US-China Trade War Escalates: High Tariffs, Market Turbulence, and Hope for Talks in Switzerland

The US-China trade war has intensified in 2025, disrupting global trade flows and markets. As both sides escalate tariffs and restrictions, a new round of high-level talks in Switzerland may offer a window for de-escalation.

US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer will meet with Chinese Vice Premier He Lifeng in Geneva from May 9 to 12

Tariffs Reach Historic Highs

President Donald Trump’s administration has raised tariffs on Chinese imports to unprecedented levels—up to 145%. In retaliation, China imposed tariffs as high as 125% on US goods and restricted exports of rare earth elements, which are critical to electronics and renewable energy sectors.

Adding further pressure, the US removed the “de minimis” rule for Chinese imports, which previously allowed low-value packages to enter tariff-free. This move directly impacts e-commerce platforms such as Temu and Shein.

Diplomatic Talks Scheduled in Switzerland

In a key development, US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer will meet with Chinese Vice Premier He Lifeng in Geneva from May 9 to 12. This will mark the first formal dialogue since the latest trade escalation.

While both sides maintain hardened stances, the objective of the talks is not a comprehensive trade agreement but rather a de-escalation of tensions and re-establishment of bilateral communication.

China's Firm but Open Stance

Chinese officials have agreed to the talks but underscored that they will not compromise on core national interests. Beijing argues that the tariff actions undermine fair trade and global economic stability, and it calls for more equitable international trade rules.

Economic Fallout on Both Sides

The repercussions of the trade war are being felt across both economies. China is facing a projected 77% drop in exports to the US this year, alongside a slowdown in factory activity. Meanwhile, the US economy contracted by 0.3% in Q1 2025. Companies such as Ford and Mattel have suspended their financial forecasts due to tariff-related uncertainty and supply chain disruptions.

Market Reaction and Investor Sentiment

Financial markets are cautiously optimistic about the upcoming talks. Global equities have shown modest rebounds, but volatility remains elevated. Mixed signals from US and Chinese officials continue to unsettle investor sentiment.

Outlook: De-escalation Possible, Resolution Distant

While hopes are pinned on the Geneva meeting easing short-term tensions, analysts remain skeptical about a swift resolution. The geopolitical tone of the conflict and domestic political considerations on both sides suggest that a full trade agreement is unlikely in the near future.

Nonetheless, progress in talks could reduce tariffs or lead to interim measures that stabilize global trade flows.