‘Neither Side Wanted a Decoupling’: U.S. and China Announce Joint Pause on Tariffs Amid Ongoing Negotiations

China and the United States have embraced a frosty truce in their burgeoning trade war. On May 12, following a two-day summit in Geneva, Washington and Beijing issued a joint statement announcing a 90-day pause on each country’s tariffs and non-tariff barriers — stabilizing American tariffs on Chinese imports at 30 percent while allowing Chinese tariffs to fall to 10 percent. Speaking about the agreement, Treasury Secretary Scott Bessent said, “The consensus from both delegations is that neither side wanted a decoupling.” He signaled that negotiations would continue during the pause.

The announcement comes while China suffers from entrenched economic malaise, provoking Beijing to seek a tactical pause to prevent a rapid decoupling from the United States.  

Beijing Agrees to Suspend Tariffs and Trade Countermeasures for 90 Days

While agreeing to lower the “reciprocal” tariffs imposed after April 2, the United States has maintained a separate 54 percent tariff on de minimis goods, a 20 percent “fentanyl” tariff aimed at punishing Beijing for its role in the crisis, and a 10 percent baseline tariff on Chinese imports. These remaining duties leave the effective rate substantially higher than before President Donald Trump took office. As part of the agreement, the United States and China also established a standing mechanism to discuss economic ties, led by Bessent, United States Trade Representative Jamieson Greer, and Chinese Vice Premier of the State Council He Lifeng.

Along with agreeing to reduce tariffs, China also temporarily suspended several non-tariff barriers, including export restrictions on rare earth minerals — which are critical for manufacturing military systems, semiconductors, and automobiles. However, Beijing did not offer a timeline for terminating investigations into U.S. firms operating in China, including an ongoing antitrust probe into Google and restrictions on biotech firm Illumina and fashion company PVH Corp.

Chinese Economic Malaise Poised to Continue Despite Pause

Despite the pause, China’s economy is likely to continue to suffer from severe structural imbalances. While Beijing has poured resources into its science and technology sector as part of its efforts to achieve self-sufficiency and develop “New Qualitative Productive Forces” — including artificial intelligence, advanced manufacturing, and military technologies — overall growth remains sluggish. China’s commitment to state subsidies and the resulting production boom have entrenched deflationary expectations, leading household savings rates to rise while contributing to the country’s record trade surplus.

These structural distortions have amplified the effects of American tariffs on the Chinese economy, forcing Beijing to enhance stimulus measures while embracing unprecedented measures to hide the tariffs’ effects. The Chinese central bank acted aggressively to cut interest rates, issued long-term bonds, and lowered banks’ reserve ratio to boost investment and consumption shortly after the United States imposed tariffs. Confronted with falling manufacturing output due to the burgeoning trade war, Beijing ceased publishing hundreds of statistics related to unemployment, land sales, and investment flows — indicating a widespread effort to cover up the effects of the trade dispute.

Washington Should Use Negotiations to Expand Its Leverage

While the agreement between Washington and Beijing represents a tactical pause in the countries’ ongoing rivalry, the United States should spend the coming months strengthening its key sources of leverage. To stymie Beijing’s self-sufficiency drive and cut its market access, Congress should consider legislation to screen U.S. outbound investment into Chinese technology firms while securing U.S. critical infrastructure by removing Chinese components.

Washington should also invest in its own sources of long-term economic strength — its allies and its scientific and technological leadership. The current pause offers an opportunity for the Trump administration to secure trade agreements across Southeast Asia, locking China out of its own neighboring markets. Closer to home, the administration should reverse cuts to the National Science Foundation and the National Institute of Standards and Technologies, both of which play key roles in spurring American innovation.

Jack Burnham is a research analyst in the China Program at the Foundation for Defense of Democracies (FDD). For more analysis from Jack and FDD, please subscribe HERE. Follow Jack on X @JackBurnham802. Follow FDD on X @FDD. FDD is a Washington, DC-based, nonpartisan research institute focusing on national security and foreign policy.