to take on a larger role in world consumption—a shift that would require politically sensitive domestic changes in Beijing.
China, however, views its industrial and technological advances as non-negotiable pillars of its strategy to avoid the middle-income trap. Beijing has resisted foreign interference in its development path, urging the removal of U.S. tariffs, clarity on what Washington expects China to purchase, and equitable treatment globally. The two sides appear further apart than during their first Trump trade war of his first term, with the added complication of non-trade issues—such as fentanyl, technology controls, and geopolitical flashpoints like the war in Ukraine—making the path to settlement harder.
The Players and the Stakes
The U.S. delegation, led by Treasury Secretary Scott Bessent and top trade negotiator Jamieson Greer, will sit down with China’s economic tsar, He Lifeng, in what promises to be a tense meeting. The inclusion of a senior public-security official by China in its delegation is a signal that non-trade issues will rule, and maybe even overpower, tariff negotiations. This is also a mirror to the broader gamut of U.S.-China tensions, where economic issues are now inextricably tied to security and geopolitical concerns.
For America, the talks represent an opportunity to tighten up markets and present evidence of accomplishment on Trump’s election commitments to restore balance in trade. For China, they are a moment to stand against what it perceives as bullying from America while demonstrating toughness to an apprehensive home country. Both possess home requirements: Trump must balance rhetoric about his toughness with the need to temper economic harm, while Beijing must deal with domestic pressures for assertiveness versus foreign pressure.
Sobered Expectations in the Presence of High Tariffs
Experts are unanimous in warning against the hope of genuine breakthrough. Scott Kennedy, the Center for Strategic and International Studies’ China business analyst, told Reuters, “They’re not going to do anything this weekend, other than just trying to determine whether or not there is going to be a process, and what agenda items are going to be.” The best possible hope, according to market analysts, is slashing the triple-digit tariffs now compressing trade. Such a rollback—perhaps to levels in the range of 60%, as predicted by ING’s chief Greater China economist Lynn Song—would allow for modest product flows but remain extremely expensive for businesses.
President Trump has recently suggested lowering tariffs to 80%, 20% higher than his campaign promise but an olive branch possibility nonetheless. But it is not clear whether this proposal will be formally tabled in Switzerland or how Beijing would respond. Ryan Hass, director of the John L. Thornton China Center at the Brookings Institution, suggested that China could demand a 90-day tariff waiver, similar to those provided to other countries, to make the atmosphere more conducive for negotiations. Few analysts, however, anticipate any abatement of such tariffs, with the political capital Trump has invested in his tariff policy.
Economic and Social Impacts
Economic cost of trade war is already being experienced. In China, workers and factories are bracing for intensified agony as high tariffs bite, potentially disrupting export-driven industries. U.S. consumers notice prices rising, and businesses threaten imminent job losses. The global imbalance in trade—economies relying on Chinese manufacturing for supply and American customers for demand—is an underlying culprit nobody’s session of talks can hope to undo. Even transient reductions would occasion half-measures at best since, at tariffs set at 60%, most Chinese goods will continue to be locked out yet imports will remain low enough not to cause product cutoffs much inconvenience.
Well over economics do these talks have weight. China’s official media has painted the U.S. as the more jittery side, providing political cover for bargaining while projecting toughness domestically. A state news-linked blog has just reported that engaging the fight “does no harm at this stage” and allows Beijing to “watch, and even entice out the U.S.’s true intentions.” At home, Trump’s administration has the responsibility of navigating a divided electorate tightrope, with base members calling for aggressive action against China and companies begging for stability.
Geopolitical and Market Implications
The Switzerland summit is not just about business. Non-trade issues, from fentanyl to limits on technology, are likely to be front and center, capturing the essence of U.S.-China rivalry. China’s inclusion of a public-security representative attests to its willingness to address these more geopolitical issues, while the U.S. will probably raise issues like intellectual property rights and market access. Geopolitical tensions, including differing views on Ukraine, contribute to the richness of the agenda.
For foreign markets, the talks offer a ray of light. Investors spooked by months of escalating threats are reassured by the possibility of a discussion, albeit incrementally so. An interim détente or reciprocal tariff retreat, as suggested by Bo Zhengyuan of Plenum advisory, can be a prelude to fuller negotiations embracing trade and non-trade matters. But the markets are wary of any breakdown in negotiations with risk of contagion to finance and other sectors hanging over them.
The Road Ahead
The Switzerland talks are a fine-grained step toward de-escalation, but the path forward is fraught with challenges. Back-channel groundwork has already been slowed by squabbles over fentanyl, rankings of diplomats, and U.S. rhetoric tone, Reuters writes. Beijing’s increasingly belligerent public rhetoric, such as threats of a “protracted struggle” in state media, foretells a lengthy and contentious course.
For Diplotic readers, this moment is important because it bears on global stability. The two most powerful powers in the world, the United States and China, can stabilize or destabilize the world economy further. Whether a modest tariff cut or agreement to resume negotiations is welcome or not, at bottom lie the economic imbalances, technological competition, and political distrust that require sustained diplomatic endeavors to resolve. As one Beijing diplomat noted aptly, “We are no longer waiting for who blinks first, but for how each of the two sides will spin the other as having blinked first.”
In the coming few days, the globe will be watching Switzerland not for some theatrical denouement, but for signs that diplomacy will be able to prevail over belligerence. For the time being, that might be the most pragmatic victory on the cards.
